At first, this is the hardest and the most frequent question that is faced by married men as they are on the threshold of an elaborate family life. Kids grow at the speed of light and with that their needs and recurring expenses sky rocket and before you know you find yourself in a financial chaos. So in essence you have to plan expenses for your growing kids specifically around their food, clothing and school/college. With that you also have to feed yourself and your wife, save for some upcoming renovations, insurances/bills and just may be for a new car in some years. Depending on the desired lifestyle, this list can balloon up quite exponentially. This also becomes critical as we exhibit a system which works and inspires the next generation to follow
Imagine a Utopian set up where you wake up one fine day and:
- You had timely payments to all your bills and insurances
- You have some smart investment (For retirement) with a comfortable monthly or quarterly pay out from your account managed automatically.
- You have some extra money every month to spend guilt free because all your expenses are covered.
- You knew exactly how much money you have.
Before we panic, lets take a step back and address the person in charge of managing all the above, that is you.
- The Mindset:
Whats the default mindset to get rich? Some things that probably come to mind:
- Let go of things you have to cut cost
- Pinching pennies to save up
- Invest in magic-bullet-of-the-week
Fortunately, there is still some saneness and sound advice that actually can help. Will power alone cannot be bullet proof and over the course of time will show up some leaks thus jeopardizing the long term aim to be financially stable and sorted. For instance there was a recent tip by a millionaire to cut out the avocado toast to save up enough for a house payment. There is nothing wrong with this tip but its not mad for long term benefit or something that can really make a difference. Sure if you cut out small luxuries from your routine, you can save some money but eventually your will power will give up and you will indulge.
How about instead you can have your Toast as well as other luxuries, but have a system in place to make sense to your maths at the end of the day.
However, this will happen when:
2. Be Debt Free:
This is the most common barrier for fathers and families around to live a good life. The debt just sucks the life out of life. If you are an average father in you early 30s, you need to get a grip on the situation. Apart from the financial impact, debt also hits you psychologically and can further exacerbate into depression and anxiety issues.
Lets form a simple process around it which is very easy to follow:
- Knowing how much debt you are in exactly is step one. There are common cases where the outstanding amount is unknown because you are so lost in the hustle to pay it off. So there is no planing in the monthly pay offs that you are doing wich worsens the situation. So step one is know your owe.
- Dave Ramsey explains the Snowball method precisely This involves paying the minimums on all of your debt, but paying more money to the card or loan with the lowest balance first (i.e., the one that will allow you to pay it off the quickest). There’s also the Avalanche Method, which involves tackling the debt with the highest interest rate first. The key here is to form a system and abide by it for the long haul.
- The actual paying off the debt needs some thinking on your end. Some of the ways include negotiating a lower interest rate and then put the save amount into the snowball methodology. If you are the enterprising kind, you can also devise methods to make some money on the sides.
But start with finding out how much you owe. The bankers would not want you to find out the same and will try and keep you in the quick sand. Get a grip of that first.
Automation is a tremendous help in maintaining discipline. It keeps you conscious of the dollars flowing out of your account for the bills and the mortgages. It also helps to save money, as you don not have to remind your self every month to do the necessary saving or the necessary payment against a last date.
Its again like cutting out the avocado toast which when manually tried can work for some time but chances of slip up are great. So manually paying very check or payment is a flawed plan. So here is a system:
First, categorize your spending. Some spending/investing recommendations:
- Fixed costs. About 50% to 60% of your income should be going toward things like your rent, phone bill, utilities, and internet.
- Investments. About 10% of your income should be going toward investments for the future such as your Roth IRA and 401k.
- Savings. About 5% of your income should go toward short- to mid-term savings goals. Think things like your wedding, down payment for your house, and down payment on a new car.
- Guilt-free spending. About 25% to 30% of your income should go toward guilt-free spending. We will leave that to imagination.
Secondly, look at your bank statement and minus the amounts in those categories from your take home amount. This will give you an idea of what you have left for categories like investing, saving, and guilt-free spending. Again, this can be a ballpark figure which you can tune as you progress
Lastly, call your bank, credit card companies, utility companies, and payroll manager at your job to make sure that you know exactly when to expect them each month.
A few suggestions:
Once the automation happens, you are on you way to more financial balance and freedom.
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