The average gross income of an American family is $71,258 (IRS) with a household debt of $132,529 (Federal Reserve). Nearly two-thirds of American families struggle to come up with $1,000 in an emergency (NORC Center for Public Affairs Research) while 77 million Americans or 35% of adults with a credit line owe an average of $5,718 (Urban Institute). The number of adults 60 years and above possessing student debt quadrupled in the last decade (Consumer Financial Protection Bureau). The cost of living rose to 30% in the past 13 years while income grew only by 28% (NerdWallet).
Clearly, American families are spending beyond their means. Without a good plan and perspective, family finances won’t get better and the shortfall widens. On a positive note, the average savings rate rose from its lowest of 1.9% in 2005 to 5.5% in 2017 (US Bureau of Economic Analysis). Whether making sacrifices or cutting corners, there’s plenty to discuss with the family when it comes to money matters.
Talk to Your Spouse and Children
A money talk is always a difficult and touchy subject among spouses or partners. However, it is necessary to discuss common goals for income generation, spending, investment or savings. Preparing a worksheet that outlines your assets and liabilities shows where you currently stand. If you still have pending student debts, this can also affect your balance sheet. In addition, there are many costs to think of including education for your kids, health care, and mortgage.
Bringing your children in early on the financial talks can only help them in the future. This way, they will get an early education on financial planning and why it is important to put away for future use or limit spending to what is affordable. Money insights can prepare them when they buy their first car or repay student loans or personal debts.
Consult your Elders
It’s not only your spouse, partner or offspring that need to contribute to financial planning. Your parents and in-laws are part of the family, so it is important to know their financial situation whether they have enough funds for retirement or elderly care. Information on the existence of an adequate health insurance can help you plan how much you should put aside to pitch in during difficult times. If they are already forgetful or do not want to disclose their wealth, you might want to keep copies of their wills and documents of assets/liabilities.
The Struggles of Military Families
Military families are not exempt from financial issues. In fact, money is one of the serious causes of suicide with rates increasing over the years. Families struggle to cope with their finances because of several reasons. Low pay is one, there is also a lack of financial literacy that should prepare them for life while in and after the military. Moving frequently also means added expenses and if they own their own home, selling their house during low market conditions. These factors along with lack of planning contribute to poor finances.
Discussing financial matters with the family is a very important strategy to manage household money. If everyone has a clear picture of the situation, a common plan can be drawn up and followed through. An open line of communication among family members is a good start to improving financial health and building wealth.
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