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How To Make a Financial Plan For Your Family – Beginners Guide

How To Make a Financial Plan For Your Family – Beginners Guide

February 04, 2023

How To Make a Financial Plan For Your Family – Beginners Guide

Maturity comes when you start taking care of your family's financial planning. You worry about the income stream, look at your expenses, divide the amount into smaller portions to cover all your needs, and save for the future. 

Making a financial plan for your family helps you save for long-term dreams and unexpected events and emergencies. It is always good to have some money around for your family. A financial plan can help you meet your current and future financial needs.

Your kids can go to college, and you can have a big vacation, start a business you have always dreamt of having, or retire on a beach. 

If you have no experience managing your checkbook and making financial plans for your family, this guide is for you. 

It will go through all the steps to manage your income, cover your expenses, cover your wants, and still save for the future. 

Here's a beginner's guide to making a financial plan for your family.

1. Set Financial Goals

Your dreams and independence define financial goals. Your financial goals are your long-term savings and spending goals. There are short-term and long-term objectives. Regardless, setting goals ahead of time makes them easier to achieve.

Setting financial goals for the future can help direct current efforts toward achieving those goals. If you lack motivation, you are more likely to continue spending as your debts grow. Assume you've set a goal to pay off a large credit card balance.

You could reduce your reliance on takeout and pay off your debts. A good plan anticipates both short- and long-term financial needs.

The plan then details how to achieve the objectives. Financial planning assists business owners in achieving more than just personal financial objectives. Saving for an emergency fund or paying off credit card debt in a year are examples of short-term financial goals. 

Saving for retirement and purchasing a home takes more than a year. When setting financial goals, it is critical to ensure they are both attainable and realistic. Here are some pointers for setting financial goals:

  • Be specific
  • Make them measurable
  • Set realistic goals
  • Create a plan
  • Be flexible
  • Make it a priority

Having a mix of short-term and long-term goals can help you achieve your overall financial goals and lead to financial security.

2. Assess Your Current Financial Situation

Before proceeding with actual planning, one must thoroughly understand one's financial situation. This is the foundation upon which a financial plan is built. It would be impossible to make informed decisions and provide relevant recommendations without a thorough understanding of one's income, expenses, assets, and liabilities. 

Furthermore, it ensures that the individual's financial plan is realistic and achievable, increasing the likelihood of success and avoiding future pitfalls. 

After assessing the current financial situation, one can make a personalized financial plan that addresses a family’s needs and objectives by understanding the financial situation thoroughly.

The following are some of the ways that will allow you to assess your financial situation.

Gather Financial Documents

Gathering financial documents is the first step in making a financial plan. Assessing these documents will give you an idea of where to begin your financial plan and what are your income, expenses, assets, and liabilities. Some of the key financial documents that will be needed when gathering information for a family financial plan include:

  • Tax returns
  • Pay stubs
  • Bank statements
  • Investment statements
  • Insurance policies

After gathering your financial documents, you must incorporate them into your financial plan. This can be done by analyzing the information in each document and using it to create a budget, calculate your net worth, and set financial goals. It is also critical to regularly review and update these documents to ensure that your financial plan remains accurate and relevant.

Calculate Your Net Worth

Net worth is the difference between assets and liabilities. Calculating your net worth is akin to giving yourself a personal finance grade. If you have a mortgage on a $200,000 home with a loan balance of $150,000, you can include the extra $50,000 in your net worth.

Keeping track of your net worth is critical because it can reveal troubling spending habits. Suppose your financials are downgrading because of your bad financial control and habits. Calculating net worth is necessary to save for the future and make a financial plan for long-term goals and financial freedom

To calculate your net worth, you will need to follow these steps:

  1. Make a list of all your assets, including cash and savings accounts, investments (e.g., stocks, bonds, mutual funds), property (e.g., real estate, cars, jewelry), and other valuable items. Be sure to include the current value of each item.
  2. Make a list of all your liabilities, including mortgages, car loans, student loans, credit card debt, and other outstanding debts. Be sure to include the outstanding balance of each debt.
  3. Subtract your liabilities from your assets. The difference is your net worth.

It is also worth noting that some assets can be difficult to value. In such cases, reasonable estimates can be used based on current market value.

Identify Areas of Overspending

Excessive spending must be identified in a family financial plan. Families can prioritize spending on necessities while reducing unnecessary spending.

Overspending reveals where and how money is being spent. This assists in directing funds toward the most important expenses and savings goals.

Checking the budget, bank and credit card statements, expenses, patterns, and history can help a family figure out where they are overspending. After identifying overspending, one can create a financial plan to control spending and save more.

3. Create a Budget

Creating a budget can be beneficial in the long run as it will allow you to spend fix amount and set the routine of controlling finances. 

Their unique circumstances and preferences will determine the best strategy for a family. There are numerous budgeting strategies available for managing and controlling spending. 

Popular zero-based budgeting starts with "zero" and builds a budget for each period. This method justifies all expenses each period instead of carrying over a budget. But it takes time to implement.

Elizabeth Warren popularized the 50/30/20 budgeting method, suggesting spending 50% on necessities (rent, groceries, utilities), 30% on discretionary (entertainment, dining out), and 20% on savings and debt repayment. This simple method may not work for high- or low-income people.

Envelope budgeting puts money in envelopes for rent, groceries, and entertainment. You can't spend in a category after an envelope's cash runs out. Budget-challenged people can use this method.

Reverse budgeting prioritizes savings, bills, and wants. Save a portion of your income, pay bills, and spend the rest on discretionary items. Enjoy your lifestyle while saving and investing with this strategy.

You can save, create a budget, track expenses, and stick to the budget by:

  • Start by listing your income and all expenses, including fixed expenses.
  • Track your expenses using a spreadsheet to see where your money is going.
  • Prioritize your spending on necessary expenses.
  • Be realistic and set a budget that you can stick to.
  • Review and adjust your budget regularly.
  • Stick to your budget.
  • Have an emergency fund.
  • Reward yourself when you meet your budget goals.

4. Develop a Savings Plan

It is critical to save for the future to achieve financial stability and security. It allows you to save for unforeseen expenses, pursue your goals, and achieve financial independence. After establishing an adequate emergency fund, savings can be used as "seed money" for higher-yielding investments. 

There is evidence that saving is linked to increased happiness. The ability to save money allows one to escape the uncertainties of life and live a more fulfilling life. There are numerous reasons to save and numerous methods for doing so.

Most experts agree that you should have at least three months of living expenses saved up. If your monthly living expenses include housing, transportation, food, and other expenses totaling $2,000, you should set aside at least $6,000. Workers in potentially hazardous occupations should aim to save six months' worth of living expenses. 

Here are some tips on how to build a healthy savings plan

  • Identify the saving goals 
  • Make saving a priority
  • Automate your savings
  • Reduce expenses
  • Increase income
  • Diversify your savings
  • Review your progress regularly
  • Be consistent and persistent
  • Utilize savings tools
  • Be flexible

Different Types of Savings Accounts

Savings accounts are safe places to keep the money you do not intend to spend immediately. There are various types of savings accounts available, each with its characteristics. Comparing the various savings account options can assist you in selecting the best one.

  • Traditional savings accounts – These low-interest savings accounts are the simplest. They have low minimum balances and ATM or debit card access.
  • High-yield savings accounts – These accounts have higher interest rates than savings accounts. They usually require a higher minimum balance and a certain number of monthly transactions to qualify for the higher interest rate.
  • Money market accounts – These accounts may offer check-writing and a higher interest rate than savings accounts. They usually have a higher minimum balance and limit monthly transactions.
  • Certificates of Deposit (CDs) – The depositor must keep the money in these accounts for several months to a few years. CDs pay higher interest than savings accounts.
  • Online savings account – Online-only savings accounts. They may have a higher interest rate and lower minimum balance than traditional savings accounts.
  • Children’s savings account – These accounts for kids have lower minimum balances and may offer educational resources or bank-matching contributions.

Consider your savings goals, the interest rate, fees, and other features, as well as the bank's accessibility and customer service when selecting a savings account. Compare your options before deciding on a savings account.

5. Create a Debt Repayment Plan

A family's finances can suffer as a result of debt. Making ends meet can be difficult when you are in debt. It can also keep a family from saving for emergencies, investing in education, or buying a home. 

Debt can also make it difficult for a family to obtain loans or credit, limiting their financial development. Excessive debt can trap a family, preventing financial success. One can create a debt repayment plan and stay on track, including making a list of all debts, interest rates, and minimum monthly payments. 

It also includes prioritizing debts, setting a budget, avoiding new debt, preparing for setbacks, and staying motivated. If you have patience, work hard, and make sacrifices, you will be debt-free.

Strategies for Paying Off Debt

People can use several different debt repayment strategies to pay off their debts. 

Debt Snowball – This strategy involves paying off the smallest debt first while making minimum payments on the rest. You pay off the smallest debt first, then the next smallest. This strategy helps people see quick progress and feel accomplished as they pay off each debt.

Debt Avalanche – This strategy involves paying off debts with the highest interest rates first while making minimum payments on other debts. Reducing debt interest saves you the most money over time. It suits savers who want to be debt-free quickly.

Debt Consolidation – Pay off multiple debts with a personal loan or balance transfer credit card. Consolidating debts into one payment simplifies repayment. 

Debt Management Plan – Credit counseling agencies can help you create a debt repayment plan. The agency will negotiate lower interest rates and monthly payments with creditors. For those struggling to make minimum payments, this strategy may help.

Bankruptcy – This legal process can reduce or eliminate debt. As a last resort, it's serious. It's for people in deep debt who can't see a way out.

The best strategy for you will be determined by factors such as your debt load, interest rates on your debts, and income and expenses. It is critical to evaluate all available options and choose the one that will most effectively help you achieve your financial goals.

6. Protect Your Family’s Financial Future

As a financial head of the family, it’s a responsibility to take care of your family’s happiness and stability, depending on your ability to secure your family's financial future. It entails putting money aside each month, planning for unexpected expenses and providing for one's family. 

A well-planned budget, retirement and emergency savings plans, and adequate protection against the unexpected are all examples (via insurance). For the same reason, keeping track of and controlling your debt is critical. You can provide comfort and peace of mind to yourself and your loved ones by saving for their future.

Here are a few ways to help you secure your family’s financial future.

Emergency Fund

The term "emergency fund" refers to a savings account kept entirely to deal with unexpected financial emergencies. It's a safety net when you need it like when you lose your job, become ill, or need major car repairs. 

In most cases, three to six months' worth of emergency funds should be saved. A separate savings account for emergencies is a wise financial decision for any family. It also creates mental space for saving for retirement or a down payment on a house. A household's financial situation may become precarious without an emergency fund.

College Fund

A college fund is money set aside over time to cover postsecondary education expenses. It is an essential component of any family's financial plan because it can reduce the cost of higher education.

Savings and custodial accounts are the two most common college savings plans. Families should conduct research and select the solution that best meets their needs.

Retirement Fund

A retirement fund, also known as a nest egg or retirement savings, is money saved or invested for future use in retirement. It is critical to a family's financial plan because it ensures that there is always enough money to cover necessary expenses.

401(k) plans, traditional and Roth IRAs, and employer-sponsored pension plans are all examples of retirement savings vehicles. Families should conduct research and select the solution that best meets their needs.


Insurance is a way to protect one's finances in the event of a calamity such as an injury, illness, or death. It is an essential component of any comprehensive financial plan because it can help safeguard a family's financial future in unforeseen circumstances. 

A family's insurance policies may include health insurance, life insurance, disability insurance, home or renter's insurance, and car insurance. 

Because disasters can strike at any time, insurance is essential. If a family does not have insurance, paying for emergency costs out of pocket can be devastating. Investing in insurance can provide financial security and peace of mind. As a result, families can devote more resources to things like retirement or their children's education.

Estate Planning

Individuals use "estate planning" to prepare for their death or incapacity. Estate planning entails writing a will, establishing trusts, naming beneficiaries on financial accounts and insurance policies, and granting power of attorney. 

It also entails ensuring that you have enough life insurance to cover your final expenses and considering your long-term care options, such as nursing homes and in-home care.


Making a financial plan and sticking to it is the smartest thing a  person can do; it gives him a sense of control and the sense of spending g the hard-earned amount considerably. 

Managing one’s expenses and identifying the debts is the start of making a financial plan that will eventually send your kids off to college, help you open a business, or retire.

Starting all by yourself can be hectic, so Diddel & Diddel offers complete service of making your financial plans, and they check on you to see if you are following the plan or giving in to the cravings of overspending.

The things that can be controlled should be controlled. This way, you will have savings and can fund anything the future holds for you (good and bad).

Diddel & Diddel offers consultancy, and our practice also does your taxes to save as much as possible. 

We make plans suited to your needs, so you are comfortable with extra spending and still get to save some.

Sit down with one of our professionals, and we will make a comprehensive financial strategy for you. 

Our consultancy is free, and we always take care of your needs. 

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