During my single days, I envisioned my future husband to be handsome, witty, intelligent and sensitive without being wimpy. Fortunately, the guy I married is all of those things -- plus, he's financially responsible. I resisted his penny-pinching ways in the beginning, but have since learned to embrace his fiscal thinking because it's best for our long-term stability.
Unfortunately, money woes are common and often lead to fighting among partners. Once kids join the fray, money becomes even scarcer than it was pre-parenthood. Naturally, the various financial obligations that face each family have the potential to cause sleepless nights. Right now, many families are living paycheck to paycheck, so it's important for couples to get educated on all things money-related. Check out our list of ten mega-important money questions to get your brood on the right financial track.
Can you afford stay home with your new baby? Find out on the next page.
10: Can I Afford to Stay Home After Baby is Born?
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Everyone's financial picture is different, so it's impossible to answer this one across the board. Families with a lot of debt, like school loans, car payments or credit card bills, will probably have a tougher time adjusting to one income than a family with only a mortgage and incidentals. First, take a long, hard look at your current expenses and be sure to consider the impending costs of childcare and other baby expenses to see how things will change. Then, spend several months before you quit your job living on the budget you intend to adopt. You'll have to make some lifestyle adjustments, but tightening the old belt will give you a clearer picture of what life will be like on one salary; plus you'll save some much-needed moolah in the process. Many financial advisers advocate the "cash only" system because it's harder to part with cash than it is to swipe a credit card, and it makes you more aware of how much you're spending.
9: Can I Reduce My Family's Grocery and Clothing Costs?
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With a little extra effort, it's possible to significantly reduce grocery and clothing expenses. In recent years, couponing has become all the rage among the fixed-income sect, so consider approaching a friend for tips or even attending a seminar. Along the same vein, make a habit of planning meals in advance, so you only buy what you need for lunches and dinners, rather than a bunch of random stuff that strikes your fancy. Next, consider cutting unnecessary items from your list. For example, rather than shell out cash on bottled water, fill up your own reusable container.
In terms of clothing, take an honest look at what your kids really need. A couple pairs of shoes is enough for each person, so resist the urge to promote your daughter's closet to Carrie Bradshaw status. Also, embrace the "new to me" mentality by purchasing used at thrift stores or consignment sales. Other great options are clothing swaps with other mothers and scouring the internet for deals you might not find in stores.
8: What Should a Family Budget Look Like?
Every family's finances are variable, so your ideal budget really depends on your particular expenses. Consider using am online budgeting tool that allows you to input your estimated expenses for things that both stay the same (mortgage, car payments) and change every month (utilities, credit card, groceries). Finance and savings guru Clark Howard swears by free budgeting tools like Mint.com, which keeps track of where your money's going and even lets you know if you're approaching your spending limit.
According to CNBC, the ideal family budget should break down something like this:
- 30 percent to housing
- 18 percent to transportation and related items (oil changes, gas, other maintenance)
- 10 percent to debt
- 14 percent to food and other daily necessities
- 7 percent to household bills (cable, power, etc.)
- 10 percent to short- and long-term savings
- 11 percent to miscellaneous expenses, such as child care, birthday gifts, charity, etc.
7: What Counts as Debt?
A lot of people think mortgages and car payments are necessary evils, so they don't count as debt in the same way that loans do. Unfortunately, they're wrong. Anything that you can't pay off in full at the end of every month is debt. So, unless you can afford to pay cash for your entire home, you're in debt.
Debt-reduction expert Dave Ramsey advocates the "Debt Snowball Plan." Simply choose one particular debt to tackle at a time, starting with the smallest and working your way up. Every time you pay off a specific bill you'll feel more energized to continue working your way out of the red. Of course, you'll need to make minimum payments on all of your other bills to avoid interest and late fees. This and all other approaches will take time, but getting out of debt is critical to long-term financial viability, so stay the course!
6: Should I Save for Retirement or College?
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The short and sweet answer is retirement. If need be, your kids can always take out affordable student loans to cover education-related expenses. If you don't save for retirement, though, you run the risk of working well into your golden years when you should be focusing on your health and grandkids. In addition, failing to save for retirement is risky because healthcare and other costs are sure to mount as you age. If you and your husband don't plan for senior expenses you run the risk of making your kids foot the bill for you.
5: How Can Single Moms Make Ends Meet and Still Save?
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Single moms have all the responsibilities of a two-parent household, but often with less or even nonexistent assistance from anyone else. For everyone -- not just single moms -- paying your bills and still finding some cash to put away is all about living within your means. To get on the right track, create a realistic budget and stick to it as strictly as possible. If you're on the lower end of the income scale, be sure to investigate and apply for government assistance options. There's no shame in accepting aid, particularly if it helps your family establish a solid future. Lastly, collect child support when applicable and make sure the terms are on paper in case of delinquency.
4: Should I Consider Investing My Money?
Automakers are pushing leases now that more people are keeping their cars longer. Beware this wallet-unfriendly trap, though. Leases tend to be much more expensive over the long haul than buying a vehicle outright or even over time.
Given the volatile nature of the stock market, it's easy to be scared of investing, but doing so can payoff in the long term. In short, it's always better to select investment opportunities that help you avoid paying taxes and put your money into something that will earn more interest than your standard savings account. There are many low-risk options for people who don't want to chance the stock market, but still hope to make dividends. Investment opportunities are numerous, so it's usually best to meet with an expert to identify the options that best suit your needs. A few of the selections are 401(k) retirement plans, futures, mutual funds, Roth IRAs, CDs, stocks and bonds. Some investment plans charge penalties if you take funds out before retirement, however, so make sure you still have plenty of savings available in an accessible format for emergencies.
3: Can We Afford a Vacation?
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Absolutely! But if money is tight, you might need to work a bit harder to find a deal you can live with. Once you pick your destination of choice, do your due diligence finding a place to stay that offers discounts, free nights if you stay a minimum and reduced rates at local attractions.
If you have to fly, try to be flexible with your dates, since certain days of the week are cheaper than others, depending on where you're going and which airline you're using. Also, off-peak months are cheaper. So, if you want to head to Disney World, avoid Spring Break and the weeks around Christmas. As an added bonus, you'll also miss a lot of the crowds! If an faraway destination is still too pricey, consider a "staycation" instead. For example, hit a local campsite or spend a weekend enjoying the sights of your nearest big city.
2: How Can I Teach My Kids Not to Make the Same Money Mistakes I Did?
Fourteen-year-old Willow Tufano recently purchased a home previously valued at $100,000 for $12,000! She split the cost with her mother, fixed the home up and now rents it out, all for a tidy profit.
Young adults often get into financial scrapes at frighteningly young ages. Help your kids avoid the stigma of bad credit by starting their financial education early in life. First, set a good example by not blowing money on stuff you don't need and always paying your bills on time. Even if you don't think they're paying attention, they probably are.
Preschoolers enjoy collecting spare change in a piggy-bank or toy cash register. Once your kids hit school age, they're capable of earning an allowance for completing predetermined chores. Tweens and teens are old enough to understand that they must pay for certain things themselves, rather than always expecting you to foot the bill for trips to the movies and mall. Encourage them to save their money and earn extra cash by babysitting or completing chores around the house. Go with older teens to open a bank account and help them keep track of their earnings, spending and interest accrual.
1: Do I Really Need Life Insurance?
More than likely, the answer to this question is a resounding "yes." People without dependents don't need to worry about life insurance so much, but if something happens to one or both parents, there will still be expenses to pay and children to rear. Of course, the amount of insurance a given person needs varies according to debt, expenses and other factors. Clark Howard recommends purchasing life insurance in the amount of 10 times your annual salary, especially if you have a mortgage. Stay-at-home moms should also be covered, since child care is outrageously expensive.
Many employers offer staff the option to purchase life insurance through a particular company, and some even give a set amount to each employee. If you choose to go another way, be sure to thoroughly research financially solvent companies that boast low premiums and high ratings. Always read the fine print and understand the terms of your policy to avoid unwelcome surprises down the line. Hopefully, this is one safeguard you'll never need to take advantage of, but it's important nonetheless.