It is still a fairly new year. And for many, February is when the grand resolutions set towards the end of the previous year are seen in perspective.
In fact, research shows that as high as 80% of New Year resolutions fail by the second week of February.
Some of the reasons the well-intentioned resolutions fail include poor definition, lack of an implementation plan, timelines, failure to define short- and long-term milestones, low self-efficacy and doing it all alone.
Doing it alone is especially a big limitation when it comes to family financial goal planning. Did you set any resolutions for your family for this year? And if you did, did you do it together as a family?
This article takes a deep dive into financial goal setting for a family, what to aim for and how to actually set yourself up for success.
We explore eight financial goals you can set for your family and how to set them.
While you might be thinking about grander ideas such as finally ditching renting and buying a home for your loved ones, the very first goal you should aim for is financial attitude adjustment.
This doesn’t necessarily mean that you have a bad attitude per se, but rather a re-education for yourself and family about the fundamentals of building and maintaining wealth is a continuous activity.
Your attitude towards money can make or break your money goals. It affects how much you think you are worth, how much you think you can earn, what you can or cannot do with money, whether to invest, take debt, if to give away money as well as your perception of the rich and poor.
Broadly speaking, there are two kinds of people - those with the abundance money mindset and those with a scarcity mindset.
With a scarcity mindset, one thinks that whatever is available cannot be enough for everyone, leading one to hog everything in an effort to ‘save’ for the future. A scarcity mindset results in stress, fear and anxiety.
The abundance mindset, on the other hand, is a concept in which a person believes there are enough resources and successes to share with others.
With an abundance mindset, you are in the driver’s seat of your private, financial and work life. You believe you have more control over what happens in your life, energised and positive with an outlook that you are working towards something bigger than yourself.
One major barrier to making good financial decisions, is the worry that one doesn't have enough and obsession over how to make more. To overcome this, you require an attitude adjustment from a mindset of desperate deprivation to disciplined abundance.
Learn more about money mindset here>> How a Scarcity Mentality is Making You Poor
Now the mindset change will have long-lasting effects on your family finances, how your children grow up to perceive money and will make your goal setting even more practical and not driven by a flawed worldview or fear and desperation.
All work and no play makes for a dull life. We have had some pretty tough last two years, income disruptions, lockdowns and health challenges.
As the economy opens up in 2022 and the potential to earn more grows, it may be time to truly commit to adding some fun into your family budget.
It could be as simple as weekly visits to parks on Sundays to a yearly family vacation, spa days with your partners and even group activities with family friends.
As you work towards your longer-term financial goals, it is important to still live in the moment and build a family that is closely knit and energised.
TIP: Budget for at least one mandatory outdoor event for your entire family every quarter and set aside funds to do so. Plus, budget for one major family getaway this year and outline how the money will be raised and from where/whom.
Whatever your income looks like, do not be under pressure to go over the top. It is important that leisure and entertainment does not come in the way of your most cherished financial goals.
Family budget planning is about proper scheduling, teamwork and regular modification.
Your family’s financial freedom and wealth creation should always be the purpose of having a budget. Purposefully plan for your household’s income and expenses over a specific timeline.
Avoid unnecessary spending and delayed payments by matching your budget plans to your financial habits, as a team.
As you work on clearing any existing debt, ensure it remains a priority. This is to avoid getting into a debt cycle - getting into more debt by borrowing loans to clear existing debt and doing it again to clear the new debt and so on.
Take for example, you have rent arrears and you borrow from a friend for repayment in 8 days, but you realise you cannot pay back your friend so you take a mobile loan, and so on. That’s a debt loop.
Identify all debts and list them according to priority - categorise your debts into short-term debt, which you should pay off first and long-term debt that you can pay off in fixed-interval installments.
Note that the decision on what debt to be paid off first depends on your situation. The rule-of-thumb is to start with debts with high-interest rates.
However, if you don’t have high-interest debt, you can choose to pay off the smallest debt first while making repayments on other debt(s).
Next, setup a repayment plan by considering the necessary changes to how you spend and earn so that you can save more. Eliminate or re-prioritise expenses you can realistically do without
You can discuss extra sources of income you can venture into with your spouse. If one has a flexible job or is unemployed, it would be a great time to find a route to making your home a double-income household.
Learn More: Tips for Living on a Tight Budget, Like a Pro
Remember: Clearing outstanding debt is important so that you can bolster your ability to save more and ultimately have enough to invest in ventures that will increase your income and build your wealth. Typically, if you are crippled by debt, most people can only manage to live from paycheck to paycheck and delay their ability to invest by years which is such a big loss considering the time value of money.
Have you started investing as a family yet? Does your partner or yourself own any equity, real estate, have a money market fund, fixed deposit account or a business?
Investing, simply defined, is the process of allocating an asset, usually money, for a period of time with the purpose of earning a profit. You could also technically invest time and effort to generate a higher return for yourself.
If you are yet to start investing, your biggest financial goal at least in the short term is not jump right in and buy shares, start a business or buy land.
Start by setting a timeline for you and your spouse to learn the basics of investing and come up with a list of potential investment options you both are interested in. It is always a great idea to involve your children in this process.
Next, having determined the ideal investment type you like, make a determination of how much you would need to set aside for this venture and map out how this amount can be raised.
Savings will typically be the natural route to investment for most people although debt could be utilised (while riskier) depending on the knowledge level of the investor and the potential reward.
You may want to involve the services of a financial advisor who is well experienced and licensed to guide you through the decision-making process of the investment type you are interested in.
An emergency fund is money set aside for your family to use in times of unplanned expenses or financial emergencies.
Emergencies happen at any time, anywhere and to anyone and an emergency comes in very handy in circumstances that are beyond your control such as.
(it’s wise to remember that sometimes your insurance cover won’t pay or cover all medical costs, which means you have to cover any extra costs)
The rule of thumb is to set aside between three to six months’ worth of living expenses over an extended period of time, or as a lump sum if you can, to act as cushion against financial derailment when unexpected events occur.
The Covid-19 pandemic is perhaps the clearest example of how things beyond our control can destabilise our financial lives if we do not have an emergency fund to give us a cushion as we restrategise.
Family life can be challenging, there are the regular couple problems that are unavoidable, you are raising children, you have extended family and societal responsibilities, and you are just human.
It can be overwhelming, but you know what is even more soul-crushing? Going through family life without a solid financial plan. If you do not have a plan, one will be made for you - by the environment, and it almost always won’t be pretty.
Get started on family financial planning with these few suggestions above and build a financial future for your family that you can be proud of.
Do not follow the bandwagon, your family is unique, your abilities may be limited and your needs and desires are deeply private - find a way to make them come alive.