According to Kerri Anne Renzulli at Money, Americans under 35 carry a total debt of $67,400. Between ages 34 and 44, however, that figure nearly doubles! What happens? A number of things: couples start having more children, education expenses increase, they move into a larger house and probably get newer cars, credit card debt grows, and more. In the midst of all of that, parents too often forget the necessity of basic financial planning: creating a family budget, becoming disciplined about spending, paying down consumer debt, and finding ways to cut costs on everything from utilities to family entertainment.


Finances are often a stress point for many families, but parents can minimize that stress with a financial plan that includes determining their current net worth and following a strict budget. Here are four things parents should consider when making a financial plan.



Determine Your Net Worth


Net worth is the difference between what you own and what you owe. You first list your assets, the value of everything you own, including the cash you currently have on hand (and any in savings or retirement accounts), your cars, the current market value of your home, any personal property such as jewelry, and the cash value of any whole life insurance policies you have. Then, list your liabilities, the balances (what you owe) on your mortgage, car loans, student loans, credit card and other consumer loans, and other money you might owe. Subtract the liabilities from assets. The result is your net worth. The key to improving your finances is to increase your assets and decrease the liabilities. And for that, you need a family budget.


Create a Family Budget


For some parents, actually seeing where the money goes can be a huge reality check -- but that’s the whole point. You need to become realistic about what happens to your money if you want to increase your net worth. Financial expert Dave Ramsey suggests you set what’s called a “zero-sum” family budget, where you list your total income (both spouses and any extra money that comes in), all of your monthly expenses, and then subtract expenses from income. The result should be zero. Following this kind of budget makes you and your family accountable for every dollar spent. Regardless of the type of household budget you create, it takes plenty of discipline to follow it. Tim Herrera of The New York Times says the best budget is the one that you’ll stick with. And that involves making sacrifices and looking for ways to save money.


Live the Plan


That hard look you’ll take at your monthly expenses will reveal plenty of places where you can save money. Look for a less-expensive cell phone plan, one that involves a discounted family rate. Also, aim for a less expensive cable or satellite TV plan, or consider eliminating them altogether. Look for ways to cut back on your utilities, or take advantage of their budget plans. You can easily blow your budget by eating out a lot, so cook at home more often. If your family has a dedicated pizza night, for example, don’t order out. Stock up on frozen pizzas instead, or learn to make your own! Brown bag your lunch for work, and use mass transit to get to and from work, if it is convenient. All in all, every single penny you can save, and every one you can account for, goes toward increasing your net worth and saving you money.


Managing money can definitely become less stressful once a plan is in place. The trick is, of course, getting started. But with some discipline and a willingness to take a hard look at where money comes in and where it goes, parents can get their household finances in good shape. 


By Sara Bailey





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