TOPIC #4 One of the top reasons for the breakdown of a marriage or common-law partnership is financial stress in the household. Life events that bring on financial stresses can include having children, purchasing a home, caring for elderly parents, and unplanned loss of income.
Here are five challenges that that families face:
#1 Living beyond your means - If you sit down and add up all of your monthly expenses, including debt repayment and savings, and compare the total against your income, are you in a positive or negative situation? If you find yourself in the negative or close to it, it’s time to re-evaluate your spending. Are you simply living beyond your means, or are you overspending in a certain area? Is it a temporary issue that you can tackle, or is it a long-term problem that will just cause you to incur more and more debt each month?
We recommend that you track your actual expenses for a three-month period in order to ensure that you have a full and accurate picture of your spending. Only then can you start making changes. You may need to reduce your expenses or increase your income to make your monthly budget balance.
#2 Little or no savings - Do you have an emergency fund in your savings account? Do you save money into a Tax Free Savings Account, Registered Retirement Savings Plan, or a Registered Education Savings Plan for your children?
We recommend that everyone have an emergency savings account available to help cover unpredictable expenses. Some examples are you need to travel for a family emergency, or the car breaks down and there is a large repair bill. What if you fall ill and don’t have benefits or sick days; how will you cover that income? Most financial experts say that you need to save 10% of your income each month, but for a lot of families, that’s just not feasible. Start small and build it up. The first step is to set a goal for an amount, for example, three months worth of household expenses. Once you have that savings goal achieved, then go onto other types of savings in order to ensure that your family is protected.
#3 Raising Children - From having a baby and facing the loss of income during maternity leave, to the costs of daycare, activities through the teenage years, to braces and saving for post-secondary education, one thing we can all agree on is having kids is expensive!
Keeping open lines of communication within the family, budgeting and savings will all help you get over each hurdle and decision as it comes.
#4 Sandwich Generation - The Sandwich Generation is a generation of people in their 30’s and 40’s who find themselves responsible for bringing up their own children while at the same time providing care for their aging parents.
Compounding this issue is the fact that more and more Canadians are choosing to have their own families later in life. Many children live at home for much longer than previous generations due to the cost of living these days. It’s taking longer for them to gain their own financial independence.
The biggest concern is that your own retirement goals will be waylaid due to the additional financial challenges of having your own children and aging parents relying on you financially.
Proper communication and planning are the only way to handle the needs of all parties. Grown children living at home should be adequately contributing to the family expenses. You’ll only be doing them a favour by teaching them financial responsibility. As for your parents, do a review of your parents’ financial, medical and emotional needs. Plan for the now and the future. Try to anticipate the best you can what their future needs may be. Research the costs of insurance, medical and transitional costs such as home support or moving them into long term care. It’s also important to find out what government services may be available to assist. In British Columbia there is the B.C. Seniors’ Guide, which is a compilation of information and resources.
#5 Carrying too much debt - Many families find themselves juggling their finances to meet everyone’s needs and before they know it they are carrying far too much debt. Once that realization hits, it can bring stress into the family especially when determining the best way to deal with the problem.
First things first: write down how much you owe, to whom, and the monthly commitment. If you find you can manage the debt you have by restructuring your budget, do it. Pay off the debt with the highest interest rate, and then tackle the rest. If the number is overwhelming, it’s time to seek professional help.
At D. Thode & Associates Inc. our Trustees will listen to you and explain the options to deal with your debt. We are here to help you find that right solution.
Call us today for a FREE consultation to start the process towards a better financial future.