Taking care of your family includes taking steps to procure future financial security of yourself, your spouse and your children. Saving money for emergencies and for later retirement can be difficult to do when current financial obligations seem to take every last penny. However, even on a tight budget there are ways to make saving money more feasible. The following tips will help you get started on building your family’s secure financial future.
1. Discuss money with your spouse
It is important to talk about your finances in order to understand each of your philosophies regarding spending, saving and budgeting expectations. The subject of money often has deep emotional significance and can be divisive; discussing it will allow you to determine each other's attitudes and open up lines of communication. Consider mixing up already established roles, including who pays the bills and who balances the checkbook. This can help each of you become more aware of the family finances and reevaluate your priorities.
2. Figure out a budget
This idea is often rejected by people who wish to maintain freedom to buy whenever and whatever they wish. However, it is one of the only ways to get control over your spending and will actually provide more financial freedom in the long run. Begin your budget with the categories in which your expenditures normally fall, such as house payments, food, medical expenses, car payments, entertainment, household items and any other categories that fit your family’s needs. Figure out how much money you will need each month in these categories and make it a goal not to overspend. After you have evaluated your spending habits, you can start to cut spending in certain areas to save money. The easiest categories to cut are food, entertainment and miscellaneous expenses.
3. Distinguish between wants and needs
Determine which items in your budget you can live without for a while. For example, if you go out to lunch every day and spend $7.00, you could save quite a bit of money by bringing a lunch from home. Over a period of ten years, seven dollars per day adds up to over $16,000. This could be a significant addition to your savings.
4. Pay yourself first
After getting paid, try putting an already determined amount into your savings prior to paying any bills. Begin with only a small percentage of your income, and gradually raise the amount as you become more accustomed to less spending money. Consider taking automatic payroll deductions so you don't miss the money taken out.
The later you begin saving, the more difficult it will be to reach your financial goals. When you are young, however, the small amounts you save will compound over time. With much less effort, you will reap much greater rewards. For example, between the ages of 25 and 40, for every ten years that you put off saving, you will have to put away approximately three times as much per month to get the same result. After age 40, that increases to four to five times as much per month. Starting as early as possible will pay big dividends in the long run.
6. Save for emergencies
Retirement is not the only time you will need money saved. Emergencies may include things as severe as a layoff, disabling illness, or death. It is also safe to be prepared for less difficult problems, such as the car breaking down or the roof leaking. One way to measure how much you should have saved for such occurrences is to put away enough to cover your family's expenses for three to six months. Start small and set a goal to put $1,000 into savings. After that, add to your savings until you have three to six months’ worth of income saved. Don’t use this money for anything other than true emergencies.
A. Lynn Scoresby, founder and president of My Family Track , First Answers , and Achievement Synchrony , and has been a marriage and family psychologist for more than 35 years. He has published more than 20 books and training programs.