This is a collaborative post. All opinions are my own.

There's something about having kids that makes you want to get your financial ducks in a row (or at least, that's how it worked for us). Before we had babies, we kept track of our spending but we weren't very intentional about it. We had plenty of money flowing in: we were both working good jobs and paying cheap rent for the basement unit of a duplex. Buying coffee every day, eating out for lunch, grocery shopping at the most convenient store even though it was way more expensive...we didn't give it a second thought. Then we had Ian. Before he was born, I really wasn't sure if I would continue working or quit my job. But after he was born prematurely and spent his first month in the NICU, I just couldn't imagine leaving him. Honestly, I think I would have wanted to stay home either way, but his tiny vulnerability gave me the push I needed to make that choice decisively. So we found ourselves in a different financial position. One income instead of two, in a high cost of living area, renting a basement that we didn't want to raise a baby in. With the added expenses of diapers, baby gear, and hospital bills, plus saving for future expenses like college. All of a sudden, we really needed a plan for our financial future. The irony is that becoming parents meant we had less money to work with...but it also gave us the motivation to take control of that money. We're certainly not experts by any means, but here is what I recommend.

Start With a Clear Overview

You can’t figure out where you’re going until you know where you are. So the very first step is to get a clear overview of your current financial situation. Take a good hard look at the full picture, together. If you have a lot of debt or your spending is out of control, this might not be very comfortable, but it is so important. If you have your head buried in the sand, you can't see the way forward. 

Define a Budget

Setting a budget is the next essential step. Tell your money where to go, rather than wondering where it went. You're in charge. If your goal is amp up your savings, then don't just see what's left at the end of the month. Start with how much you want to save, then work out the rest of your budget from there. Consider each line item intentionally instead of assuming it needs to be there. Can you cut out subscriptions? Do you actually use that gym membership? Do you really need to spend money on clothes every month? Make sure your money allocation actually matches your goals.

Save an Emergency Fund

You never know what’s going to happen in this world, and there will inevitably be months where things don't go according to your budgeted plan. Those surprise expenses (hospital bills, traffic tickets, broken appliances, and the like) can put us into financial difficulties if we don't have sufficient money set aside to handle them. That's why it's so important to build up an emergency fund of at least $1000. It's not a fun reason to save for, but you will be grateful for your efforts when the money is required. 

Read Up On Good Habits

One of the most frustrating things about the education system is that it doesn’t do a good job of teaching you about money. In fact, most schools don't teach kids anything about money management or good money habits. Luckily, there is a wealth of knowledge (literally) in books and blogs. The time you spend reading these kind of materials can pay off profoundly in your financial life. A few books that have helped me with the principles are The Richest Man in Babylon and Rich Dad, Poor Dad. 

Get On the Same Page 

If you and your partner have a completely different outlook when it comes to finances, you won't be able to make much progress toward your goals. Money, after all, is the number one cause of arguments for couples. This is why it's so important to communicate and get on the same page about your financial priorities. Ultimately, you both want your family to be healthy, happy, and prosperous, right?

Avoid Lifestyle Inflation

Getting a raise doesn't automatically mean your money situation is better. You have to avoid the trap of lifestyle inflation: boosting your lifestyle in accordance with how much you take home. You could earn a high salary, but if you use that as an excuse to get a bigger house, a nicer car, fancy clothes, expensive date nights, and the best private schools...then you could still be living paycheck-to-paycheck.  There's always something extra you could spend your money on. If you add new "necessities" every time you get a raise, or upgrade your lifestyle because you "deserve" it, then increasing your income will have limited impact on your actual money situation.

Learn How to Invest

Money management is not just about keeping your purse-strings closed; it's just as much about spending in the right places. Investing in your future is a crucial step, whether you're buying mutual funds, signing up for a course that would lead to a better-paying job, or buying a house. Know the difference between good debt and bad debt. If it’s something that will eventually bring more money into your world, then it’s probably good debt. If you’re spending on a temporary indulgence, then it’ll be bad debt.

Consider the Future of Your Job

Obviously your job is an important part of your financial picture, so make sure to choose a career in a field where job growth is expected. If you're concerned about the future of your current job, it might be time to consider a career switch. For example, a person who can deliver insights into the world of big data will find plenty of employment options. If that field sounds interesting to you, then look at studying for an online masters in business analytics. It’s a smart way to ensure that your family’s finances are prosperous in the future. 

Accumulate True Assets

An asset is something that puts money in your pockets, a liability is something that takes money out. Most people think their house is their biggest asset, when in fact it's probably a liability. If you're serious about improving your finances, look at ways to turn liabilities into true assets. With your house, can you rent it out on Airbnb when you go on vacation? Or can you sell your big house and get a duplex instead? With a car, can you deliver for Doordash or Instacart as a side hustle? These ideas won't be for everyone, but if you're willing to sacrifice a little, they can accelerate your savings rate significantly.

Work with Experts 

I believe in taking control of your own finances, and there's a lot you can do yourself to create a healthy financial future. But realistically, most of us can’t do everything. Some money matters are complicated and require more advanced skills to manage. If you have a long list of responsibilities (as all parents do), then it’s unlikely that you’ll have the time to figure everything out on your own. When it comes to your long-term financial planning, look at working with experts like an accountant for taxes and a lawyer for your will. They’ll have plenty of experience and knowledge, and can help you make the best decisions. Experts aren’t only for when you are trying to save. If you’ve got yourself in a bit of financial trouble, there is advice to help you curb bad habits, or help when you are looking to wipe the slate clean. While bankruptcy isn’t an ideal option for many, experts can help you choose something like a consumer proposal instead, which works to help you keep your assets. Experts will always show you the best way. We can think that we are too proud to ask for help, but you need to know when you can’t do it by yourself. 

Teach Your Kids Good Habits

You and your partner are going to be the main players when it comes to securing your family’s financial future. However, it’s important to also teach good habits to your kids as well. After all, there will come a time when they’ll have to navigate the murky world of money all on their own. You can ensure that they’re well-prepared for this by teaching them good habits from an early age. If they know how to budget and manage their money, then they’ll be set up for a responsible financial life when they’re adults. This is something I've been considering a lot as our kids are getting older...how will we teach them about money? And when should we start those lessons?

Review and Update 

Finally, remember that your financial situation can’t run on autopilot. It needs to be actively managed as the years go by, and especially as and when things change. Be sure to periodically review and update your financial practices. That way, you’ll be highly unlikely to fall into any errors.

Name, please

Email (hidden)

URL, if you wish

Comment