Effective family financial planning is essential to have so that we do not have problems later in life or in times when our financial need exists due to certain reasons. The steps in effective financial planning can be broken into;
1. Incoming and Outgoing Expenses
We will find the financial affairs of the family becomes much easier if we can manage all the income sources and expenses in the family. For example, we need to know how many family members that are on a monthly salary, the overall family expenses ranging from mortgage and car payments, water bills, electricity, telephone, and children’s school expenses.
2. Provide Family Financial Goals
One of the most important measures to move towards financial stability is to determine our needs. In this regard, it will be helpful to determine exactly what we need in life as individuals, couple and families. These financial goals may require short-term and long term goals. However, these goals must be something in the range that we can afford, for example something that we possess within the time frame we have set.
3. Prepare Budget and Estimate Cash Flow
In reality, financial planning becomes more difficult to manage if we do not know how much income we receive each month and what we are actually spending. This information should be provided first, if we want to determine whether we have to increase our revenue or reduce expenses to achieve the financial goal that we have set. Once we list down all the income and expenditure, we can start preparing the budget and see if we have surplus funds that can contribute to our goal.
4. Dividing Income by Priority
The monthly income of an average, happy family should be spent according to priorities in which the family can live in peace and comfort. Normally, expenses for basic needs like food, beverages and clothing require 1/3 of the total monthly family income, another 1/3 for bills and gas while 1/3 more should go to savings or investments for the future.
5. Reduce Dependence on Credit Card Use
In today’s economy, the use of credit card has become a necessity for everyone especially for working adults. If credit card is used wisely, it can be very convenient to the users. However, if it is used without control, it can be a dangerous financial instrument and can lead a consumer into bankruptcy due to the high interest rates charged by the bank..
6. Make Assumptions about the Future
Change is something that presses us out of our comfort zone. As the world changes, so does the economy. When the economy changes, it can affect our finances. All these changes are difficult to avoid. Therefore, we must not only be prepared for a change but to make plans how to deal with it. For example, how to deal with the effects of inflation, rising oil prices, freight vehicle and the increase in toll charges. All these will certainly affect our financial situation.
7. Financial Strategy
For every financial goal that we prepare, we must have a strategy on how to achieve those goals. For example, if we intend to buy a house a year from now, we need to know how much we should provide as a down payment and what resources we can use.