Having a young family can be quite expensive, which makes it very easy to get into debt during this life stage. You may feel like you can’t quite make ends meets, especially when you have diapers, preschool expenses and the need for a bigger house and car looming over your finances. Here are some tips for staying debt free while your family grows.
Budget your money.
Creating a budget and sticking to it can be one of the best ways to protect your family from making everyday purchases on credit - a surefire way to wind up in debt. One of the first steps to making a workable budget is to examine your spending habits from the past few months. You’ll need to look at your regular expenses like rent or mortgage payments, car payments and utility bills. Also figure in your other required bills, like student loans. You can then determine how much you have left for groceries, entertainment and recreation. By figuring out where you waste money, you can avoid making similar mistakes that may cause you to cover expenses with a credit card.
If you have already gone into credit card debt, you will need to make a solid plan to get your finances back in the black. Refigure your budget and consider cutting down on some of your expenses so you can contribute more money to paying off your debt each month. If you are in the hole from multiple sources, you might want to look into a consolidation loan, which repays your balances with a loan that has a lower interest rate. The sooner you are debt free, the sooner you can start saving and investing for your family’s future.
Be smart when making major purchases.
If you haven’t done it already, you are probably thinking about buying a home for your family. While getting a mortgage does mean going into debt, if you make a smart and well-informed decision, your purchase will be smart debt that can further you financially. Dumb debt, on the other hand, makes your finances unmanageable and won’t help you complete other goals. Educate yourself on the different types of loan products so you understand what they mean for your finances over time. Ultimately, you should go with the loan or mortgage that helps you build the most equity in the least amount of time, while maintaining a monthly payment that fits within your family’s budget.
Don’t forget to save for the future.
If your family is young, you may feel like college and retirement are miles away. Though you have many years left before high school graduation and the end of your career, remember that saving and investing now can help keep you and your children out of debt in the future. Right now, you may not be able to afford to sock away a large amount of money each month, but every little bit helps. The longer money is saved, the more it grows. If you can stick to a regular saving and investing plan, you may be able to avoid having to take out student loans when you are getting close to retirement. This can enable your kids to start their post-college career without having to dig out of debt, and you can retire without having to worry about making loan payments while you are on a fixed income.