Family Financial Planning Begins with "I Do"!

Family Financial Planning starts with two small words that means so much! A life long agreement-a mutual decision to face the world together no matter what!

Congratulations! You finally found the right person to spend your life with, just like you imagined!

What's next?

A well-thought out, written and honest discussion on Family Financial Planning?

Of course not! How unromantic and boring can one be?

As a culture, we run off to Bed Bath & Beyond and similar type stores to register for the latest housewares and kitchen gadgets.

Tell me if you disagree. (I am waiting.....)

Anyone paying the least bit of attention knows that divorce rates in this country are nearing 60% for first time marriages.

Can't we do better? We need to do better.

What if Family Financial Planning was accepted as a romantic practice to help assure marital success?

Practically speaking, a weekend or so of sober discussion about your mutual goals and values could go a long way towards keeping your marriage on track for the duration. Historically, a key element for prosperity and wealth accumulation has been maintaining one's marriage since no money is wasted during divorce and reestablishing separate households.

Ideally, your concepts about family, finances and values should have come up much earlier in the relationship, but better late than never.

So, assuming your goals line up for family and career, let me outline what you should be doing from a family financial planning perspective.

Our family financial planning focuses around a model called PS&G. or Protection, Savings and Growth

Your budget must include basic insurance to safeguard against unforeseen events so that accidents and sickness don't result in huge losses that undermine the SAVINGS and GROWTH aspects of Wealth Creation.

Basic insurance includes adequate coverage to reimburse for financial losses related to Automobiles, Residences, Medical, Disability (loss of earnings due to injury or sickness) and Life itself.

Recently, much attention has been focused on protecting one's identity and credit score. Theft of personal information can result in huge losses of time and money when a stolen identity is used to obtain credit sources to purchase goods and services.

Credit scores, known as FICO scores, are used by nearly every credit provider to rate your fiscal worthiness. This score dictates whether you receive credit and the percentage rate that you pay for car loans, credit cards and mortgages to name just a few.

Proper management of your cash flow to be certain that your installment obligations are paid on time is crucial to a smooth and low-cost financial future.

Poor management of credit sources will cost you a great deal of time, and money over your lifespan.

The bottom line here is to use credit sources just like cash. Only buy on credit what you can handle each month in cash payments.

I am a big proponent of having an operating budget that is followed by the adult partners in a household. Assuming that enough after-tax income will be earned to meet basic rent, food and utilities then everything else is discretionary.

Next, obtaining adequate basic insurance as outlined above under PROTECTION is appropriate.

What remains after basic living and protection costs are met can be set aside to fulfill SAVINGS goals.

Break down savings goals into multiple conceptual envelopes:

Short Term (1 year and less) Emergency funds, insurance deductibles for home, car and medical insurance obligations would be here.

Medium Term (2 - 5 years) Down payment on Home and next Car.

Long Term (5 years and beyond) Accumulating funds for College, Retirement Home, New Business Venture, etc.

I think having money automatically deposited or transferred to various savings accounts or even one savings account to take advantage of better interest rates is the best way to reach savings goals. Many paycheck companies can direct net pay to multiple accounts. Also, your bank's software can easily handle recurring transfers to savings from checking.

Use of personal accounting software is very useful to track balances and spot upcoming cash flow shortages. I use Quicken since 1989 when I graduated and I have never bounced a check.

Under our model, GROWTH, as used in Family Financial Planning is used to define proper placement of your Long-Term Savings.

This will include retirement assets like 401(k)s, 403(b)s, IRA, Roth IRAs, Medical Savings Accounts and Vacation or Retirement Homes.

Remember, automatic additions to these types of Savings Accounts are the best way to go. Out of hand is the best way to avoid temptations to spend on something that won't add to your overall wealth.