It is important to include all members of your family in any official financial planning that takes place, as this is a facet of life that affects every member of any family.
Much of what you demonstrate surrounding fiscal responsibility now will be directly translated to the values about money your children will express as adults, not to mention your ability to realize your own financial goals. There are practices any style of family can follow to achieve success in financial planning.
Financial planning for families can be as diverse and differentiated as families themselves and thus requires careful attention to the unique details of each family unit. The America of today is no longer home to a large percentage of what was once considered to be the “traditional“ family composition of two heterosexual parents and a couple of children by those two same parents. Domestic partnerships, single-parent households, same-sex marriages and blended families now account for a far greater percentage of the American family dynamic than ever before and dwarf the comparatively small percentage of traditional family representations by more than half.
The emotional and financial stress of heading a single-parent home can sometimes feel immeasurable. Financial planning is key to maintaining stability and fiscal progress for a single-parent home. The single most troublesome issue when creating a family budget reported by single-parent households is expanding expenditures for child upkeep. Many divorce decrees are not written with the concerns and needs of older children in mind. These documents often reflect expenses, as they were needed when children were young and do not take into account the fluctuating and ever-increasing financial needs of growing children. Talk with your financial planning advisor and your former spouse about balancing the expenses for your children as they grow up and as their needs change.
Make detailed, collaborative financial plans about college funds, orthodontia, summer camps and hobbies, medical expenses, car insurance and childcare. It can be hard to save for retirement on a single income when you have children to feed and support. Prioritize your own savings when you speak to your financial advisor. Remember that there are multiple options for funding your child to go to college but only one person looking out for your financial future, you.
Take every tax break you can get. Keep in mind that child support is not taxable income for the recipient but alimony is. Ask your financial planning advisor if it is fiscally wiser for you to file as a single or as a head of household depending on your specific circumstances, as one will result in a lower rate. Have frank and honest conversations with your children about the need for frugality. Explain why new clothes or daily restaurant outings may no longer be in the picture. Remember that financial planning requires discipline and sometimes discipline can be difficult, but always worthwhile, especially when it pertains to the long-term financial well-being of your family.
The most important rule of thumb about financial planning for blended families is the realization that fair may not be the same as equal when delegating funds between children of previous unions and those you have with your current spouse. Money can be a hugely divisive factor in your remarriage if you do not lay out the specific guidelines you have for the children you are bringing into the union and their upkeep with your partner.
Do not expect your partner to share your views on all aspects of the raising of your children from a previous marriage or their own children from a previous marriage. The biggest hurdle to collective financial planning for blended families is coming to terms with the way each parent chooses to implement financial support to a child or a former spouse. It may be beneficial to your financial planning for you and your spouse to keep separate accounts for specific items such as child support, alimony or other personal expenditures that may arrive as financial baggage from a previous union.
As blended families typically have double the expenditures of other types of families, you may want to prioritize one of the primary topics with your financial planning advisor is saving. There are many programs through banks and brokerages that can offer you automatic savings plans that do not make you feel like you are budgeting or going without, which can make saving a part of your daily financial routine.
Another important aspect of family financial planning is making sure to fully and adequately set up bequests and guardianships. If there are certain sums of money or assets that you want to go to your biological children at the time of your death, then set those items up in a trust and have it notarized with your official last will and testament. If there is a particular family member outside of your current spouse who you wish to have guardianship of your minor children in the event of your death, then draw these plans up in official legal documents after discussing with your spouse and financial advisor any financial restrictions or outcomes this guardianship may impose on the marriage. Encourage your spouse to do the same with the children he or she brought into the union. Clarifying subjects like these early in a remarriage and being forthright about them with all children involved, prevents a great deal of hurt feelings, disappointments or family in-fighting about finances later on.
Now that same-sex marriage is legal in all fifty states, many of the hurdles homosexual couples used to face with regard to joint finances are now no longer obstacles. Same-sex couples can now automatically enjoy retirement and Social Security benefits from their spouses, joint health care coverage, legal and medical proxies, life insurance beneficiary status, joint tax filings and inherited property.
However, despite this progress, there are still special considerations that must be made in financial planning for same-sex families if they are to enjoy equal rights and privileges to heterosexual unions. For example, take financial precautions for any children brought into a same-sex marriage either biologically or by adoption. It may be necessary for you to actively/legally select your spouse as the functioning guardian in the event of your death if certain forms of adoption, donor or surrogate were utilized in the acquisition of the child. Your financial planning advisor can help you to delineate your wishes for bequests to children you bring to your current union and those you may have with your current spouse.
Another particular item of interest for same-sex marriages is strategized savings based on the statistical higher incomes same-sex couples enjoy. You may be tempted to spend this extra money on a family vacation while your partner has a more frugal approach, and these differences in approach can cause friction if not addressed at the outset. Outline individual savings plans with your financial planner and then talk to your partner about where you can meet in the middle if differences exist. Remember that separate accounts are often the best solution to common disagreements about saving and should not be viewed as marital failing or refusal of teamwork.
While civil unions have gained leverage in recent years with regard to money-related benefits, there are still many financial drawbacks to not being legally married in a partnership. For instance, members of a domestic partnership are not eligible for survivor’s benefits from Social Security or retirement. They can also be penalized with a tax bill at the death of a partner wherein joint property is intended for bequest. Talk with your financial planning advisor about establishing your partnership legally. This may mean registering your civil union or simply obtaining legal and health proxies for one another so that you can make medical, financial and legal decisions on one another’s behalf in the event of illness or death. It is imperative that both parties in a domestic partnership draw up official legal wills outlining all property and financial endowments they intend for one another. You can also speak to an estate lawyer about setting up a revocable living trust in order to further safeguard your wishes from outside contest.
It is advisable to have your financial advisor create separate savings and debt plans for each of you, as there is no divorce law regarding equitable division of assets in place for unmarried couples. Consider drawing up a life partnership agreement, also with an estate lawyer, to fully determine who gets what if the relationship should end. The main goal of financial planning for any union is the betterment and progression of that couple’s wealth. To that end, do not be timid about stating and incorporating individual needs in a financial plan for your domestic partnership that may have no other safety net for your personal interests in place.