4 Steps To Be Financially Prepared
Did you know that in the United States alone it can cost more than $200,000 to raise a child? Whether your child is a newborn or a teenager, understanding how to become more financially stable is something parents often have to do more than once. From buying a house to managing a budget, becoming financially prepared can save you and your family precious money that can then be put toward savings, vacations, or college funds.
Are you wondering how to become a more financially prepared parent? If so, here are four steps you can explore to take charge of your finances, allowing you to not only do more for your kids but also to be a better financial role model for them.
1. Become a Homeowner
Owning property is a major financial asset. Parents who are also first-time homebuyers should take their time learning about the housing market. They may have a lot of additional priorities— like school districts, nearby parks, and playgrounds, homes with space for large yards and multiple car garages. Before you begin to look at these houses for sale, be sure you have a budget so you know what you can actually afford and get pre-approved for a loan that size.
2. Follow a 50/30/20 Budget
Managing a household budget can be very demanding on parents, especially those who are not comfortable talking about finances or calculating budgets. The 50/30/20 formula is a simple, easy way to stay on track of your family’s budget. Be sure that your major bills — mortgage, car notes, utilities — all add up to no more than 50 percent of your monthly income. Next, only 30 percent of your income should be used for non-essential bills — such as your Netflix subscription — and entertaining yourselves by shopping, eating out, or going to the gym. And finally, the remaining 20 percent you put into savings each month.
3. Start an Emergency Fund
While most families have savings, few separate that from their emergency fund. A savings account subsidizes big purchases like replacing a broken laptop or repairing the windshield on your car. An emergency fund is more like a safety net for crisis situations. These can be times where you face a much larger financial burden — like when you or your spouse is unexpectedly laid off or you are looking at a long hospital stay. A solid emergency fund should roughly equal three months of your household’s income. Because it’s much larger, it can take time to build an emergency fund. Be patient and stick to your budget.
4. Take on a Second Job
If you really want to boost your finances, consider getting a temporary second job. A second job is a great way to put money into your emergency fund, pay off your debt, or begin saving for childcare. If you want something simple, you can pick up a night or two delivering pizzas or waiting tables. Others may take on professional contracts, a popular option in today’s gig economy. Many parents make extra cash driving for a rideshare company such as Uber, freelancing, or working part-time online jobs.
When it comes to organizing your finances, you can’t predict the future, but you can plan for it. This is especially important for parents who need to stay afloat during emergencies. You have more to consider with a family depending on you. That means that working to be more financially savvy is more than a financial goal; it’s a family goal. It can have a tremendous impact on the lifestyle and opportunities that you offer your child now and in the future.
Today’s Guest Blog is from Sara Bailey of The Widow.
When Sara lost her husband, she quickly learned there is no handbook for those who have lost a partner and suddenly find themselves raising children on their own. She created TheWidow.net to support her fellow widows and widowers.
Want more about being Financially Prepared? Check out Save Me The Money!