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Posted on May 7th, 2020
All you're hearing about is how COVID-19 has us re-thinking everything from free-time to finances. We've pulled together our no-fuss guide to family budgeting and made a few edits given the state of the world, so you can regain or maintain a sense of control over things.
Setting some time aside where you can focus on your finances without interruption is key. This can be extra challenging while sheltering in place. We suggest a budget date after the kids are asleep, or while they're watching a movie in the next room. (Although maybe not Frozen - all the singing that goes along with it could prove distracting.) Whatever you do, make sure to commit to a time where you can give your finances your full attention.
While the idea of talking finances with your partner might fill you with dread, we promise that regular conversations about financial planning will actually alleviate a lot of the stress around the topic. Go into the meeting with an agreed upon agenda so that everyone involved can come prepared. Bringing a positive and collaborative attitude about the future helps to minimize friction. Bringing snacks also helps - no one likes budgeting when they're hangry.
Are you still struggling with your own student debt and a pesky credit card or two? If so, you'll likely want to prioritize debt repayment. Do you have the equivalent of 6 months of your income saved for emergencies? If not, now may be a good time to focus on building your emergency fund. If you have your debt and emergency fund under control and are looking to build wealth; identifying opportunities for investment might be your goal.
Discuss this together and then use the tips below that are relevant to you as stepping stones toward that goal.
Make a list of any benefits you are able to capitalize on, what the amount is, and for how long that aid will last. For example: If you usually pay $100 in student loan repayments a month, and student loan interest and repayments have been suspended until September 30th 2020, that means between now and then, you have 5 months where you don't have to make a payment, which will total $500.
Keep in mind that if you are suspending payments on things like student loans and mortgage, you will need to call your loan provider to request that they suspend the interest.
Identify fixed expenses (ex. rent) and variable expenses (ex. groceries). Understanding how your variable expenses can change from month to month can help you better prepare for a more expensive month.
Listing out your expenses will give you an idea of how much money is left at the end of the month to put towards your main budget goal, as well as putting aside money to a "slush fund" to help you avoid paying with credit when you have a month with higher variable expenses.
Don't forget to keep track of all these payments in your monthly budget.
If you have kids it's never too early to start saving for college. If you don't currently have a line item in your family budget for college savings, take a look at what is left over after monthly expenses and commit to a manageable monthly deposit into a college savings account and add it to your budget. No amount is too small - these things add up over time!
Shameless plug: Don't have a financial advisor? Not sure where to start? We've got you! Scholar Raise makes signing up for a state-run 529 plan super simple. In just 5 minutes you could be on your way to saving effectively for college and all you need is the information on your driver's license & your social security number. No advisor fees, no account minimums. You could even set up an account during your budget meeting.
If you've got your debt and emergency fund under control, now's the time to think about building wealth. Try to allocate as close to 10% of your income as you can to a long-term savings/investing plan - add that amount to the investment line item in your budget. If you're still employed, now is a great time to set aside a little extra, since you're not spending as much on dining out, entertainment and your daily commute as you usually do.
Don't feel bad if you're still paying off some debt and are not able to save a full 10% right off the bat. As long as you contribute something to your investments each month. Once you've paid off your debt, you'll have a lot more money left to add to your investments.
"If you had invested in the stock market from 1999 to 2018, and not touched it, your money would have tripled. But if you had traded in and out and had missed out on just the 10 best stock market days over that period - just 10 days - your returns would have only been half of that. People may think they should wait for a pullback to invest, but the data shows that historically, "time in the market beats timing the market." - Sylvia Kwan
If you have anything left over at this point, you can start setting additional financial goals that make sense for your family. Don't forget to consider want vs. need!
Same goes for cost-prohibitive extracurriculars for you and your kids. Of course you want the best for your family, but living beyond your means to send your child to a socially distanced equestrian camp, or for you to take up vintage car restoration is not a smart idea. If your interests are beyond your budget, that doesn't make you a bad parent. For the time being, look into online classes and YouTube tutorials that could teach the basics and some theory about your interests. Once things open back up, look for creative ways in which you can begin to expose your family to the things they're interested in without breaking the bank. Volunteering, open-days, community events, and work trade opportunities (if your child is old enough) are all great places to start. Always ask for scholarship or sponsorship opportunities.