Protecting Your Family Finances for the Future
While population growth in the 12 months between 2018 and 2019 grew at just 0.5% (the slowest rate since 2004), the number of people in the UK during this time swelled to an estimated 66.8 million.
You may be contributing to this by having a young family, of course, although this remains a daunting prospect at present given the soaring cost of living and record energy price cap hikes.
With these points in mind, what steps can you take to safeguard your family finances going forward? Let’s find out!
1. Minimize Your Debt
Regardless of your earnings or budget, it’s crucial that you don’t build significant levels of debt relative to your income.
But how do you quantify this? Well, there’s a method referred to as the debt-to-income ratio (DTI), which divides your recurring monthly debt by gross monthly income to create a debt-to-income ratio.
Ideally, this value shouldn’t exceed 35%, and any figure north of this sum may be indicative of a higher than reasonable debt load.
So, focus on minimizing debt and spending within your means as you look to build towards a fiscally sound financial future.
2. Set Up a Retirement Plan Early On
While you may not plan to retire until your 60s, it’s crucial that you build towards this from as early an age as possible.
This should not only encourage you to create workplace pensions that can boost your retirement pot in the future, but also seek out viable investments that can deliver a viable yield over time.
For example, you could seek out managed investment plan that require a nominal commitment each and every year. This allows you to leverage the financial market and assets such as stocks without having prior knowledge or experience, while also tailoring your portfolio to suit your cash holdings and appetite for risk.
If you have knowledge of the financial market, you could seek out your own investment options. This may combine stocks and bonds primarily depending on your outlook, while the balance of your portfolio will change and become increasingly risk-averse as you continue to age.
3. Get the Right Insurance
Speculating to accumulate is central to safeguarding your financial future, especially at a time when the cost of living continues to rise.
This rule also applies to insurance, as you may need to invest in life and health policies that will pay out in the event of your death or cover the cost of extensive medical treatments.
While basic life insurance policies will suffice for most, you may need to seek out additional coverage when engaging in high-risk professions or pastimes. This can help to cover the costs associated with brain injury claims or similar instances, while negating any of loss of earning in the event of an accident.