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Financial Tips for Families

Posted On: 2006-07-17Length: 12:58

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Want to create a solid financial plan for your family? The top five financial tips in this Fidelity Investor's weekly podcast.

Tip 1. Keep track. Creating a budget.

Tip 2. Think about tomorrow, today. Making sure your retirement is on track.

Tip 3. Start saving for your child's education as soon as possible.

Tip 4. Make sure you're covered. Choosing the insurance policies that are right for you.

Tip 5. Don't let someone else decide your children's future. Making sure they're taken care of after you're gone.

We'll get into each of these five tips in more detail in a minute. But first, we all know the American dream comes with a price tag. According to the National Association of Realtors, the national median cost of a home these days is $219,000. And the typical American family will spend more than $260,000 to raise a child from birth to their 17th birthday, according to the US Department of Agriculture. But don't let these numbers stop you. Here are five smart financial moves you can make today to help you meet the financial challenges ahead.

The first smart financial move you can make is, keep track of your money. Every sound, long-term financial plan starts with a sensible budget. Think of a budget as a way to help you become more of a mindful spender so that your money buys the things you and your family value most. A sound budget doesn't require unreasonable sacrifices, it simply sets guidelines for sensible spending and saving. And tracking your current spending in various categories is the most important step in the process of developing a budget. Chances are you'll identify opportunities to save a bit more. According to David Little, a financial planner from Fullerton, California, the results can be eye-opening, and you may find you're spending far more than you mean to spend in some categories. Once you free up some extra cash for saving, you can start to build an emergency fund, that can cover three to six months of estimated expenses, if not more in case you need to manage a short-term setback, like losing your job, maybe some unexpected medical costs, or a major auto repair. You may also want to set up separate accounts for your short-term goals, which could include a down-payment of a new home, or a fund to help care for your elderly parents. And make sure you choose a relatively stable mix of investments for that money, because you may need to draw upon it soon.

The second smart financial move you can make is simply, think about tomorrow today. Meaning, your retirement. Financing a secure retirement is the most challenging goal you're likely to face. You can begin to meet that challenge head on by carefully estimating how much your retirement is likely to cost. Many financial planners contend that retirees will need 85 to 100% of their pre-retirement income to meet their retirement needs. You may wish to create a more precise estimate of your future costs. Take a look at your budget, and think about how your outlays in various categories...

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