Money can be a sensitive topic for couples and families to discuss, but it’s important to have open and honest conversations about financial matters. Here are five key conversations they should have about money:
Budgeting
Creating a budget is an essential conversation to have. It involves taking a closer look at income and expenses and figuring out how to allocate money effectively. Start by listing all sources of income, including wages, allowance and any other funds. Then, create a list of all expenses, including bills, groceries, entertainment and more. Compare the two lists and identify areas where expenses can be reduced, such as eating out or entertainment. By creating a budget together, couples and families can better manage their money and avoid unnecessary debt. Do you and your family have a budget and is it up to date?
Emergency Funds
Another important conversation is about emergency funds. Emergencies can happen unexpectedly, such as a job loss or unexpected medical expenses, so it’s important to have money set aside to cover these expenses. Discuss how much money should be saved and how to build an emergency fund over time. Aim to save at least three to six months worth of living expenses to cover unexpected emergencies.
Debt Management
Debt is more than just a source of stress for families, it’s a monstrous problem that’s growing at an alarming rate. Brace yourself, because the total consumer debt balance has skyrocketed from a whopping $15.31 trillion in 2021 to an eye-watering $16.38 trillion in 2022, according to Experian’s latest report. But wait, it gets worse: as of September 2022, a staggering 340 million Americans were drowning in debt! That’s right, you read it correctly – 340 million! And if that wasn’t alarming enough, only a measly 25% of American households were found to be debt-free, as per a recent study by First Republic. It’s clear that debt is a massive source of stress for families, so it’s high time to face the music and come up with a plan to tackle your debts head-on. Start by prioritizing those high-interest debts, such as credit card debt, and work on paying them off as quickly as possible. But don’t stop there; you may want to consider seeking the help of a financial advisor like Austen Morris Associates for additional guidance on effective debt management strategies. Have you looked at your debt and how to get it under control?
Retirement Planning
Retirement planning is an important conversation for couples and families, especially for those with elderly parents. Discuss how much money is needed to retire comfortably and how to save for it. Review how much you are contributing to retirement in vehicles such as employer-sponsored plans and personal retirement policies. It is important to start planning for your future as soon as possible, saving the recommended 15% of your salary in order to ensure a comfortable retirement. A financial advisor can help create a plan tailored to your family’s specific needs. Is your retirement planning on track?
Estate Planning
Estate planning may not be the easiest conversation to have, but it’s absolutely crucial to ensure that your family’s wishes are carried out after you’re gone. It involves creating a comprehensive plan for the distribution of your assets, including the creation of a will or trust, naming beneficiaries, and considering any potential tax implications. Shockingly, a recent poll conducted by Gallup in 2021 revealed that less than half of American adults have a will that details how their money and estates will be handled after their death. Less than half! Have you stopped to consider what your parents’ plans are for their estate? And more importantly, do you have a plan for your own estate? Don’t wait until it’s too late to have this important conversation with your loved ones and take the necessary steps to protect your legacy.
Talking about money can be challenging, but it’s crucial for couples and families to have these five key conversations. By discussing budgeting, emergency funds, debt management, retirement planning, and estate planning, couples and families can better manage their finances, prepare for unexpected events, and work towards a more secure financial future.
