There is no doubt that by bringing a new little person into the world is an overwhelmingly amazing and wonderful thing to experience. But figuring out how to put strong, healthy financial management in place for a new family, is also an overwhelming but stressful experience.
And let’s face it, not all of us are finance whizkids or want to be! But here are some easy tips to manage your family’s finances like a pro.
Tip 1: SPEND LESS THAN YOU EARN
This tip is not just an important part of keeping your family’s finances in order, but it is also a crucial element of any financial plan. Spending less money than you and your partner earn is the first step to ensure more stability and more room to breath when it comes to finances.
If you were the one screaming ‘Easier said than done!’ at the beginning of this section, you’re not wrong! But there are some relatively easy things you can do to ensure you’re not spending outside of your means. First, know your income. Knowing how much money you are bringing into the household will be the first step in understanding where the money comes from and where it’s going. Second, by knowing how much is coming in, helps you to draw up a budget (see below)! Third, use some handy money-saving apps to help to identify those items where you overspend. The great thing about these apps are that they are free & non-judgemental 🙂
Tip 2: KEEP TRACK OF YOUR SPENDING
Drawing up a budget to track monthly spending can really be an eye-opening exercise that helps you to understand your financial habits (good and bad). Recording all of your receipts for a month can give you useful insight into how to budget. But if this sounds like too much work, there are a number useful budgeting apps that streamline the task for you – try out 22Seven or most South African banks have this online functionality available to their clients now – and it’s for free! Let them help you to take the slog out of keeping track of your expenses and help you give some insights in how to curb those bad spending habits. Knowledge is power and when you know exactly where your money is going, you’ll be better equipped to draw up a family budget that is realistic about your spending habits, that helps you to spend within your means and that takes your children’s needs into consideration.
Tip 3 SET UP AN EMERGENCY FUND
The only certainty is that life is unpredictable. And when you have a family to look after it is important to have contingency plans for those unexpected things. By setting up an emergency savings fund can really help to remove some of the stresses and anxieties for when your family faces unexpected income loss or more likely, unexpected expenditures such as medical bills or a car giving you trouble.
It is recommended to have a minimum of three months’ worth of basic living expenses in your emergency fund, but the more is always the better. This safety net will help you to avoid accessing other sources such as withdrawing from your retirement fund (which is NEVER a good idea) or going into expensive debt (which is also NEVER a good idea).
Wherever you decide to build your emergency fund, just be sure to invest it into a financial vehicle that is easy to access, low cost and that has low-risk of losing your capital. Your bank should have these types of accounts available. Ask around.
Tip 4 USE TIME-SAVING MONEY TOOLS
As a parent, you know best how precious time is which is why we understand that you don’t want to spend hours of your time dealing with money matters. Thankfully, you can save by doing a few simple things.
First, sign up for mobile banking (if you haven’t already). This will allow you to check your finances, pay bills and manage your budget (if you bank have this functionality). Most banks also offer the option of setting up automatic deposits into a savings account for emergency purposes (see Tip 3 above). This takes the worry and management off your hands so that you can focus on other important family matters.
Tip 5 COMMUNICATE COMMUNICATE COMMUNICATE
Be open about finances with your partner. This doesn’t just mean knowing how much each person is bringing home but also means discussing big purchases and expenses and how to manage your budget. As a family unit, you and your partner will need to establish the needs and priorities of the household and be talking about how to best implement your budget effectively. Being open about family finances will also help foster a healthy and trusting relationship between you and your partner.
Last thoughts: as a new or young family, it’s important to get your thinking right when it comes to money and what your family needs (read our previous article here). By implementing these 5 easy tips will go a long way in putting a system in place that will remove the anxieties around finances. At Hero Life, we’re happy to help young South African families with their finances or point you in the right direction.
Author: Kosie Jansen van Rensburg, Co-Founder @ Hero Life
#BeAHero #SuperSavvy #HeroParents
This article is to provide general information on the subjects covered. It is not, however, intended to provide specific advice or to serve as the basis for any purchasing decisions.
Hero Life is underwritten by Guardrisk Life Ltd an authorised Financial Services Provider (FSP 76).
Advise is rendered by representatives mandated by MMI Group Limited trading as Metropolitan (FSP 44673).