Managing finances for one person can be challenging enough; when you’re managing money for your entire family, it becomes exponentially harder.
Unfortunately, families are more susceptible to stressful financial problems than individuals, and that means you need to be aware of potential issues and effective ways to deal with financial stress.
I remember the day I combined finances with my partner– all of a sudden, our shared income made it seem as though we were on top of the world. We made plans for trips, talked about buying a house one day, and added each other to our credit cards because it seemed as though we had so much more money available.
Except we didn’t come up with a plan for paying off bills or for alerting each other to individual expenses, and we didn’t focus on our newly shared costs to reformat a budget. Instead, we quickly found that we didn’t actually have as much money as we thought, and had to backtrack to fix our mistakes from excessive spending and poor money management.
It’s crucial that you develop a plan to discuss your finances openly as a family so that no one skews your budget. Prepare yourself for any financial problems now or down the road with these five solutions to the most common family financial troubles, and learn how to deal with financial stress before it happens.
1. Problem: You Don’t Have Enough Money Coming In
Solution: When you don’t have enough income, you have two main options: find additional sources of making money, or cut out unnecessary expenses – or ideally, both. To increase your income, start looking for simple ways to take on side gigs that will allow you to earn some extra money without disrupting your life. Whether you want to do extra work from home or want to get out in the community, try any of these easy methods to boost your incoming funds:
- Take surveys online for money with a reputable site like Survey Junkie
- Start freelancing in an industry you are familiar with (try Fiverr to find your cup of tea!)
- Sell items on Swappa that you no longer need
- Drive for a ride-sharing service
- Offer your services on Fiverr
When it comes to cutting expenses, you’re going to need a budget that lays out all of your costs compared with all of your income. Always aim to spend less than you make, but also look at each line in your budget for easy ways to reduce your current costs, such as:
- Cut out or reduce your cable subscription
- Turn your thermostat up in the summer and then down in the winter to save on utilities
- Eliminate frivolous purchases by restricting spending to cash or giving yourself a waiting period before you buy
- Eat out less, and prepare lunches at home
2. Problem: One Of You Likes To Spend
Solution: How to deal with financial stress when one of you is the problem? I was the overspender in my relationship, and I would make a big purchase using our shared money without saying anything to my partner. While I rationalized these purchases as things that belonged to both of us, I was actually selfishly sacrificing our shared goals – like vacations and homeownership – because of my whims.
The only solution in my case was to have a serious talk with my partner. This meant looking at my habits and figuring out ways to reign in my spending. It also meant listening to him air his concerns about my spending behavior, and how he was hurt that we’d have to postpone our shared dreams.
We took a look at our budget and highlighted where my spending had knocked out much of our savings efforts. We set new goals, with actual deadlines, which helped me see that there was a reward at the end of this new path. I stopped carrying my credit cards to certain places, and we decided that I would call him anytime I was going to spend over $200. Soon enough, our budget was back on track.
3. Problem: You’re Holding Too Much Debt
Solution: According to the Federal Reserve, in February 2018, total U.S. consumer debt rose to more than $3.867 trillion. Carrying debt can wreak havoc on your budget and prevent you from accumulating savings, and getting out of debt can be a long, uphill battle.
So what can you do to reduce your family’s debt burden? First, know what kinds of debt you owe, and make a plan for each:
- Credit card debt: Credit cards carry higher interest rates than any other debts, so you want to avoid overusing your cards and accumulating higher balances than you can pay off.
- Mortgage debt: If you own your home, make sure you are always paying your monthly bills, and consider working with your lender to restructure a payment plan where you pay off more of your balance each month.
- Student loan debt: It’s almost impossible to make your student loan debt go away, but you can try refinancing your loans into one new loan where you can aim to pay off more of your bills in a shorter period.
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For any type of debt, you always have the option of taking out a personal loan at rates better than your current arrangement. For example, if your credit card interest rate is over 16%, using a 9% personal loan to pay it off will help you cut out almost half of your interest, dropping your payments and reducing your debt. Try Upstart for a smooth approval process, rates as low as 8.92%, and loans up to $50,000.
4. Problem: You Lost Your Job
Solution: Losing your job can lead to multiple financial problems. You might not get any heads up if you lose your job, which means you need to prepare to cover expenses in an emergency like job loss, even if it never happens. If both you and your spouse have jobs, what would you do if one of you suddenly lost yours?
An emergency fund is your life-saver in the case of unexpected job loss. You want to aim to have between three and six months of living costs saved in your emergency fund, as this is one of the best ways to deal with financial stress. When you know there will be food on the table tomorrow, you can focus on finding another job today.
If you do lose your job, don’t keep spending as a family like you did before. Trim down your budget in this interim period so you can maintain additional funds in case they are needed. Prioritize making debt payments, handling monthly bills, and providing for necessary household expenses.
5. Problem: You Can’t Get Your Savings Started
Solution: With debt payments, bills, and monthly expenses, it can be a challenge to have enough left over to contribute to savings. But when you don’t have a healthy savings account, you’re vulnerable to emergencies like unexpected health problems, and you don’t have funds set aside for your family’s future.
Start prioritizing savings as part of your budget – consider it a monthly cost like your utility bills that must be paid. Come up with a number that you can reasonably part with every month, and remember, giving up some coffee on-the-go now can be a big help later in life. From there, find the right place to keep your funds. A high-yield savings account will offer you a higher interest rate than most savings accounts from major banks, meaning that you actually earn money while keeping yours safe. The more money you add, the faster it grows.
It’s also smart to automate your savings with an app like Trim, where you’ll get help negotiating your bills and identifying easy costs to cut out of your life. Those savings should be added to your budget’s saving category, so you keep making your money grow.
As a head of your household, it’s crucial that you stay up-to-date on your family’s finances, and that you don’t make the same mistakes that I did. Make sure the entire family is aware of and adhering to your shared budget, and always prioritize saving for your family’s future.