Work together on a family financial plan

When you pursue the financial goals you share with your spouse, you’ll need a clear direction and a clear plan. If you’re working, however unintentionally, at cross-purposes, you won’t be as effective in reaching your aims. Here’s how you can get started.

Brainstorm

Start talking to each other, and be as honest as you can about what you want. Really think about how you envision the upcoming years. Don’t start cutting your list down yet; just put everything on the table. Keep written records — they’ll come in handy.

Your goals are going to be specific to your family, but here are a few general questions you can ask yourself and your spouse:

•Do you have an emergency fund? If you don’t, what’s a good target amount?

•Are any large expenses coming up in the near future?

•Are you planning on any major career changes or taking time off for school?

•Do you want to start your own business?

•Do you want to have children?

•When do you want to buy a house?

•How much do you need for retirement?

•How much do you want to save for your child’s college expenses?

•Do you want to travel? When, and where?

Prioritize

What is fundamentally important to you and your family? Talk about your priorities with your spouse, and be specific about the goals that you want to fund first. Compromises will be in order, but they’ll be worth the dual focus you and your spouse give to your goals.

Needs vs. Wants

With your spouse, tentatively order your list, so that your family’s urgent and important goals are grouped at the top.

It’s best to prepare your family for uncertainty before funding your non-urgent goals. Anything can happen, and an emergency fund will reduce your financial stress before, during and after an unexpected event. You’ll feel more confident about your other financial decisions, and you won’t need to go into debt to cover unforeseen extra costs.

It may help to reduce your existing consumer debt before you start funding your larger goals. Credit card interest rates tend to outstrip earnings on your savings and investments. You’ll get more use out of your money by choosing to pay down an 18 percent interest-rate card instead of putting away non-emergency savings in a 4 percent high-yield account. Debt can also drag down your credit score, making it more difficult to obtain credit in the future.

Try sketching out a general financial timeline for the next twenty or thirty years. When do you want to accomplish specific goals? You may have an easier time prioritizing when you see all of your goals laid out before you.

Form your plan

Paying small, specific amounts, monthly or bi-weekly, will give you constant, sustainable progress. Come up with target amounts that you’ll want to pay each month toward your goals, and align them with your monthly budgets. Ensure that those target amounts are realistic, and commit to those target amounts with your spouse. When you’re in it together, encouraging each other and contributing as much as you can, you’ll be surprised at how quickly you get to the finish line.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

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