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How To Manage Family Finances Effectively Before Retirement

  • October 3, 2022

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How To Manage Family Finances Effectively Before Retirement

As a family, it’s important to have the finances in a good position before retirement. Once a person is retired, there’s rarely any additional income that comes in, other than pension payments. 

It may be for some that they continue to take on a side job or hustle to make some extra income here and there, but for the most part, what they have in their bank accounts, needs to last them. 

How does a person manage their family finances effectively before they come to retire? This post will help those looking to manage their finances more efficiently before retirement, whether far off or in the future.

Why is it important to manage family finances?

Basic money management is essential to help meet the family’s everyday expenses. Whether it’s just the parents who are left in the home or some of the kids are still living in the home. 

From handling unexpected bills to saving for a rainy day, these are essential for money management. Earning more money as a household doesn’t necessarily make it easy to manage money. In fact, a study found that 18% of people making over $100,000 annually, live paycheck to paycheck.

Whether a person earns $25,000, $150,000, or $400,000 a year, knowing how to manage family finances is critical to a stress-free retirement. With that being said, let’s look at how a person can manage their family finances effectively before retirement. 

Talk openly about finances with loved ones

Finances are something that should be discussed openly with family members that are trusted. This is important because there may be certain financial decisions that need making before retirement or will happen further down the line during a person’s retirement.

By having honest and frank conversations about finances, it’s going to answer some of the questions that families naturally have when it comes to passing down an inheritance, etc. Not that anyone should expect a handout from anyone, even their family, it’s a conversation worth having to clarify the person’s wishes. 

Make finances a joint effort

Finances are a joint effort, especially when it comes to understanding the household’s income and outgoings. What if the sole person responsible for finances suddenly passed without warning? The other household members may have no idea how to manage finances, leading to mistakes being made.

Everyone should have a good knowledge of how their finances work and what is included in the household’s expenditure. Make it a discussion that’s often had so that everyone who needs to be responsible, can manage it should they need to.

Generate enough savings to sustain the lifestyle required

When it comes to retirement, the money that the person retires with is likely going to need to last for the remainder of their years. With that in mind, it’s necessary to generate enough savings to sustain the lifestyle that the individual(s) requires.

Look at how much the current lifestyle costs and how it might change during retirement. If it doesn’t change, then the money available in savings needs to translate accordingly to how much time one believes they have left. This for most people is likely unknown!

Pre-pay for any funeral arrangements

Funerals are a costly expense. For the person in question, it’s not something they would have to worry about if they passed. However, for the rest of the family and friends, it’s a cost that would need to be sorted by the estate.

A good way to help relieve the stress of loved ones who may be mourning is to have a funeral package that’s already been pre-paid for by the time they retire.

Pay off all debts before leaving work

Before retiring, it’s necessary to pay off all debts before leaving work. This is important because having debts when retired means it’ll burn through any savings held, a lot quicker. With no more income coming in from a paid job, having a debt of any kind can be dangerous.

Try to consolidate any debts so that they can be tackled under one individual account, rather than in multiples. By paying off all debts, the person can retire with ease and without having to worry about it impacting the quality of their retirement.

Struggling to pay off debt? It’s worth getting help to tackle the debt and get it paid off regardless before retiring. If that’s not possible, then retirement may need to be revised, or downsizing may be an option for some to help pay off debt.

Review spending habits regularly

Depending on how a person spends, this can affect how lavish their retirement will be. Reviewing spending habits before retirement can be a good way to introduce a more conscious spending routine that is catered to a work-free lifestyle.

For some, cutbacks might be needed and habits may need to be enforced. Whereas, for others, it might not be too much of a problem when it comes to spending habits having to compromise.

When it comes to spending habits, it’s always a good idea to note all expenditures down in a spreadsheet and to assess financial spending each month if possible.

Always try to save money

To help improve family finances, always try to save money. Even with retirement, savings can be made. Saving money is a good habit to have because it helps with safe spending and it avoids going over the top of running out. 

When saving money, take it out of the pay packet like any other bill. It should be something that comes out automatically and that isn’t considered as a saving but more as a bill that goes into another account. This account shouldn’t be actively looked at and over time, a person saving in this way will make a real difference to how much they have to help with expenditures and other rainy day scenarios where money is needed.

Use these tips to manage family funds before retirement

To manage family finances effectively, make sure to use these tips and get the most out of the build-up to retirement.

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