Strategies for Securing Your Family's Financial Future

Planning for the future includes setting financial goals, understanding what you need to do before you reach retirement age, and caring for your children's future through estate planning and comprehensive financial education.

Economic uncertainty and personal finances have always been issues for families. The cost of living, including the cost of housing, food, and energy, poses a threat to the financial stability of millions of families in the United States. According to TD Ameritrade, 47% of Americans believe that the rising cost of living is the biggest threat facing their financial security.

The best way to combat this uncertainty is to develop strategies for securing your family's financial future. A plan can help you to identify your financial goals and prepare for different difficulties. By developing a plan, you can set yourself and your family up for a strong future and a chance at long-term financial independence.

Planning for the Future

By taking these steps to plan for future events, you can lessen the effect that future financial struggles will have on your stability. Estate planning is the best option in your legal toolkit to plan ahead.

Estate Planning

While many people associate estate planning with older individuals who are in retirement, the truth is that estate planning is a worthwhile endeavor at any age. With estate planning, you're able to allocate your assets — including real estate, stocks, and retirement assets — to ensure they benefit your family once you pass away. This eliminates financial uncertainty and sets your family up for a bright future.

If you're younger, estate planning might involve creating a will and naming your romantic partner, best friend, or sibling as the beneficiary. As you age, estate planning may focus more around caring for your children and dependents after you are gone, or the tax implications of divvying up your property.

Part of estate planning also includes choosing a person who can assume financial power of attorney and take care of your finances if you're ever incapacitated. This will ensure that your bills are paid on time and your investments are cared for if you can no longer make those decisions on your own.

How Can Estate Planning Help?

Here are some specific ways estate planning will help your family. Estate planning:

  • Creates a clear plan for who gets what: If you pass away and there is no estate plan in place, there could be a great deal of confusion and conflict regarding the allocation of assets and property. With an estate plan, you'll ensure each family member is taken care of in the ways you'd prefer.
  • Makes things easier for everyone if and when you're incapacitated: If you're no longer able to make financial and medical decisions, the powers of attorney you designate with an estate plan will eliminate uncertainty. Your family can rest assured that your best wishes are carried out and money matters are covered, leaving them financially secure and free from added stress.
  • Enables you to minimize or avoid federal estate taxes: If your estate is worth more than the cutoff amount for estate taxes, your estate will be taxed. To avoid or lessen tax liability, you can use an estate plan to set up trusts and give tax-free gifts so that your family will benefit from the full value of your estate.

While estate planning and preparing for your own passing may seem morbid, it's an essential part of securing your family's financial future.

Personal Retirement Accounts

Consistently contributing to a personal retirement account is a great way to build a solid financial future. The cost of living is constantly increasing, making it important to set aside money for your retirement. That way, you can afford a comfortable life during your golden years and pay for the care you need as you age.

There are different types of retirement accounts that you can choose from. Many people take advantage of 401(k) accounts through their employers. Speak to your place of employment about whether they offer 401(k) contribution matching. There are also pension plans that are offered by specific employers.

If you can't or don't want to fund retirement through your employer, you can set up a Roth individual retirement account (IRA) or traditional IRA and contribute to it each year. Like a 401(k), the funds will become available when you reach retirement age.

By contributing to one or more of these retirement accounts from a young age, your money can grow throughout your adult life and provide a fund for living expenses after you stop working.

Teaching Your Children Good Savings and Spending Habits

One aspect of improving your family's financial future is the concept of generational wealth. You can help your children financially by providing for them through estate planning, but you can also provide for them by educating them. Helping your children to open savings accounts, start a Roth IRA, and manage their budgets from an early age can set them up for success throughout their life.

Developing strong financial habits and a healthy relationship with money and spending can help your children weather any financial storm they may face in adulthood.

Removing Debt and Managing Credit

The final part of creating a strong financial future for your family is learning to eliminate debt and manage your credit. No matter how much you plan, you can't stop bad things from happening or predict the future. However, you can ensure your family does not suffer from outstanding debts. With that, you can build your credit, which improves your family's financial mobility and ability to afford the essentials.

Destroying Debt

Getting out of debt is about more than putting your finances in order — it's about setting your family up for success. Consider the following steps towards a debt-free life:

  1. List and assess your debts: Create a document listing how much you owe and to whom, minimum payment amounts, payment due dates, and the interest rates for each debt. Your assessment should take into account which debts are the most serious, such as ones with past-due payments or debts that have gone to collections.
  2. Figure out how much you can afford to put towards debt: Look at your typical grocery expenditures and how much you need for other necessities, such as utilities and housing. Then, subtract those costs from your monthly earnings. The amount left over should give you a ballpark figure of how much you can put towards debt payments that go beyond the minimum.
  3. Understand your options for debt relief: If you have any debts in collections, you can offer to settle for less than you originally owed. Work with debt collectors and set up payment plans. If you ignore collectors, they could file a lawsuit against you, which may allow them to garnish your wages or subtract funds from your bank account.
  4. Strategize debt payments: You need a roof over your head, transportation, and basic living necessities. Make minimum payments on house, car, and utility debts as part of the snowball method. With this strategy, you'll choose one smaller debt to focus on, making more than the minimum payment while you maintain minimum payments on your other debts. Once you've paid off one debt, move on to the next until you've worked your way up to the largest debts.
  5. Consider a debt management plan: Non-profit credit counseling agencies offer these plans and help set up an agreement with your creditors. You'll make a lump sum payment to the agency instead of multiple payments to various creditors. However, be certain the agency isn't a scam before you give them any information.
  6. Budget effectively: Cut down on expenses that aren't necessary, such as eating out, entertainment, expensive clothing, and gifts. Instead, shop thrift stores and make DIY gifts.

Getting out of debt can be a long and arduous process. If you find your debts are simply too much to manage, you may need to file bankruptcy, which is a legal way to eliminate most of your debt. Doing so will hurt your credit for a few years, but this may be a small price to pay in exchange for improving your family's finances long term. Consult with a bankruptcy attorney if you're considering this step.

Managing Credit

The path to good credit involves paying off your debts, maintaining good standing with creditors via on-time payments, and understanding your legal rights as a credit consumer. As per the Equal Credit Opportunity Act (ECOA), you have a right to fair treatment when you're applying for credit. You can't be discriminated against due to your familial status. A creditor can't question you about whether you have kids or you're divorced. By law, credit card companies have to disclose fees that come with the card, such as annual/maintenance fees.

Take a good look at a credit card's terms before you sign up. Federal law allows credit card companies to charge interest rates based on the law of the state in which they're incorporated. This means some credit cards come with exorbitant rates.

As a credit consumer who's looking out for your family's best interests, consider cards that come with minimal fees, low annual percentage rates, and cash back for purchases. Once you receive a card, do your best to maintain a low debt-to-income (DTI) ratio by paying off your credit debt after you make a purchase. This will keep credit debt from building up and will help you maintain a low DTI, which will help you qualify for loans and other credit products.

Can I Solve This on My Own or Do I Need an Attorney?

  • DIY is possible in some simple cases
  • Complex estate planning situations usually require a lawyer
  • A lawyer can reduce the chances of a family dispute
  • You can always have an attorney review your forms

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