Why Every Family Needs Financial Planning.

Every family should learn and practice good financial habits. Though it is not something many people learn in school, financial stability eases day-to-day struggles and can set your family up for future success.

Financial health is almost as important as your actual health. Without it, it can be hard to take care of your family, do things you love, and let’s be honest, it’s stressful when your finances are not in order. Most American families are one emergency away from financial ruin.

Good financial standings are the difference between a high or low interest rates on big purchases. Be it a house or car, more than likely you will purchase via financing. People with better credit scores and less debt experience lower interest rates. Paying a little extra interest seems like a small thing, but it could affect your budget and be the difference of affording a similar house for two very different prices in two different neighborhoods.

Another benefit of being smart with your finances is your children can be set for life or at least for a very long time. Consider transfers of wealth, and how you want your children to live after you are gone. A simple Life Insurance Policy can ensure some future financial stability for your family in the event something happens to you.  

The most important reason to have good finances is so that your money can eventually work for you, and not vice versa. When making your money work for you, on a small scale think 401K. On a larger scale, consider investment accounts, investment properties, and entrepreneurship. Those with the best financial standings find methods of creating extra income without necessarily doing more work.

The idea that you have to make more money to get in a good place financially is a myth. Though making a ton of money helps, it’s not the only way to achieve financial stability. Being smart in your current tax bracket can make the difference that gets you to the next one.

So how do we get there?

Let’s not pretend setting yourself up for financial success is easy. If it were our parents would have done it and we’d be set for life. However, we all know there are certain barriers, historically and current, that prevent financial success among African Americans, women, and other marginalized groups. Below, MATS has outlined some small things that every household can do to attain financial stability.

Make a budget and stick to it. Most people can live on less money than they earn, they just don’t want to. It requires sacrifices, but the money that can be saved is worth it. Map out your monthly expenses such as bills, groceries, gas, tuition, entertainment, and savings, and don’t exceed the spending limits you set.

Do not touch your savings. The best method is to start a savings account that is with a separate bank, not connected to your checking account. Set up an automated deposit either weekly or monthly and just don't touch it. 

Start accounts for your children. One thing not discussed enough is how strong financial standings affect more than just the adults in a family. Whether it is a regular savings account or something like a CD that they cannot touch until they turn 18, start the savings. Have discussions with your children about finances early on and get them excited to save.

Pick up a second job. Overworking yourself is not something we condone. However, if you have a specific goal like paying off student loans or saving for a house, you should absolutely consider opportunities to bring in extra income. Something like driving for Lyft or Uber may be ideal because it is a commitment-free way to make extra money. 

Nobody likes talking about money, especially if you have very little. It’s a touchy subject, but one we should all be discussing. If you have not thought about how your money can work for you, it’s time to start. If you have thought about it, but have yet to take action, now is the time. At Madison’s Accounting Tax Service, we make it our mission to educate families on financial planning. Schedule a consultation with MATS today, and let’s set your family up for financial success.

 To talk with a Madison’s Accountant email us at info@madisonstax.com or schedule an appointment here.