Securing Your Family’s Finances

Forming good habits can be tough full stop, but especially hard when it comes to money. However, learning how to manage your family’s finances can provide you and your loved ones with a greater sense of security and a better quality of life.
You can get on the right track with a little help.

In the age of paper receipts, the ability to track spending was much more difficult. Now, families can use banking apps to track and even categorize their expenses automatically. 

Keeping a close eye on your account activity can help you identify and dispute unauthorized transactions. In fact, fraudulent activity and scams have risen over the last couple of years, with U.S. consumers losing over $10 billion in 2023. 

By understanding where your money is going, you can also set a realistic budget for your family. 

“Instead of starting with how much you’re going to spend, let’s talk about how much you’re going to save,” advises Robert Wagner, CPA and leader of the specialty services practice at HoganTaylor, an accounting firm headquartered in Tulsa.

A general rule of thumb? Save at least 10% of your earnings. Next, take stock of your necessary expenses, like groceries and utilities. Whatever is left over afterwards can be spent at your discretion. 

“Maybe you can splurge. That’s the beauty of a budget; it gives you freedom to be okay with spending money on things,” says Wagner. 

With current interest rates still high, borrowing money is expensive. If you have debt, paying down the amount you owe can help you achieve your long-term financial goals.

A common strategy for getting out of debt is the “avalanche method,” which entails paying off your accounts with the highest interest rates first. To really make a dent, put more towards your debt than the monthly minimum payment. This approach attacks your principal balance, helping you pay less in interest over time. 

Wagner advises to consider why you got into debt in the first place. For many families, it comes down to making large purchases that they cannot afford, oftentimes in order to keep up with their peers. 

“There’s a lot of pressure, and it’s hard feeling like you’re not able to do what other families are doing,” he says. “But the dirty little secret is people aren’t as wealthy as they often live. It’s not worth the stress of putting yourself in a hole and being unprepared for the future.” 

Life is full of curveballs. Home and car repairs, medical emergencies and the like can quickly put you in a bind if you don’t plan ahead. 

“As the leader of your family’s finances, strike the words ‘unexpected expenses’ from your vocabulary,” Wagner says. 

By establishing a rainy day fund, your family can be in a better position to navigate hardships and times of uncertainty. At minimum, Wagner advises having $400 set aside. If possible, consider automatically allocating a percentage of your paychecks to go toward your rainy day fund. This extra cash can help your family stay afloat when dealing with out-of-pocket costs. 

Contributing more towards your family’s contingency fund can empower you to stay on track with your financial goals, too. 

“It really is a good feeling,” says Wagner. “Even if it [your rainy day fund] goes from $700 to $1,500 this year, that’s awesome. It’s a big win. It really is a motivating factor to see your savings start building with time.” 

Unlike emergencies, some expenses can be forecasted. Think about life events and major milestones that your family might experience in the next decade, like sending kids to college or needing to purchase a car. 

By giving yourself plenty of time to save, you can reduce the stress involved with planning for these changes and explore different savings options. For example, parents that are saving for their children’s college education may be eligible for Oklahoma 529, a tax-advantaged savings plan that can be used to cover tuition, textbooks  and other common expenses. Establishing an irrevocable trust is another option for parents who’d like to cover their child’s educational expenses. 

Another milestone to consider is retirement. The earlier you begin saving, the better. In many cases, employers provide 401(k) plans, and even matching contributions to their employees. 

“Go for the free money,” encourages Wagner. “Figure out what your employer will match and maximize it. That’s the best way to get started with long-term savings.” 

The term “sandwich generation” describes middle-aged adults who care for both their not-yet-grown children and their aging parents. This phase of life can be particularly challenging for families – both emotionally and financially.

According to the U.S. Administration for Community Living, about 70% of adults over the age of 65 will need some form of long-term care. To best prepare for this transition, talk with your parents about their financial standing and assets. 

Knowing what their priorities are can help your family avoid conflict and make more informed decisions when that time comes. If your parents need assistance with end-of-life planning, consider consulting an attorney who specializes in elder law.

You may also qualify for a Dependent Care Flexible Spending Account (DCFSA), a pre-tax account that can help you save up to 30% on dependent care services. Funds from this account can be used to support a child, spouse, or relative that resides in your home. 

Buying a house may be one of the biggest purchases that you ever make. It can also be one of your greatest investments. 

“For most Americans, a house is their number one asset and the best way to build wealth,” explains Wagner. 

Many homeowners who have paid down their mortgage may qualify for a home equity loan. If you do borrow against your home, Wagner advises to put those funds toward home-improvement projects. 

“It makes sense for people who need to either renovate their kitchens or bathrooms – the things that have been proven to add value,” he says. 

Families may also consider refinancing to get a better interest rate. There are costs involved, but Wagner recommends the consideration of refinancing if it would drop your current rate by a half point or more. You may also want to consider shortening the length of your mortgage, which can help you secure an even lower interest rate. 

There are a wide variety of insurance policies that you can sign up for to protect your most valuable assets. Common forms of insurance are health, life, auto and homeowners. 

Regardless of the type of insurance, consider what your family’s needs are. You may want to opt for extra protection or coverage, depending on those needs. For example, if you expect to incur several medical expenses in the near future, you may want to set up a Health Savings Account (HSA) or Flexible Savings Account (FSA) to help plan ahead and maximize your savings. 

Check with your insurance providers to see if they offer any discounts to bundle your insurance, too. Even if that’s not an option, you may be able to save a little bit of cash by going paperless or paying for your annual policy in full.  

Oklahomans may also qualify for Insure Oklahoma, a health premium assistance program for low-income adults. Some employers participate in the program, so it’s worth checking if your family qualifies. 

When in doubt, getting help from the pros is always a good idea. A financial advisor can help your family create a customized plan based on your personal goals, whether that’s purchasing a house or retiring early. 

There are several types of advisors, from accountants to wealth managers. Research financial professionals in your area and choose one that seems to be the right fit based on your family’s needs.

Some banks and credit unions offer their customers access to financial advisors without charge. If that’s not an option, working with a wealth management firm may be the way to go. Although there may be costs associated with hiring a financial advisor, the long-term benefits are well worth it.

 “I’m passionate about family finances because I know it’s such a big generator of stress for families,” says Wagner. “There are a lot of things you can do to… make the path a little smoother for your family.”

The world of investing can seem intimidating to many. After all, there’s always some risk involved. But if you do a little research, make a plan and consult with the experts, investing can truly help to secure a strong financial future for both yourself and members of your family. 

Firstly, don’t put all your eggs in one basket. This means diversifying your economic portfolio. Stocks, bonds, real estate and other options mean you can maximize your potential returns and minimize potential risk.

Next, consider passive income streams you can enact. Essentially, work smarter, not harder – and make your money work for you. Passive income can look like rental properties or low-maintenance dividend-paying stocks. 

Avoid impulse-led or emotional investments. This means taking out overconfidence, fear, greed or thrill from your investment choices. Instead, create a well-researched plan and don’t stray from that plan unless an expert is advising you to do so.

You can also take a look at low-cost index funds.

“Index funds are defined as investments that mirror the performance of benchmarks like the S&P 500 by mimicking their makeup,” says Jason Fernando in an article for Investopedia. “These passive investments, long considered an unimaginative way to invest, are behind a quiet revolution in U.S. equity markets, attracting a widening swath of investors.” 

While they may be coined as ‘unimaginative,’ the numbers as they relate to index funds don’t lie.

“Passive index funds tracking market benchmarks accounted for just 21% of the U.S. equity fund market in 2012. By 2023, passive index funds had grown to about half of all U.S. fund assets,” Fernando continued. 

Investing, paired with other decisions like smart budgeting, considering home equity, consulting with experts and reviewing your insurance plans, will help your family in securing the financial future you’ve always dreamed of.