We should always take great care of our personal finances. However, things get even more important when we start a family. Now, your personal finances become family finances. Every decision you make will affect multiple people, not just yourself.
As a consequence, if you make bad financial decisions, then this can have negative consequences on your life at home. You don’t want to do that, I don’t want you to do that, so here are some smart financial decisions your family should make this year:
Pay off or reduce your debt
It’s rare to see someone who isn’t in debt. Your family may still have a mortgage to pay off from when you bought your house, but you could also have credit card debt, a personal loan, etc. Well, this is the year where you finally get your debt under control. Some debt, like credit card debt, can basically be ignored for as long as possible. The problem is that this just increases the money you have to repay.
So, start paying off or reducing your debt. You can do this by setting up regular repayments and sticking to a monthly budget. Or, you could use a debt consolidation loan to pay off all of your debts, then be left with one debt to worry about. This is one of the most effective ways of reducing your debt, but there are a few obvious concerns. Some people often wonder, does debt consolidation affect credit score? The short answer is yes, but in both a negative and positive way. You may see an initial dip in your score, but it will actually improve over time.
Improve your credit score
That brings us nicely onto the second thing you should do; improve your credit score. A better credit score means you will have access to more options when applying for finance. So, if you need a loan to pay for home improvements, then you can get a much more reasonable interest rate, making it cost less – and possibly helping you avoid too much debt!
Good credit scores also make it so much easier to get anything from a phone contract to your insurance. Companies check your score all the time, so it’s a smart financial decision to improve it.
Set up an emergency fund
Next, you should start an emergency fund for your family. Don’t confuse this idea with a savings account, they’re slightly different. A savings account should be set up to save money for something. This might be your kid’s education, a new house, a new car, whatever.
But, an emergency fund exists alongside this to keep money ‘just in case’. Ideally, you make it through your life without ever touching it. In which case, you pass a hefty investment over to your kids! However, if you ever need money – and you don’t have enough – then the emergency fund kicks in to provide you with instant cash. Think of it as a financial safety net!
If you want to improve your family finances, then these three decisions are the perfect way to start. It’s never too late to take control of your financial situation, but the later you leave it, the harder it will be.