You may be wondering whether to involve every member of your family in financial planning and how to do it. You may also be asking why it is necessary to do so.
In this article, I will help you out and give you some guidelines or steps to make financial planning a family affair without any difficulties.
But before that, you must know that financial communication with every member of your family is critical. This is because it helps you plan financial goals together and work to meet everyone’s needs.
That is why you should consider making everyone to be part of your financial planning and management process. It also creates connectivity and understanding among members of your family.
Why is it Important to Make Financial Planning a Family Affair?
Financial planning for a family is important for several reasons. In this section, I will let you know some of the reasons why I find it useful for every family. Below are some of them:
1. It creates connectivity and breeds understanding among family members.
I have realized that involving everyone in the decision-making process regarding financial planning for a family’s needs improves the bonds of family members.
This is because everyone understands what is there for them and the likely sacrifices that come with pursuing certain financial goals.
In the process of financial planning, every goal is presented and justified for the understanding of everyone. Due to this, everyone understands why a particular financial goal is good for the family and others are not.
In light of that, everyone comes out of the meeting or process being happy with no doubts about why the family pursues some financial goals and not others. Because of that, there is a healthy relationship among everyone.
2. It helps you prepare, financially, for future eventualities.
When planning financially for the family, it is necessary to create an emergency fund for unexpected events affecting your family.
Engaging everyone in the planning process can provide you with much data to plan very well on the amount and the probability of facing eventualities in the future.
That is, making financial planning a family affair can help you plan wisely for future financial threats.
For example, I have heard one of my friends complain about not planning for his daughter’s school’s transportation fee. He claimed that he forgot about it. Him, I think financial planning is just for him not including every member of his family.
If you make financial planning a family affair, you will not face that problem.
3. It helps you save money
During the process of financial planning with your family, you can increase your savings. But how is that possible?
You get detailed insights into your income and expenditure when planning your finances as a family. Likewise, you adequately understand everyone’s needs and wants.
Due to that, you can easily cut down on the cost of some needs and wants that are not on top of the scale of the preference. In that sense, you can save a lot of money while making everyone understand why that is necessary.
This is always a critical part of the financial planning process of my family. We always cut down on unnecessary wants of family members and that gives us the space to invest that money somewhere necessary.
4. You become happy
Planning your finances well together as a family can help you achieve happiness in your family. There are research findings that disagreements over money are one of the top relationship wreckers.
One way to avoid that is to understand financial planning as a family affair. That means involving everyone in the process of making your financial plan.
With that, the chances of having fights and disagreements about money in your marriage or family relationship will be reduced. That translates into healthy and happy relationships.
How to Engage Your Family in Financial Planning?
You have understood the importance of making financial planning a family affair from the above. It is now time for you to learn and understand the steps in engaging your family in financial planning. The following are the key steps involved:
Step 1: Identify All Your Financial Dependents
In this step, I recommend you identify all your financial dependents. In other words, who are your dependents? Generally, these are people who will be affected if your financial situation changes.
Remember, they are people you are going to cater for based on the following:
a. School fees
b. Healthcare
c. Other insurances
d. Care for the elderly
e. Others rely on you.
These people are often our spouses, children, parents, and other extended family members who are less privileged. Depending on your culture, your dependents will be small or many.
Remember, the number of dependents affects your financial abilities.
Step 2: Inspire Them
After you identify your dependents, it is critical that you get everyone on board in making your financial planning successful. This is where the challenge is.
The best way to get them to sign up is to inspire them. But how do you do that?
To do that, present them with your vision for the financial goal of the family for the period in consideration. Be sure to explain in detail the importance of each goal for you and everyone. Also, let them know what everyone will benefit from if each of the goals is accomplished.
While explaining the payoff for the accomplishment of each vision, elaborate on the sacrifices and compromises everyone must make to achieve each vision.
Remember, it will be difficult at this stage. But getting everyone on board the process pays a lot. Work together to find creative ways to solve your financial challenges and avoid focusing on problems.
Step 3: Identify All that You Are Planning For
Explore all the activities and issues you are going to plan for, financially. That is dependent on your lifestyle as a family. Every lifestyle comes with some events and their costs.
So that will determine the number and kinds of events you will encounter. All of that presents you with numerous financial challenges, which you must plan for.
Below are some examples of events that presents families with financial challenges:
a. Needs of children such as school fees.
b. Marriage
c. Divorce
d. Sickness
e. Loss of job
You may have to encounter any of the above events depending on the size of your family and your circumstances. By planning together as a family you can mitigate the financial impacts of these events.
Step 4: Assign Monetary Cost to Activity
In this section, you must attach monetary costs to each of the events and activities you have identified in the previous sections. Try to understand the financial impact of each on your family income.
For example, let’s look at the financial impact of “losing your job.” That is one event that you and your family must plan for always.
I always recommend for you create an emergency fund containing at least six months of your salary. So, that should be the cost that you can attach to the event of “losing your job.”
After knowing and attaching a cost to each activity, you get the extent of the impact of the total activities on your income. This is important for the next step.
Step 5: Make a Scale of Preference
As humans, we have many needs and wants. But we only have enough money to cater to them. This applies to you as a family.
In that case, let everyone understand that you cannot possibly meet all your needs or wants within the period under consideration.
Because of that, make a scale of preference to help you identify everyone’s top priority. After that is done, plan to achieve them.
This means the most important needs or wants are planned for in the time being. The least preferred items or activities are sacrificed or compromised to save money for more important ones.
Step 6: Implement Your Financial Plan
After doing all the above, it is time to implement your plan. Make sure all that has been planned is properly catered for.
Try as much as possible to meet deadlines in the implementation of the plan. Else, a delay in meeting some needs can cause additional costs.
Step 7: Monitor the Implementation
After implementing your financial plan, you must always evaluate your processes from the point of crafting the plan to the implementation stage.
Problems encountered in the process must be addressed and must be considered when planning in subsequent periods.
This phase is important and must not be disregarded when developing a financial plan as a family.
Final Thoughts
I think it is critical to financially plan a family affair. This is because it helps you save money, plan for emergencies, build strong bonds, and build healthy and peaceful family relationships. The guidelines provided in this article are key in helping you engage your family in developing a financial plan. So, be sure to use them. Please, check out more of our articles here.