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Are You a Parent Without a Financial Plan?

Here's how to fix that!

by Katie Conroy

Life flies by. It’s an unexplainable phenomenon that the days are so long and the years are so short. As parents, it’s especially easy to see this phenomenon, since it seems that overnight that our children go through their milestones and grow up into independent people. Because things happen so fast, having a financial plan is a must for you and yours. Read on to learn how to set your family up for a secure future.

Assess What You Have

Before starting a plan for the future, it’s necessary to determine what you have right now—that is, your net worth. In short, this means that you need to determine what all your assets are (the things you own outright), determine what all your liabilities are (the things you’re still paying for), then subtract the total liabilities from your assets. The remaining number is your net worth.

This part can take some time, merely because it takes work to gather all the information, and some of the values of your assets may not be readily apparent. If you are a homeowner, for instance, you will need to figure out what your home would sell for in today’s market. Get an estimation as to your home’s value and compare that with your mortgage loan.

Create a Safety Net

Once you determine what you have, then it’s time to prepare for the worst-case scenarios. If a disability arises, you or your partner dies, or health bills mount, do you have a plan to subsidize lost income and cover child-rearing expenses? Here are some safety nets you can put in place:

  • Short-term disability insurance — For a monthly premium, you can protect your family from a percentage of your lost income if you become sick or injured. This is essential, especially if you don’t have an emergency fund in place.

  • Life insurance — For parents, this should be a priority. It protects your loved ones financially from your absence and would provide financial security for years to come. As long as you have minor children and/or a mortgage, this is a great safety net to put in place.

  • Save — There’s no time like the present to start saving. One of the best safety nets you can have is enough savings for six months of all your expenses. That way if you encounter illnesses, high bills, or a lost job, you’re not scrounging to make ends meet. If you’re stumped on how to squeeze out enough money to do that, a financial advisor can help you solidify a personalized and practical plan.

Go Back to School

The decision to continue one’s education has become a vital option for earning a greater income and for career advancement in many jobs/career fields. If you're looking to pursue entrepreneurship, a bachelor's degree is a natural next step for business leaders and entrepreneurs who are trying to climb the corporate ladder. A bachelor’s degree from a quality business school can help you develop the skill set required to further your family's financial security and build leadership qualities that extend beyond the board room.

Make End-of-Life Plans

No one likes to think of the day they won’t be around any longer. However, there are very few things you can do better for your loved ones than plan for your funeral. When you pay for arrangements ahead of time, you protect your grieving family from having to plan and pay for your funeral when they aren’t mentally or emotionally up to it.

You can consider establishing a joint savings account that will pass outside your estate and designate your wishes in a note to your family. Setting up guardianship for your children and drawing up a will are also musts for parents. If you haven’t undertaken these tasks, it’s best to meet with an attorney and ensure your desires are established in writing.

While we all have great intentions to plan for the future, time can easily escape us. It’s important to make it a priority to plan for your family’s financial success. Start by assessing what you have and then create some safety nets in case you fall on hard times. Finally, prepare for the day when you will not be around by purchasing prepaid plans—saving your family time, expense and emotional strife.

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