As we all enter a new decade, it’s likely that we each have drafted up our own plans for the months to come, with dreams of financial stability success, growth, and achievement – whether simply for ourselves, or for our families. While having a resolution for the year to come is good, it is even better to back that up with an actionable plan.
The difference between a wish and a plan is the commitment one has to either, and if you wish to help yourself and your family attain better control over your finances in the coming months, this January is the perfect occasion to begin working on your gift of financial stability to your loved ones.
While it would be easy to simply chalk up financial stability to ‘work harder’ or ‘work smarter’, income is only a portion of the equation. To achieve financial stability, you need to define what it is you understand as financially stable and set out a realistic plan to achieve that.
What Does Financial Stability Mean to You?
There is no right answer here. To an economy, financial stability is defined by the ability to absorb financial imbalances, meaning, having enough of a cushion to deal with bad times while having the means to generate a healthy surplus in times of good fortune.
But for individuals and families, financial stability can have its own unique definition depending on what you aim to achieve, such as saving up a specific figure every year on the road to retirement, or simply achieving a debt-free status.
Circumstances are drastically different for families across the country, let alone the world – so to begin with, you will have to decide on what your criteria should be for financial stability in 2020. From there, it is onto the next step.
Create a Budget Plan Immediately
The first thing you should do this month is sit down and compile very single one of your yearly expenses, from:
- Online bills and entertainment
- Regular date nights
- Children’s allowances
- Heating bills
- Food costs
- And more
If you do not already have a comprehensive budget plan, getting one down on paper today is a good idea. It doesn’t have to be to the letter – create a budget plan that gives you a general overview of what you spend in a year to maintain your current lifestyle, or the lifestyle you aspire to lead in 2020.
Not only does this give you a more concrete idea of how and where you should be saving money, but it also helps you prevent the common occurrence of Parkinson’s law, which first applied to bureaucracies and planned work, but also applies to spending.
Put shortly, the more you earn, the more you spend – but with a budget plan, you can better control your spending. The key here is not to lead a completely austere life, but to realistically and accurately note down how much you can afford to spend each week, month, and year, and how much you are spending.
Create a plan for the year and note down each month how much you have had to spend on costs for everything coming out of the family pocket, from bills and subscription fees to gifts and snacks. With an overview of the monthly difference between your earnings and your spending, you can project how long you would have to save up to reach your personal goal of financial stability.
Secure Your Financial Legacy
It is not enough to save up – you need to protect those savings. Retirement accounts, savings accounts, assets, bonds, and other financial instruments all eventually become meaningless to you when you pass away, at which point all that you own represents a great fortune and countless opportunities to your loved ones and close kin. But it remains in your control how all that fortune is best distributed – so long as you appropriately seize control.
Otherwise, if you die without leaving behind any indication of what should be done with what you own, it all goes to the nearest of kin according to each state’s intestacy laws, which generally defer to blood relation, or consanguinity. Dying without any clear indication of who gets what can invite disputes and arguments, and lead to a lengthy and costly probate process – especially if the estate is complex, and spans assets in various states and countries.
If you have any savings and a family – even one as simple as a partner and child – you must consider setting up an equally simple estate plan. Estate planning is not exclusive to the wealthy and the elderly and can greatly profit young parents by ensuring the creation of a sensible trust for their child should they pass away unexpectedly.
Many accounts, assets, and funds can be passed directly to a beneficiary or set of beneficiaries upon death, bypassing the probate process entirely. A will can give you the ability to determine your child’s legal guardian, while estate planning tools like a living trust allow you to ensure that your children and loved ones have access to your savings when they are ready to make use of them.
This way, you can entrust your child’s wealth to a close friend or relative, who will manage and grow it until your child is old enough or mature enough to take it on – rather than receiving it once they reach the legal age of maturity, as they might if no plan is created.
Financial stability is a great goal in 2020, but poor planning can have it all fall apart. It is important to plan for the present, as well as the future. Estate planning can help preserve wealth for modest estates as well as large and complex ones, and a simple will or trust need not be complicated or overly expensive.
Grant yourself and your family peace of mind by opting to protect your savings and investments and ensure that they are quickly transferred to the next generation.