When you are supporting a family, life planning takes on a different meaning. Not only are you responsible for achieving your own financial goals, you are also responsible for setting the foundation for your children. Life planning is even more important for families. The guide below can help your family create the life plan that is best suited to address your needs.
Evaluate Your Situation
Life planning in NYC begins with identifying where your family’s finances stand now. Today, many families rely upon two incomes, yet still find themselves living paycheck to paycheck. Other families have a vision for the future, but aren’t clear on what is necessary to achieve that vision.
The first step is to evaluate your family’s total assets, debt, income and expenses.
Assets
Consider anything of value that your family owns. This includes:
- The market value of your home.
- The balance in your checking, savings and money market accounts.
- Your retirement savings.
- The market value of your automobile(s).
Add the value of all of these items together to determine your total assets.
Debt
Next, determine the total of your debt, including:
- The balance of your mortgage.
- The balance on your credit card accounts.
- Any personal loans, including automobile loans.
- Student loans.
Net Worth
Subtract your debt from your assets. This determines your family’s net worth. The higher the number, the better your financial position. If this number is negative, your assets are not sufficient to cover all of your debt. This situation is not uncommon for new families, especially those who are carrying large student loan debt.
While net worth is an important indicator of financial health, it only paints a portion of the picture. Understanding your monthly budget and cash flow is equally important to determining financial fitness.
Income
Write down all of your sources of income on a monthly basis:
- The take-home pay from all of your jobs.
- Other sources of regular income, including disability payments and annuities.
The total of this is your family’s income. This represents the total amount of money your family is able to spend on all of your expenses without taking on additional debt.
Expenses
Your family’s monthly expenses represents all of the outgoing money from your household. Determine your monthly expenses including all the following:
- Your rent or mortgage.
- The total of all monthly debt payments.
- Utility costs.
- The cost of tuition or child care.
- Groceries and dining out.
- Entertainment expenses.
- Clothing budget.
- Savings plans.
Take care to track where every dollar of income is spent during a month. Once you understand how your money is being spent, you can make informed decisions about where you want to be financially and how you plan to get there.
Establish Goals
With a full understanding of where your family stands, you can now establish goals based upon where you want to be. The goals your family develops should be reflective of both long-term and short-term objectives. Although each family’s life planning will be different, there are several common goals that apply to most individuals. Common goals include:
- Paying off debt.
- Taking a family vacation.
- Saving money for retirement.
- Saving money for college.
- Having sufficient life insurance.
- Establishing an emergency fund.
It is a good practice to involve the entire family in the goal setting process. Likely, the entire family will need to make adjustments to meet financial goals. You’ll have a better chance of getting the family on board if they are involved in the life planning process.
Estimate how much money will be required in order to achieve your financial goals. This part of the life planning process can seem overwhelming, particularly when reviewing long-term goals, such as saving for retirement. It is important to not only look at the total amount of money required, but also to consider how long each goal should take. Aim to have several short-term goals in addition to long-term goals. Achieving goals as a family will continue your momentum and provide a tangible way of reaping the rewards of your efforts.
Create a Plan
You know where your family stands financially as well as where you want your family to be. The question becomes, how to get from point A to point B. The first step is to evaluate your budget. Are you able to allocate the necessary funds based on your current standard of living? If so, congratulations, you are well on your way to meeting your financial goal. Unfortunately, this case is the exception rather than the rule. Chances are, your family will need to make adjustments in order to meet their financial goals.
If your current budget does not allow for your goal savings you can adjust in two ways:
- Decrease expenses: There are likely some areas in your budget where you can spend less money. For example, if your family dines out on a regular basis, preparing meals at home can generate significant savings. Another place for fast savings is the entertainment budget. A family can have just as much fun watching a movie together at home as they can during a trip to the movies, while spending substantially less money. Involve the entire family in brainstorming ways to save money. Be sure to point out how small changes now can have a large pay out in the future.
- Increase income: Once you’ve trimmed your expense budget as much as possible, evaluate your income. There may be simple ways to increase your family’s income, including providing child care services to other parents or taking on part-time work. Again, even small amounts of additional income add up. Your family can make the decision to funnel all additional income towards your financial goals.
Execute Your Plan
Put your plan in motion by being an example. Schedule regular family meetings in order to touch base with all family members. Encourage one another to stay on track. Additionally, regularly review your family’s financial goals. The goals should be reflective of who you are as a family and realistic given your family situation. Life changes, such as an addition to the family or job change, should be accompanied by a review of your family’s goals. You may need to make adjustments to your NYC life plan to reflect your current situation.
A certified financial planner can provide the support and expertise your family needs to meet their goals. Having professional assistance can ensure your family stays on track with all of their financial goals.
