Creating a Financial Plan Both Personally and for Your Family

Creating a financial plan that covers both your needs and your family’s is important for protecting your financial future. Personal and family goals may differ, but they often overlap, so it’s necessary to coordinate efforts to achieve both. A good plan prepares you for unexpected events while working toward long-term goals like homeownership, retirement and your children’s education. A financial advisor could also help you develop a plan that balances your needs with your family’s overall priorities.

Family Financial Planning vs. Personal Financial Planning

Financial plans can take many forms. Two common types are personal and family plans. Family financial planning and personal financial planning are both essential aspects of managing your finances, but they serve different purposes.

Personal financial planning focuses solely on an individual’s financial goals. These might include building an emergency fund, saving for retirement or paying off personal debt. This plan is based on your income, expenses and financial objectives, and could help you achieve those goals over time. For example, a personal financial plan might include saving 20% of your monthly income for retirement and putting aside another 10% for a personal travel fund.

On the other hand, family financial planning involves managing finances for a household, which may include a spouse, children or other dependents. This type of planning goes beyond individual goals and considers the needs and future well-being of all family members.

For example, in family financial planning, you might prioritize paying for your children’s education, saving for family vacations and taking steps for your family to be financially secure in the event of an emergency. While personal planning may call only for your input, family financial planning is likely to include coordinating with your spouse or partner to align shared financial goals and responsibilities. Paying the mortgage or contributing to a college savings account are typical examples of shared goals.

Personal and family financial planning differ in scope while sharing common principles, such as budgeting, saving and investing. The key difference lies in the goals being pursued. Personal planning focuses on individual needs, while family planning accounts for the broader needs of the household.

How to Create a Financial Plan for Yourself and Your Family

Creating a financial plan that addresses both your personal needs and your family’s future requires careful planning and organization. Here are five general steps to get you started:

• Set clear personal and family goals: Start by identifying your personal financial goals as well as your family’s long-term needs. Personal goals might include paying off debt or saving for a vacation, while family goals could involve saving for your children’s college education or buying a home. Write down these goals and determine a timeline for achieving each one, as this will guide the rest of your financial planning.

• Assess your income and expenses: Calculate your total household income and track your monthly expenses, both fixed (such as mortgage payments or utility bills) and variable (such as dining out or entertainment). Understanding your cash flow is key to determining how much you can allocate toward savings and investments. Be sure to account for both personal expenses and family-related costs.

• Create a budget: A budget is an essential part of any financial plan. Divide your income into different categories, such as savings, necessities and discretionary spending. Make sure to allocate a portion of your income to personal savings, retirement accounts and family-focused savings, such as an emergency fund or education fund.

• Plan for retirement: Make sure that both you and your spouse or partner are contributing to retirement accounts, such as a 401(k) or IRA. If possible, take advantage of employer match programs and consider opening a spousal IRA if one partner isn’t working.

• Build an emergency fund: A basic building block is an emergency fund that covers at least three to six months of household expenses. This fund can be used to cover unexpected events, such as medical bills or job loss, and it is a top priority in both personal and family financial planning.

Other Considerations in Family Financial Planning

Family financial planning goes beyond day-to-day budgeting and savings. It’s also about building long-term financial security for your loved ones, which is why it’s important to consider estate planning and legacy planning as part of the process.

Estate planning involves determining how your assets – such as your home, savings accounts and investments – will be distributed to your family members after your death. This might include setting up a trust to protect your children’s inheritance, designating beneficiaries for retirement accounts and writing a will to help distribute assets according to your wishes.

Preparing to handle the financial needs of future generations may take other forms. For example, funding a 529 college savings plan for your children could help support their education financially without incurring significant debt. Another consideration is long-term care insurance, which can help cover the costs of a nursing home or other extended care.

Preparing a personal and financial plan is not a one-time project. Regularly review and update your family’s financial plan as circumstances shift. Job changes, the birth of a child or fluctuations in the economy can all call for substantial revisions in your plans.

Bottom Line

Creating a financial plan that covers both personal and family needs helps establish long-term financial security. By balancing your own goals with your household’s needs, you can develop a strategy that prepares everyone for the future. From budgeting and saving to estate planning and retirement, having a clear financial roadmap helps you handle life’s financial challenges confidently. Regularly reviewing and adjusting the plan will also help keep it aligned with your goals and changing circumstances.

Tips for Financial Planning

• A financial advisor can work with you to create a personalized financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• When creating a financial plan, don’t forget to account for inflation. SmartAsset’s inflation calculator can show you how the purchasing power of a dollar is affected by inflation over time.

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