It can be very challenging to build wealth while you are trying to raise your family. It is not an easy task save when you are tempted to spend on things or activities that will make your life more comfortable or convenient. This is a struggle for a lot of parents who are forced to put aside their retirement savings in favor of their children. Most of them postpone saving for their own retirement just so they can give a more luxurious life for their kids.
While there is nothing wrong with putting the welfare of your kids before yours, it is not always the smart thing to do. It is very important to keep building your wealth despite the various expenses that your family needs.
But what exactly will it cost you to raise a family in the US?
According to the data from MarketWatch.com, you need between $50,000 to $100,000 a year to finance a 4-family household (2-parent, 2-child). This was according to the report from the Economic Policy Institute. The amount you will spend will rely on where you choose to live in the US. If you want to live in an expensive place like New York, then you have to be prepared to pay more for your family.
For the average American household, it may be tough to build wealth if you need to spend $50,000 a year to make your family live a decent and comfortable life. But truthfully, it is not impossible. And in reality, it is something that a lot of families should start working on immediately.
According to the data from a Wall Street Journal article, a lot of households got a boost in their net worth because of the rising home equity in 2015. Apparently, US household reached $86.6 trillion just as 2015 was ending. This meant a $1.6 trillion increase from the third quarter.
Obviously, the main reason for the increase is the higher value of real estate and the consistent and continuous mortgage payments of borrowers. This gave home equities a boost.
As you can see, it is possible to build wealth while you are spending for your family. You just have to come up with a realistic plan to make it happen.
Tips to make wealth and family building simultaneously possible
Although it will admittedly be hard, it is not impossible to accomplish wealth building while taking care of the needs of your family. Here are some of the things that you need to work on.
Revise your budget plan. Start by changing your budget plan. Make sure you include savings or investments that will help you build wealth. If you are currently in a tight financial situation, that should not hinder you from saving. Even a small amount will do. The important thing is to put it in your budget so you can identify the expenses that you have to sacrifice to make it happen. Once you have revised your budget, show it to the whole family. You want everyone to learn how to save and pitch in.
Set financial goals. The second task is to set financial goals. These goals do not have to be earth shattering. It does not have to be big goals. There is nothing wrong with starting with a small amount – especially if your current finances are tight. You can start with $100 savings each payday. When you see this grow as you consistently contribute towards your savings, you will be encouraged to build it up. Sometimes, starting with small goals will help you reach success faster. After every success, you will feel more confident and raise your expectations for every goal you set.
Anticipate expenses before they happen. Most of the time, people who end up in debt are not really irresponsible. They are usually unprepared for emergencies and expenses that they should have prepared for in the past. For instance, that expensive trip to the ER might have been avoided if you have an emergency cash fund. Or what about college? All our children will go to college. Why not just save up for this (or teach them to save when they reach a certain age) so we can save them from hefty student loans? The same is true for birthdays, annual vacations or the holidays. Instead of using your credit card for these expenses, why not save up for it?
Prioritize expenses. You have to admit that not everything that we spend for is important or necessary. This is why you need to think about what is your priority so you can be sure that your finances will only focus on that. This is especially helpful if you have a tight financial situation. You will minimize the money wasted on unnecessary expenses.
Learn to say NO. In an interview published in Scholastic.com, David Walsh Ph.D., founder of the National Institute on Media and the Family, revealed that parents have a hard time saying “NO” to their children. While this may seem like good parenting – it is actually more destructive. We need to teach them that we do not get what we want all the time. Saying NO will teach them to do things for themselves. They get to be more determined or resourceful. Apart from character development, this is also helpful when it comes to our finances. We get to save money by saying no to some of our children’s requests.
Know when to splurge and when to save. While it is important to save, there are also instances when it is okay to splurge. You need to reward the family every now and then – but you have to find a balance. You cannot just keep on saying NO. It helps to think about your priorities. You will know when to splurge or save if you know your priorities as a family.
Deciding to have a single or dual-income household
The truth is, when you build wealth, your family will be more secure. Of course, that is easier said than done. You have to think about how you will do this. Since the cost to raise a family is high, you might have to opt for a dual-income household. That means both parents will work to financially support the family. While it is possible to increase your savings while living on one income, it would be easier
Now this is easier if the kids are all grown up and able to take care of themselves. However, this is not always possible if the kids are still young. Here are some tips that will help you decide so you can start building your wealth.
Compare child care costs and the possible income. This is usually the best way to decide if both parents will work or not. If the child-care costs will be higher than what you will earn (less travel and lunch expenses), then it is better to just live on one income. But if the earning will be bigger despite the expensive child-care costs, then go ahead and work at the same time.
Opt for a part-time job. In case you decide to live on one income, that does not mean the stay-at-home parent gets to do nothing. He or she can opt to get a part-time job. You simply have to schedule the work when the other is at home.
Try to work from home. Thanks to the Internet, it is now possible to work from home. You can ask a former employer if they will allow you to work from home so you can continue earning while taking care of your child.
So far, we have mainly discussed how you can increase your money to save and make smart spending choices to increase your extra money. Of course, that is only half the battle. The key to build wealth is to decide what you will do with the money that you will save. One of the best things you can do is to invest it. Here is a video that will teach you what to do with all your extra money.
Common questions about building wealth
Question: What does building wealth mean?
Answer: Building wealth works towards the improvement of your financial position. It means increasing your financial worth by either increasing your assets or paying off your liabilities. It is when you go through a process that will help you acquire more money or assets.
Question: How to start building wealth?
Answer: You can start building wealth by defining what wealth means to you. Is it an accumulation of assets? Is it a business? Is it investing in various stocks, bonds, and mutual funds? By defining wealth, you can set a goal that you will be motivated to reach.
Question: Why is building wealth important?
Answer: It is not really about being materialistic. When you have enough wealth, you get to feel more secure about your finances. It also creates stability.
Question: When should you start building wealth?
Answer: As soon as you can. In fact, as soon as you earn your first paycheck, you have to start building wealth – just to get ahead of the game. For instance, when you start investing in your youth, compound interest will help you become rich early on.
Question: What are wealth building assets?
Answer: Wealth building assets are those that appreciate over time. A perfect example is a home. Since land is something that cannot be reproduced, the value of your property will go up in a few years and decades. Other assets that appreciate includes gold and jewelry.