Starting a new family is no joke. Aside from having to get used to each other’s company, couples and young parents need to become financially stable as soon as possible to be able to cover everything from paying the bills to investing in your child’s future, and your retirement funds.
Sounds like a lot, right? That’s the reality of it and there’s no way of sugar coating it. If you’re looking for financial advice for new parents like you, there are a more than a handful of ways for you to gain financial independence early. Here are three smart money tips to help you be financially free while you’re still young.
Monitor your cash flow
Before anything else, you need to know how much you’re making and spending as a family. This means you need to work as a team and monitor your cash flow. List down your sources of income first so you can find out how much budget you can allot for your expenditures. Yes, this also means you need to disclose how much you’re making to your partner if you haven’t.
After you have a concrete figure of how much you earn together in a month, you can now calculate how much you need to spend to fund your cost of living in the Philippines. You can start by listing down your monthly bills, groceries, monthly allowance, debts, or even your family trips to the mall.
If the monthly expenditures exceed your combined monthly income or at least reach the halfway mark, consider altering your lifestyle to reduce how much money you spend. Maybe you can remove that bag of chips and bottle of soda from the grocery list, you can commute together, or enjoy more time at home to save on that hard-earned cash. Pay off your debts as fast as you can to avoid the burden of the interest rates.
With the extra money you now have, you can start building your emergency funds and savings, especially if you’re a new parent. These will be your catch net in case something happens that interrupts your cash flow like losing your job or health issues.
According to Reader’s Digest, your emergency funds should at least be three times your current salary and there’s no real cap for this. To achieve this, Rappler suggests the 80/20 rule, wherein you set aside 20 percent of your income for savings while 80 percent goes to covering your daily needs.
Increase your means of income
Be it hospital bills, increasing prices of goods, or even inflation rate – there are plenty of factors that could squeeze your monthly budget so tight that it will be hard to save for the future. So how do you work around this?
Without leaving the company you work in, you can increase your means of income by starting a small business. Although it may require a small investment, the potential return will help you increase your monthly budget enough to make you financially stable.
Are you good at baking or cooking? Start taking orders from your friends and market your menu online. Selling goods over the Internet will help you earn extra cash. If you’re good in photography or writing, then pick up freelance work. Even if you’re into arts and crafts, you can sell it off as souvenirs for events like weddings or other gatherings. There are even workshops that help you learn a skill or two that you can use to earn. The possibilities are endless; all you have to do is take that first step.
You can also search for ways to earn a passive income. This means earning money on a regular basis without having to exert too much effort. Passive income can be anything from investing in real estate properties and renting them out to a convenient business that requires little managing.
Plan for the future
What if, for some reason, you can’t work anymore? How will your child go to school? How will your family get by? We know it’s a scary picture to imagine, but it happens and that’s why young parents have to start thinking of the future. Right now.
According to a report by the Philippine Statistics Authority, the average age a woman gets married is 26 years old while a man ties the knot at 28 years old. If the couple gets pregnant the following year, it is safe to say that they will be more or less 30 years old when the baby comes out. It would take 18 years from kinder to senior high school. That means a woman and man will be 44 and 48 years old, respectively by the time their child reaches college.
Nobody can guarantee that we’ll be alive and kicking by then. So it would be wise to invest in a college fund very early on like GradMaker by Manulife. It will allow you to begin investing for just Php10,000 and can grow up to 8 percent annually, depending on the fund performance. The good thing about this is that you can begin investing even if your child is still in the womb. You can even monitor its progress or invest more funds via the Manulife Gradmaker mobile app.
Meanwhile, you can begin preparing for your retirement as early as today by investing in mutual funds or actively trading in the stock market. If you’re scared to do this because you lack knowledge in the stock market, you can always attend the free seminars by the Philippine Stock Exchange or other certified third-party agencies.
Finding ways to become financially stable while starting a new family sure is tough. But by managing your finances, expanding your income, and investing in your future, you get a head start to ensure that you and your family are taken care of financially not just today, but in the future as well. And that is one of the best ways to show them that you love them and prepare your children for their own future.