Family Financial Planning Made Easy

Family financial planning isn’t just about managing money; it’s also about charting a course toward a secure and fulfilling future for your loved ones. It’s a collaborative process that requires open communication, shared goals and a strategic road map. This comprehensive guide will help you learn the tools to navigate the world of family financial planning, from setting realistic goals to implementing practical strategies for achieving them.

7 Steps of Financial Planning

For some, starting a financial plan for their family can be intimidating because they don’t know where to take the first steps. Good news: AAA is here to help you on your family financial planning journey.

A study by financial planning company Empower found that 62% of Americans don’t talk about money. But the cornerstone of any financial plan is setting clear, well-defined goals. Here’s where open communication about money can get you started down the right path.

1. Find a Family Financial Planning Adviser

A family financial planner acts as a trusted adviser, guiding you toward achieving your financial goals. They offer personalized strategies, manage your investments and provide the peace of mind that comes from knowing your financial future is in good hands.

When you are looking for a certified financial planner, prioritize those who have experience working specifically with families. They’ll understand the unique challenges and opportunities that families face and can tailor their approach accordingly.

Remember, finding the right family financial planner is an investment in your future. By following these tips—and reaching out to one of AAA’s knowledgeable family financial planning experts—you will put your financial well-being above all else.

2. Create a Financial Plan

First things first: Start by brainstorming your short-, mid- and long-term financial goals. Short-term goals might include saving for an upcoming family vacation or a down payment on a new family vehicle. Mid-term goals could include funding a college education or home renovations. Long-term goals often mean saving for retirement or creating a legacy financial plan for future generations.

The milestones of a single person are very different from those of a couple or family. Your financial goals may include saving for the down payment for your first house or prioritizing paying off your student loans.

Once you’ve made a comprehensive list of your goals, prioritize them based on importance and urgency. This will help you allocate resources effectively and develop a road map for achieving each goal.

3. Start With the Basics

While most people have a desire to take control of their finances, they need an actionable place to start. Here are four tips that can help you create a monthly budget—and actually stick to it for the long term—so that you can accelerate meeting and exceeding your family financial goals.

1. Establish your income. Before you can begin to create a budget, you need to know your financial baseline. Take stock of the pay that you actually receive—subtracting 401(k) contributions, health insurance premiums, taxes and other payroll deductions. If you’re paid a salary, your take-home income is easy to track. However, if your pay depends on unpredictable variables like hourly wages or commissions, look at past pay statements and determine a reasonable average monthly income. Err on the side of expecting lower paychecks and take unusually high amounts out of the equation.
2. Make a plan. Most of your spending falls into one of three categories: needs, wants, and savings and debt repayment. While there are many schools of thought on budgeting, one of the most popular is the 50/30/20 budget.
3. Track your spending. The most difficult part of any monthly budget is sticking to it, and bad spending habits can be hard to break. Persistence and discipline are key, especially when you’re first starting out. Use free apps like Mint or PocketGuard to help you track what you’ve spent and stay in control.
4. Refine and adapt. Perhaps you’re spending less on groceries than you expected. Or you’re driving more than you thought and need to adjust for higher gas prices. Make adjustments with your financial goal in mind—and avoid making your budget a wish list.

4. Think of the Details

Avoid making a family budget you can’t stick to. It’s important to think about all of your family’s expenses when you’re putting one together. Your mortgage or rent and groceries are common expenses to include in a budget, but also factor in television subscription services, children’s dance lessons or saving for your next family vacation. It’s easy to overlook small costs of everyday family living, but these are the things that will slowly erode your budget.

It's also a good idea to organize a family meeting to discuss financial goals. Involve everyone, even young children, in the budgeting and planning process to foster a sense of ownership and shared responsibility. (Bonus—you’re also teaching great financial literacy to your children at a young age!)

5. Add an Emergency Fund

An emergency fund is a bank account with money saved to pay for large, unexpected expenses like unemployment, major home or car repairs, or unforeseen medical expenses. Think of your emergency fund as a buffer that helps keep you financially sound in a time of need and that helps you avoid having to rely on high-interest credit cards or loans.

Most people are confused about how much they should keep in an emergency fund. But the truth is that it depends on your unique financial situation. A good rule of thumb is starting out with three to six months of living expenses in your emergency fund.

6. Include College Savings

While college costs may seem overwhelming, planning and using the right tools can ease the burden:

• Invest in 529 plans: Consider opening a 529 college savings plan, which is a tax-advantaged account specifically designed for education expenses. Contributions grow tax-free, and qualified withdrawals for education purposes are also tax-free. Many states offer additional tax benefits for contributions to 529 plans, too.
• Start early: The power of compound interest is your greatest ally. Starting a 529 plan early (or using a high-interest savings account), even with small contributions, allows the earnings to accumulate over time. Set up automatic transfers to ensure consistent saving.
• Explore funding options: Contributions to your college savings can come from various sources—parents, grandparents, other relatives and possibly even employers offering matching contributions. You can also start a custodial Roth IRA for your kids. 

7. Think of Other Expenses

Creating a robust family financial plan goes beyond just the major expenses like mortgage payments and college savings. A comprehensive plan takes into account a variety of other costs that contribute to your overall financial picture. Your recurring monthly expenses form the backbone of your budget. Items like utilities (electricity, water, gas), internet, phone plans, subscriptions (streaming services, gym memberships) and transportation costs should all be included.

Your variable monthly expenses, like groceries, gas for vehicles, dining out, entertainment, personal care items, clothing and pet care will fluctuate from month to month depending on needs and habits. Don’t forget annual and semiannual expenses, such as car insurance, homeowners or renters insurance, property taxes, and subscriptions that renew less frequently. And don’t miss the hidden costs associated with major expenses. For example, for car ownership, consider including the costs of car maintenance or repairs.

Segment your financials for big milestones. Perhaps your financial goals include saving for the down payment on your first house, or perhaps you may want to consider buying your child their first car, paying for their wedding or helping them with a down payment on their first home. These may seem like long-term goals when your children are young, but the years go by quickly—the earlier you start planning and saving, the better.

Bonus: 8. Planning for the Future

While having conversations about your end-of-life plan may not be something you look forward to, your family members will be incredibly grateful to know your wishes while you’re still here to tell them.

The first step in end-of-life estate planning should be creating a will. A will is a legal document that coordinates the disbursement of your assets and can appoint guardians for your minor children. It’s recommended that anyone over the age of 18 or who owns property have a will so they can communicate their last wishes clearly.

For families with children, it’s important to discuss who will have legal custody of the children if both parents pass away. This prevents confusion during an already difficult time. If you have life insurance, you should identify the beneficiary of your plan in your will. Life insurance helps you ensure that your spouse and children will be taken care of if something were to happen to you.

AAA Makes Family Financial Planning Simple

Ready to jump-start your bright financial future? Book a meeting with a AAA family financial planner to get on the road to success, no matter where you are in your journey. Through your AAA Membership, you have access to savings tools like special CDs and IRAs that can help you achieve your financial goals.