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How to keep your family from getting your finances off track

Family is one of the strongest bonds - most of us will do anything for our family, especially parents or kids.  And it is this strong sense of responsibility that can create havoc to even the best laid retirement plans.  There are a few moves you can make to help avoid financial disruption caused by your family especially if your become aware of some of the possible negative outcomes that could be looming in your future.
Why is a person’s family the biggest wild card for financial planning?
There are two very emotional reasons:  First, everyone wants their kids to do better than they did so they can sometimes overcompensate by giving them more financial help than they really should.  The second reason is that we often don’t know what our parent’s financial situation is until a crisis occurs and then we have no choice but to handle any financial burden that comes up.
Let’s start with the kids, how do we keep them from derailing our financial plans?
First, if you don’t start our retirement savings until after the college savings is completely funded, you have lost a huge opportunity to achieve the retirement savings you really need.  Secondly, our kids can cost us more, especially in the teenage years.  One area that has a double impact is high school grades, if they don’t get the best grades possible you will pay more for car insurance and your child will miss out on many merit scholarships. 
What about college, how could that impact our financial plan?
You need to make sure that you don’t overpay or go too deep into debt for their college choice.  Make sure they select a college that is appropriately priced for their career earning potential and your ability to pay for college.  And most importantly, impress upon them to work hard in high school so that they can get scholarships and other financial assistance based upon their merit. It is also important to have them share in the cost of college, even it is a small amount, it is always a good idea to have them be financially committed to their college experience.
What about helping our children obtain loans?
This is an area that can end up being very costly for parents.  Co-signing or guaranteeing a loan means that you are responsible if your child doesn’t pay the loan back.  Make sure that your children are financial able to make the loan payment and that they are not getting over extended with credit cards and other loans. You really need to assess their financial stability before agreeing to sign on the loan.  Not only will their credit be impacted, it could wreck your credit score too which in ultimately could cost you as well.
How do parents impact our financial situation?
The biggest impact from your parents could be if they didn’t save enough for retirement or don’t have proper coverages for health related concerns.  It is best to talk to your parents and make sure they have planned for their future and aren’t missing anything.  Helping parents a little now might help them avoid a major financial crisis in the future, a crisis that could impact you in a financially significant manner.  Sometimes just a discussion and minor adjustments or additions to their plan is all that is needed.
The best way to keep family financial issues from impacting your own financial situation is planning and working to avoid many of the family problems that can wreck your financial future.  Family is important and it is important that you can help them when they need it most.

Posted: 3/18/2015 with 0 comments

Categories: Finances, Kids and Money, Money Matters

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