In a recent research carried out by the Credit Protection Service (SPC Brasil) and by the National Confederation of Shopkeepers (CNDL) in UK residents capitals, it was found that 58% of the interviewees are not dedicated to the family financial planning, ignoring the balance between your income and expenses.
The consequences of this are as varied as they are serious. For example, the absence of financial planning can lead to the accumulation of debt. In addition to making access to credit more difficult, default it affects their standard of living and stands as an obstacle to the achievement of their goals.
- Why have family financial planning?
- Where to start?
- How to apply family financial planning to your routine?
Want to know everything about it? So, continue reading this post!
Why have family financial planning?
In addition to the data previously shared, it is worth reinforcing the importance of family financial planning based on another dangerous statistic: over 60% of UK citizens are in debt with their credit card<span style=”font-weight: 400;”>.
The degree of default is high and certainly the coronavirus pandemic plays a part in that. But we cannot ignore the lack of financial organization style=”font-weight: 400;”> of the population for the design of that spectrum.
Even more so because the division of expenses and the accumulation of incomes among family members can generate conflicts. Imagine that, without organization and planning, some spend more than others and with services / products that do not add anything to the collective life.
As a result, expenses weigh more than income, preventing financial goals from being set – and achieved, whether in the short, medium or long term.
On the other hand, this type of discipline and planning coincides with the balance between financial expenses and gains, allowing the construction of a gradually greater equity.
And, best of all, immune against new debt.
Where to start?
If the unknown is a key point for the accumulation of debts and the awakening of the financial stress, start by analyzing the real situation of the family budget.
As a result, the direction of income is evident on a daily basis, allowing everyone to readjust their financial habits so that expenses never exceed the family income ceiling.
So, check with us a quick step by step to put family financial planning at the tip of the pencil:
- identify the reality of your financial reality;
- observe the fate of your resources, throughout the month, between fixed expenses (such as rent, electricity bill etc.) and variable expenses (such as supermarket and leisure options, among others);
- evaluate some financial operations that help to monetize the money saved;
- analyze the main risks against your family financial planning;
- set financial goals.
Let's see how this can be established in practice and be part of the daily lives of each of your loved ones?
How to apply family financial planning to your routine?
Like any novelty, the practice proves to be effective over time. Therefore, discipline, organization and collectivity are key words so that family financial planning does not remain in the promise.
That goes for children, too, you know? To learn more about the subject, save it for later reading our article that explores the importance of financial education for children!
In the meantime, let's start with some good practices for this, considering that family home evening is the first step so that everyone is aligned and committed to the process and the result.
Separate fixed and variable expenses
Do you remember that we commented on this in the list above? So, this separation is important so that the calculation of family income and expenses remains under control.
After all, fixed expenses are not going to change. And that already requires that a slice of the budget be directed towards paying them. Consequently, variable expenditures have to be assessed and a spending cap must be established to ensure that the budget limit is never exceeded.
On average, reserving 35% of all income for variable expenses) is an interesting number, as the other 65% of the budget can be used for investments (10-15% of income) and for payment of expenses fixed (from 55 to 60% of the budget).
Set goals for family financial planning
Immediate objectives are usually related to the settlement of debts or even to installments with the days numbered. Regardless of the reason, it is worth having a clear objective on the subject.
This favors the planning of larger and more distant objectives, which are those with deadlines set for more than 12 months ahead. And that is where some alternatives that usually circulate in the UK residents's imagination come in, such as:
Once again, the family meeting offers a perspective from which everyone can express an opinion and contribute to the alignment of objectives. Consequently, it guarantees the participation and motivation of everyone in the process.
Regardless of how much you can save through family financial planning, find out about the best means of investment.
And don't worry about the initial value and monthly savings, as there are options on the market that can start with a investment of only £ 100.
But, in a complementary way, keep in mind that it is essential to align the selected investment with the established objectives. That's because, each alternative has its characteristics, and one of them may have more to do with the family project designed by you, for sure!
Avoid new installment expenses
Control credit card spending it is a positive way to strengthen family financial planning. Because the payment in cash tends to guarantee some discount, in the final price, and guarantees a more effective monitoring of the expenses.
After all, who never preferred to leave a purchase for the following month, with the help of the invoice's due date? But the bill, one day, arrives and the family financial planning has to be very well designed so that unforeseen events do not occur or become frequent.
Respect the family's standard of living
With the spending ceiling (fixed and variable), guide all family members not to exceed this limit. And this is also true for everyday ambitions. For it is common that we want to buy something better, when there is an extra income left in a given month, but the goals must always be remembered.
Otherwise, an exaggeration here and there over there begins to become more common. And that facilitates the derailment of the whole discipline built in the last few months.
The rule is clear, therefore: do not spend more than you have on monthly income.
Exercise financial education daily
financial education it's all about organization. It is not just a question of restraining spending, but of doing it all with wisdom and strategy. Hence, the value of family financial planning.
All because the reason behind this change in attitude has at least one goal. Gradually, with the achievement of these goals (small or larger), family members can witness the evolution, which generates more motivation and engagement over time.
Do not penalize yourself with unforeseen events
Sometimes, due to unforeseen circumstances (such as car repairs or emergency medical expenses), the family's financial planning for that month is compromised.
But that does not mean that the family should take penalties and point fingers at the culprits. The source of the problem, yes, must be clarified and adjustments must be made, but it is an excellent opportunity for everyone to have more flexibility to align themselves with the new scenarios.
Avoid underestimating small expenses
Some villains in family financial planning are tiny – literally. You small day-to-day expenses seem harmless, but accumulated they are great rivals for happy endings.
Thus, it is essential that family members understand and recognize the care with these expenses that seem insignificant. In the total of the month, they are hungry and can damage the budget. Heads up!
Create an emergency reserve
In addition to the investment, there is something of great value for the strength of your family financial planning: the construction of an emergency reserve.
Through it, those unforeseen expenses that we mentioned earlier impact less on family income, and over time this amount can become a fraction dedicated to investment for larger plans.
But it is important to have a minimum amount, that is, to ensure that unforeseen circumstances do not put you to lose all the effort dedicated by your family members.
To help, we have a complete guide for you to develop your emergency reservation. Take a look as soon as you finish this article!
Constantly review family financial planning
We have already talked about this, but it is worth reinforcing: do not think that planning is inflexible. On the contrary: it must be constantly monitored and, above all, always open for adjustments.
THE budget maintenance it is an elementary step that will contribute to the security of your goals and, also, guarantee quick and effective actions to overcome any obstacle that may arise along the way.
And if you are looking for more strategic actions to strengthen family financial planning, here's our invitation: like our page on Facebook and follow us on Instagram, Twitter and LinkedIn to stay on top of all our tips and news on the subject!