Category: Family

In the field of home economics, family financial planning is very important as it is the first step in achieving our life goals. One of these goals will probably be to achieve financial independence as soon as possible in life in order to be worry-free. In order to be able to plan well for the future, people need to be aware and able to plan accurately: How our income may evolve in the coming years (from work, from other investments, income from other professional activities, etc.). How the family’s expenses will evolve, taking into account life events (studying, getting married, having children, retirement, etc.). Depending on your starting situation, your age and situation in the usual life events of people and your future life goals, everyone should make a different financial planning. And in between, we should be aware of the protection solutions offered by the insurance industry. Insurance, those great misunderstood people of finance (we only think about paying, but not about what we would have to pay in the event of a culpable loss if we were not insured). Financial planning in business and family The concept of family financial planning is very similar to that applied in the business world. In any company it is understood as the process of elaboration of an integral, organized, detailed and personalized financial plan, which guarantees to reach the financial objectives previously determined. And the deadlines, costs and resources necessary to make it possible. Two financial streams to manage In every company or family there are two streams or flows related to money: the flow of income and expenses (what we earn and spend without taking into account the “when”). the flow of receipts and payments (when we have money in our account, when it leaves our account). This is what affects the treasury, i.e. your family “cash”. Note that you can have 100 euros of income but your collection does not occur until the end of the month each month you work. On the other hand, debit cards with cash payment at the end of the month, involve a series of expenses every time you use them. But you don’t see the payment until the finance company bills you at the end of the month. In financial education, it is very important to know and manage the family’s treasury well. That is to say, to know that we have sufficient funds at all times, to take care of the expenses of all type that can come to us. And for that it is important to have a sufficiently comfortable emergency fund. Family financial planning, together with foresight, prioritization of expenses and empowerment of your patrimony, are part of the four “pes” of financial education. Requirements for financial planning In order to plan well for the future evolution of our personal finances, experts recommend following these four phases: Set and prioritize your personal goals pursued. A short-term goal could be to pay for next summer’s vacation (1,500 euros). Another medium-term goal could be to save for a down payment on an apartment. For example, to save 40,000 euros, at a rate of 10,000 euros per year. A long-term goal would be to have 100,000 euros in a pension plan for our retirement (making annual contributions of 3,000 euros). As you can see, in life there are multi-term objectives and the success of our financial planning will depend on knowing how to organize our savings today to meet these objectives, knowing what amounts to allocate to each one, depending on its priority. Drawing up the family budget The third phase of the financial planning process is the preparation of the family budget with its three main sections: income, savings and expenses. Making a correct family financial planning can be arid and you may or may not like it. To help you in this task, there are professional advisors specialized in personal finance and investments (financial wealth advisory). These professionals can help you set your goals based on your age and personal situation (single, married, with children, etc.). And they will help you make the right savings and investment decisions at all times.