Raising a family can be expensive. A study from the Department of Agriculture, for example, found that the average family spends $233,610 to raise a kid through their 18th birthday. You’ve got to figure out how to pay for sports, college, vacations, clothing, healthcare, food, and every other conceivable expense, too. Those costs can add up quickly—particularly when there are several kids involved.
At the same time that you’re funneling huge sums of cash to your kids, you probably also want to focus on securing your own financial future. To do that, you need to save money. With so many moving parts in your family, though, that’s not always as easy as we’d wish.
So how exactly can you save money when so much cash is flowing out each month?
It can start with cutting out unnecessary expenses. To do that, you may need to start budgeting. That way, you can see where your money is going and figure out what you can do to cut down.
Once you’ve reduced your unnecessary expenses and determined how you can start saving money on a regular basis, consider investing as an option.
Up next, we’ll examine some of the easier ways you can do that.
Everyone’s financial situation is unique. That said, there are some general steps that can be taken to begin saving money.
First things first: Figure out what your family is most interested in spending money on.
For example, some families prioritize experiences over saving; kids might agree to take out student loans so that the family can go to Peru for two weeks. On the flip side, a family might prioritize education, and the parents might choose to pay for college out of pocket so that their kids graduate without any debt. Other families might value things such as giving to charity or acquiring real estate.
Whatever the case may be, by determining priorities and tethering spending to family values, you can actually uncover what’s most important to the most important people in your life—building a stronger familial bond along the way.
Taxes are part of life. Although not that many people might enjoy writing checks to Uncle Sam, we all must abide by the law of the land. As you begin thinking about saving, you’ll also want to think about creating a tax plan.
For example, your tax plan might include maxing out contributions to a 401(k) and IRA (which serves the dual purpose of helping you save for retirement while possibly lowering your tax burden), creating college savings accounts, and maxing out a health savings account. Similarly, if you are a small-business owner with a limited liability company, you might evaluate the tax implications of your corporate retirement plan.
Once you understand your priorities and are confident in your tax plan, it’s time to start saving. One way to do that is by automatically routing funds to a preselected account. You might decide to funnel 5 percent of each paycheck to said account, for example. It’s a relatively easy way to stockpile a good chunk of cash over time, without even thinking about it.
You can also build up your savings by pouring any windfalls that fall into your lap—bonuses, oversized tax returns, large dividend payments, and the like—into a savings account.
Building up a good savings account is one thing. Maintaining it is quite another. In pursuing your goal of securing a better financial future starts with paying off high-interest debt—such as credit cards, car loans, and student loans.
You’ve created savings, and you’ve paid off all of your high-interest debt. Nice work! Now, it’s time to take the next step and consider invest some of those savings.
Instead of choosing how to invest your funds on your own, consider speaking with a financial advisor who can work with you to put together an investment strategy that helps you meet your goals.
For example, you might decide to put the bulk of your funds in a balanced stock portfolio while setting aside 20 percent in a high-yield savings or money market account.
Saving money for your family might require you to change your behaviors. If you’re prone to buying things on impulse or spending lots of money on Amazon on items you don’t really need, you may want to rein those habits in. A good rule of thumb is waiting 24 hours before splurging on any high-ticket item.
Saving starts with putting together a financial plan. That way, you know where you are going, whether you are on track, how much spending you have to cut, and where you need to cut it.
Once you’ve determined the non-negotiables—such as that trip to Peru—you can start figuring out where you can reduce your spending. With a plan in place and the wherewithal to stick to it, you can help build up a solid chunk of savings and give your family a more comfortable life.
To learn more about what you can do to enjoy a financially secure retirement, check out our new e-book, The Retirement Planning Guide for People Who Don’t Want to Work Forever.
The EP Wealth Advisors financial planning process starts with the relationship between you and your financial advisor. How do you value a financial coach? Developing a partnership that ensures we understand your goals lets us help you prioritize and organize your financial decisions—so you can achieve peace of mind and live your life.
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