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Financial Planning for Families: Focus on the basics

(Estimated reading time: 4 min)

The conversation often starts something very much like this: “We don’t know what we’re doing right, what we’re doing wrong, what we haven’t even thought about – where do we even start?”
As a parent of two young girls, I know all too well the intense focus on the here and now that is required to keep up. That often doesn’t leave the energy and space we feel we need to tackle the most important elements of laying out what makes up a good financial plan.

The good news is that, for most people, as in many areas of life, attention to the basics will go a long way for most families.

A good way to think about it is the foundation of your house. You probably don’t think about it much, because it received a thorough inspection when it was purchased. Everything else is built on it and depends on it being solid. I see cracks here all the time, whether small or large. Shore these up and you can move forward with confidence and peace of mind. Don’t underestimate how powerful that can be.

Have adequate emergency savings. In the bank. You may have heard the very common rule of thumb here: 3-6 months of the bills that have to be paid to keep your household running. Adjust based on whether you have one income earner or two, consistency of income, and pure personal preference. Your taxable brokerage account is not emergency savings. The criteria here are: can you access it today, and do you know how much is there. At least for now, don’t waste your time looking for ways to get a return on your savings. At times, I am a little unsure why banks still offer CDs.

Have a will. Many couples I talk to do not have a will in place. The most common experience is that I ask the question, and across the table there are looks at the floor, at each other, and a sheepish – “well, we know we need to, but…” or “it’s on our list, but…”. Chances are that this set of documents will not come into play in your life until you are older and your kids are looking at their own retirement, but when they are needed and not in place, the results can be devastating.

That leads me to Life Insurance, as these are two sides to the same coin. It may not be easy, but take a moment and think about what you would want for your family if you weren’t there for them. Then take that feeling and act on it. In my view, group life insurance doesn’t count. It is a great extra to have, but you do not control it. Think about if your will went away when you moved to another company, and you had to rely on what they built for you.

Do something. Make a list of your most important financial to-dos, take this short list and see where you stand, then do something. Pick a place to start and take the first step in that process. Progress is motivating and over the course of weeks or months, you can go back and make adjustments or changes.

When these foundational steps are in place, we really get into a level of planning that naturally involves very specific decisions based on the specifics of your life and your goals. These could include, but are certainly not limited to: your new monthly budget with childcare expenses, reducing personal debt or managing college loans, comparing renting or buying a new home, college savings for your new baby – and let’s not forget about retirement. Be very cautious about giving too much weight to broad, sweeping advice. Oh, and don’t watch CNBC.

About the Author

Seattle native Aaron Leland is a Financial Advisor by day, and gives a portion of his time as a volunteer Financial Educator with Money Management Educators, a role in which he is regularly invited to present to PEPS Parent groups as well as local and national employers. He lives in Northeast Seattle with his wife, two young daughters, and their Lab, Grace.

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