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Plan ahead to avoid financial traps

Know where you’re financially, but also be clear about how your situation might change

Gulf News

For many professionals, getting a high-paying job may precede getting married and having a family. In fact, this financial comfort could be an incentive to make the jump to the next step.

But because families don’t happen overnight, the years of having fewer financial obligations can lead to a lifestyle that is not sustainable afterward. Even worse, if you get into long-term financial obligations early on, you may not be able to manage all of your payments if your marriage and family come with an expensive wedding and honeymoon, higher rent and eventually childbirth and childcare.

So the question is: how can you make financial decisions today that don’t backfire in a few years? Here are some steps to ensure you’re not willingly walking into a financial trap.

Be honest about your objectives

“Marriage isn’t on my mind,” or “no babies anytime soon” can be popular statements if you’re talking with your group of single friends. But is that really your plan? If the truth is you’re actively looking to start a family, don’t believe your own claims and act accordingly. For example, don’t walk into an auto showroom and drop half your salary on the monthly payment of a sports car.

In addition, if your objectives are more in the realm of changing locations or taking a break from work once you have children, now is the time to put as much money as possible aside in savings to help yourself through those transitions.

Predict change

Know where you’re financially, but also be clear about how your situation might change. For example, if your current excellent job is likely to end, do you expect to find a similar job in your industry? If the answer is maybe or no, be sure you don’t settle in a lifestyle that is not sustainable on the long run.

Similarly, make sure that your lifestyle allows for savings, because change will happen — if not in the form of job loss or another emergency. Be prepared to accommodate higher living costs and growing needs for yourself and your family down the road.

Don’t get in debt

You may want to finance a nice car or even consider buying a home, but don’t jump into too much debt too soon in your life. Because your needs may be growing, getting in debt can be catastrophic if you fail to make your payments later on.

In particular, stay away from credit card and personal loan debt, which his typically very expensive and can spiral out of control quickly.

If you’re making a good money to cover your expenses and allow for some savings, learn how to live within your mean. Staying out debt means more freedom for you to move to a new place, maintain a good credit history and finance something that you really need when it is necessary.

Develop systems and good habit

Start early with good financial routines and plans. For example, think of how you will manage your bills, payments and expenses. Consider tracking your online banking or getting software to help you keep on top of your expenses. Getting organised early on will help develop good habits in managing your financials. It will also will help you detect any early signs of trouble in terms of accumulating debt or exceeding your income.

Focusing on creating a budget and watching your spending closely when you’re making good money and feeling comfortable may sound like a luxury. It is your way to maintain this status, however, as your expenses begin to grow. It is also how you will be able to estimate if you have the money that is required to start a family.

Share your priorities

It is exciting to get into a relationship and start a family, but the financial aspect can quickly complicate matters. Knowing your financial priorities and capabilities and sharing those with your life partner is a must to keep the relationship and your financials healthy.

Be ready to be flexible when it comes to money issues. The transition from being single with all the freedom to make your own money decisions to taking another person’s needs into account can be hard on some people — especially when money is tight. So talk it over to align expectations.

 

The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.

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