Having the responsibility of caring for an extended family can be financially exhausting, especially in this post-COVID environment. In this article, we explore how to manage your money while also meeting your extended family obligations.
- Budgeting Tips
- The Power of Compounding Interest
- Thinking About Opportunity
- Emergency Fund
- Consider Owning Rather Than Renting
- Wrap Up
Having a tight handle on how your money is being spent is vital to ensuring that you are covering all of your commitments and preventing financial anxiety. Here are five tips to help you successfully budget your money:
- Budget to zero at the start of each month. That means that your income minus your budget mounts should come to zero.
- Involve all family members in the budget. This promotes buy-in and lets everyone know what the financial situation really is.
- Adjust your budget every month as your situation changes.
- Prioritize your budget items as follows: savings, food, utilities, shelter, transportation.
- Budget to pay off debt in excess of your monthly obligations.
The Power of Compounding Interest
One of your first budget priorities is saving. However, a next step to saving is putting that money into a compounding interest bank account, which will allow you to build up your financial resources. Compounding interest means that you receive interest upon your interest. Each subsequent addition of interest amount will be greater than the previous one, so that eventually it becomes greater than the original amount invested. The rate at which compound interest accounts can grow has resulted in people referring to the “miracle of compound interest.”
Even if you are only able to invest a small amount each month into a compound interest account, you should do so. Look for ways to cut back on your expenses with money-saving apps in order to save a modest amount of your income. Set up the account so that you cannot withdraw from it without being penalized, as an incentive to let it grow naturally. The accruing benefits of compound interest will make the effort well worth it.
Thinking About Opportunity
Be on the lookout for opportunities that arise around you. At work, become attuned to opportunities to advance your position. Don’t be afraid to ask for a pay increase or bonus if you feel that you are not being paid what you are worth. Be prepared to back up your request with substantial reasons as to why you deserve more money.
Be on the lookout for additional ways to make extra cash that can help you drive income into savings. There are plenty of opportunities online, including freelance writing, affiliate marketing, and drop shipping.
At some point, it’s inevitable that each of us will encounter a financial setback or money emergency. Planning ahead for that rainy day is an integral part of looking after your financial future.
Before you spend or invest any money, know what your budget is and stick to it. Develop the policy of only buying it if you can afford it. That means staying away from incentive programs like After Pay or Hire Purchase. Discipline yourself to waiting and saving until you can afford it.
Protect your financial stability with insurance. Even though it can seem like an unnecessary expense, nothing could be further from the truth. If you are unable to work, for example, having income protection insurance will provide an income source to get you through.
Paying off your debt load is one of the smartest things you can do to protect your financial future. As well as rescuing dead interest payments, you will also improve your credit score. The better your credit score, the higher your chances of acceptance for a loan in the future.
Most people are terrible savers. As a result, they have no fallback money when an emergency strikes. Set aside a small amount each week that you can channel into an emergency account. Ideally, you want to be able to cover 4 months worth of rent or mortgage payments with your rainy day savings.
Consider Owning Rather Than Renting
People who own their own home are far more likely to be financially secure than renters. They are also creating an asset that will accrue in value for the rest of their lives, providing options that renters do not have. When you own the home that you live in, you don’t have to worry about being kicked out by a landlord or having your rent hiked up unexpectedly.
Considered purely from an investment point of view, buying a house is a far better option than investing in the stock exchange. For example, say you had $30,000 to invest, and you put it into shares that appreciated at 3 percent per annum for three years. You would, after three years, end up with $2,782 on top of your initial investment. Of course, if you sold your shares, you would have to pay tax on that interest. Contrast that to putting your $30,000 down on a $300,000 house. If the value of your house appreciated by 3 percent per year, you would have gained $27,818, which is almost double your investment—and you would not have to pay tax on it!
You are able to deduct mortgage interest and property taxes when you file your annual tax return. If you are paying $1700 in mortgage payments monthly, you should be able to claim about $300 back on your taxes. When you deduct that from your mortgage payment, you will probably find that owning works out to be a lot less expensive than renting.
Your financial future doesn’t have to be turbulent, even when you have extra family responsibilities. By using the five ideas to make money covered in this article, you’ll be able to build a solid financial base, which will, in turn, underpin your family’s future.