Most experts agree that family financial planning should include preparing a budget, lowering debt, and establishing a way to save. In addition, families should attempt a full and honest evaluation of their financial situation. If they feel incapable of doing this on their own, it might be a good idea to hire a professional. Though this can be expensive, in some cases, hiring a professional may actually save money in the end.
Budgeting may sound simple, and though it is probably the key element in family financial planning, many families have trouble setting a budget and sticking to it. Financial guru Dave Ramsey advocates keeping a monthly notebook devoted to studying spending habits. The smallest expenditures should ideally be included. At the end of the month, most families should be able to look over what they have spent and make adjustments where necessary.
Family financial planning should typically include a plan to reduce overall debt, especially credit card debt. Ideally, credit cards should be used sparingly, if at all, and any charges made to credit cards should be paid off monthly. This should greatly reduce the amount of interest paid. If credit card debt is very high, it may be a good idea to get an outside loan with a lower interest rate and use it to pay off the debt. Borrowing should generally be reserved for major expenses such as homes or automobiles, not clothing and recreation.
Even if money is very tight, family financial planning should incorporate a way to save. This can generally be accomplished by cutting spending or increasing income. Simple ways to save include using coupons at the grocery store, walking or car-pooling when possible, and cutting back on recreational spending. In addition, families can save on heat bills by lowering the thermostat in their homes and adding insulation if necessary. If cash flow is not a problem, many families may benefit from the advice of an investment counselor to determine the best way to save and invest their money.
Budgeting, saving, and debt reduction may sound like simple steps, but according to a Princeton University survey, fewer than 50 percent of the families participating in the study had any sort of financial plan. In fact, less than a third who participated in the survey even knew the amount of interest they were paying on credit card debt. According to other studies, in the world's major economies, household debit is generally much greater than household income.