5 Pitfalls to Stay Away from While Handling Family Finances

Young couples, especially those expecting their first child, must learn how to manage the family budget. Good money management has a direct impact on the future of the kids as well as the relationship between a couple.

Here are six common pitfalls that newlyweds should steer clear of while handling family finances.

Lack of a Defined Plan

The expenditures of raising a child, which can range from medical visits to their college tuition, can be challenging for many married couples who decide to have children. Therefore, as soon as possible after the wedding, even if it’s only the two of you, you should put up a financial plan for your family to ensure that it is financially stable. You must manage your finances and set clear objectives.

Lack of Emergency Fund

Even though your aims are clear, not everything turns out as you had hoped. Unexpected events that may have an influence on your money include unemployment, income loss, and illness. You must create an emergency fund to ensure that you will always have enough to provide for your family, even when the unexpected occurs.

Failing to Teach Your Kids the Value of Money

From an early age, children need to learn the value of money and how to save money. Depending on your child’s age, you can make this into a fun game to help them learn the value of saving money and practical methods for doing so.

Failure to Set Aside Enough Money for Your Child’s Education

Even before your children are born, you should think about their education if you decide to have them. This provides you more time to get ready for each phase up until graduation. This guarantees that their education won’t be disrupted by any monetary issues the family could have.

Failing to Divide Household Finances Between the Husband and Wife

The couple should talk about and explicitly define their financial responsibilities after the wedding day. For instance, contributions to the family fund (based on each person’s salary); if the husband pays the rent and utilities, then the wife should pay for groceries, savings, etc. In the event of a significant financial emergency, both of you will feel upset if neither of you has responsibility for the various bills.

On a more positive note, here are 6 more tips on how to organize your family’s finances.

1. Determine your financial objectives and how to meet them

Establishing your financial goals first will make organizing your family’s goals the simplest. We are more likely to hit our targets if we have a number to shoot towards. For instance, estimate the expense of a family vacation before starting to save weekly or monthly toward that objective. You need to plan for this and think carefully about the figures you use.

2. Make a budget that includes your monthly revenue and a strategy for allocating it to cover costs

Track your monthly expenses after you’ve established your goals. Now is the moment to allocate all your funds—we mean all your funds—to a category. You shouldn’t have any money left over after creating a budget. Why? You should set aside money for savings, clothing purchases, and socializing. Budget does not imply financial ruin.

3. Track your spending

Stop using shoebox methods and use internet tools to keep organized. There is a lot of spending tracking applications you can find online. We as a culture, have lost sight of how much money we spend when ATM cards became common. If there was money in the account, you could just swipe the card and proceed. There is no justification for failing to keep track of your costs now that there are so many apps available. When you realize how much money you spend on items, it might be eye-opening.

4. Create a system for paying your bills

Use different labels in your bank account for various expenses. It’s crucial to have a reliable strategy for paying bills. Have accounts for things like paying my mortgages, saving for holidays, taking vacations, etc. Do this so that it is simple to see how much money is set aside for each bill and how much you spend on other things. Additionally, having to transfer funds from one account to another to make a purchase makes it more difficult.

5. Check your account statements again for fraud, errors, or term modifications

Examine your bank and credit card statements to see what you spend each month. Don’t forget to destroy outdated financial documents as well. How many of you have the bad habit of signing up for a free trial that requires a credit card and then failing to cancel it? Or perhaps you receive a notice and choose to disregard it. Whether it is 500 pesos or 10,00 pesos, it is still your money, and that is what matters most. Pay close attention because minor fees can add up.

6. Engage in communication with your partner

Be prepared to talk to your significant other about the situation if you decide to create a checking account or combine your funds. Your spending will increase if you both swipe credit cards simultaneously without telling each other. The idea of “my, yours, and ours”—a separate account for yourself. At the end of the day, you can have an account for your partner, and if you are feeling fancy, a joint account into which you can deposit a portion of your earnings.

Spare yourself from a financial burden in the future, prepare now and do it well!

The sooner you begin putting your long-term financial plan for your children’s education into action, the better, as it will act as an “armor” to shield them from everything life may throw at you. Young parents frequently get long-term life insurance and mutual fund investments as a safety net to give their kids the security they need to pursue their aspirations. This practice is widespread throughout the world.

More importantly, should the unexpected occur before your children reach adulthood, insurance products are a surefire method to safeguard their future. Talk to a reliable financial expert right away if you’re still unsure about where to begin.