Financial Goals for My Family of 5

financial goals for family of 5

As anyone with a family can tell you, financial planning is super important, but to keep things going as planned is probably the most difficult. I'm going to lay out my framework for the things that we're trying to achieve as a family and how we're going to get there.

This post originally appeared as a video on the 40 Finance YouTube Channel

The first part of any kind of financial planning is simply understanding where you are currently, and we're in a pretty good place as a unit. We're not rich, but we also don't have a lot of the problems that you see other people have. So no credit card debt. We do use credit cards but we pay them off. We have one car payment across two vehicles. I take the status “hit” with a 2009 Nissan Pathfinder that's running great with 100,000 miles. We then have a 2015 Chevy Tahoe that I bought a couple years old that provides us a quality safe car for the family.

We have an affordable mortgage with a payment that equals about 20% to 25% of our monthly income, including taxes and insurance. The mortgage is one that we'd like to pay off, but at least we're not underwater with it. It has positive equity, an affordable payment, and so I feel we are in a good place there.

We have about $50,000 in liquid assets. That is a combination of savings and brokerage accounts. This liquid aspect of that is important because it provides a “rainy day fund” where we can access money as needed.

And last but not least, we have multiple income streams. I have a professional career as a digital marketing manager. My wife has a job as a teacher. We also have a couple of side businesses that generate income, which I'll talk about more on another video. The multiple income streams by themselves are not overwhelming. They are not million dollar businesses, but they do allow for a little bit of risk assurance. If one income source goes down, there are others that can help pick up the slack.

So at the end of the day we've got a great foundation from a day to day basis. There's not a lot of nail biting on what's going to happen at the end of the month. But even having a solid foundation, there are still leaks to address, which I'll get into here.

So now let's talk about our gaps and challenges. Number one, consumer spending. We are not a penny pinching family. We do mind our purchases, but we are not overzealous in any way about saving money on this and that. So we definitely need to do a better job. It is the mindset that needs to change and that's something we're working on right now.

Next up is our home remodeling plans. We have a couple bigger projects coming in that are not necessarily essential, but we know we're going to stay in our house for a long time. So there are things that have been on the list for awhile. Kitchen, for example. We're going to go at it with a cost savings approach. We're not going to go overboard with custom cabinets from Sweden or anything like that. We'll be mindful in the way we approach it, but it is still going to be an expenditure. It will ultimately bring ROI over time, not only to the value of the house, but the value of our lives.

Another issue, particularly on my end, is my relatively small retirement account. I do have savings from the different positions I've held over the past 10 years consolidated into one retirement account. Right now though I essentially work as freelance labor, which obviously does not provide any type of 401k company match. I invest on my own. I have a SEP IRA with my business so that I can stash money there, but overall I'm behind the average on retirement savings for my age. However, I do invest in the stock market regularly with our taxable brokerage accounts. I have a lot of reasons for that. Even though I could save by investing more pre-tax money, I have a different approach. Unfortunately for my retirement, I have a couple things I need to cross off the list first.

PErhaps our biggest gap is just being a family of five. It's always something. Some of the things you can control, some of the things are optional. But at the end of the day, expenses come up, whether it's school clothes, whether it is athletic fees, repairs. Our house is not brand new. It's a 1950 cape cod and little things pop up. We have replaced the air conditioner, furnace, and a roof over the past three years. The fact is you just never know what is going to come up from either an opportunity standpoint or a necessity standpoint. So having a family of five by itself can present a lot of leaks in your savings plan.

Looking ahead to the next 5 years and then again from 6 to 10 years, these are the things that are on my list. I want to go from $50K in liquid assets to $250K in liquid assets, namely savings and brokerage accounts by 2024. This goal was the launching pad for my YouTube channel where you see me talking about stocks. That is an active hobby of mine, if you will, because I definitely need to get a better ROI on my money in order to make a lot of these dreams come true. I've chosen the stock market to help reach these goals.

Next on the list is paying off the mortgage. So I have this number at $250,000. While we only owe $200,000 on the loan, I'm not paying it off tomorrow, so I anticipated that to get aggressive with it, it's going to take at least five years, maybe seven or eight. So the minimum cost to pay off the mortgage as far as cash out of my pocket is probably going to be about $250,000. At the end of the day, the interest that you pay monthly for your own personal home, it's depressing quite frankly. I don't mind the idea of using debt for rental properties where there's cash coming through, but for my own home, it is an important goal of mine to reduce the projected amount of interest we will pay.

Looking ahead in the next five years, my oldest son will graduate high school. My personal goal for each of my three children is to provide them $100,000 worth of opportunity to pursue their post high school dreams. That probably means college, but I'm also open for ideas, whether it's a businesses, trade school, or whatever they want to do. I do not want my kids to come out of high school and immediately spiral into consumer debt or student debt. So while I may not be able to pay for everything, I can at least give them a nice head start. To be clear, it will not be a $100,000 check that I give them. There'll be some supervision involved with it.

The head start fund is something that's important to me, particularly in this day and age when I read so many terrible, terrible stories about people being locked in student debt with very few options. That's a burden that's difficult to work your way through as a young adult. My wife and I are hoping to offset some of that pain by being able to offer some opportunity after high school. But the deadline to deliver on this is coming up. My first son's graduation is scheduled for 2024. So five years from today I'll need to gain about $500,000 to reach the combined goal of paying off the mortgage, having $250k in liquid assets, and have $100k by son's graduation.

The second time period, 6 to 10 years from now, we'll need the second and third college funds for my daughter and youngest son. Then, as I mentioned earlier, with me being behind on my retirement, I'll need at least $500K to sock away by the year 2034. So that goal for the second five years is about $700K plus daily living expenses.

The bottom line, somewhere over the next 10 years, I need $7000,000 just for mortgage and savings goals, plus daily living expenses. Then after that I needed an additional $300,000 plus for college savings, bringing the whole thing to about $1 million. It's a pretty big ask on paper, but it's really not that absurd when you start digging through the things you pay for and how much we save as a family unit. And knowing that, of course, identifying the problem now gives you five plus years to address the issue.

So the last thing here, and this really probably a whole other video which I'll think about doing, is how do you get there? The one thing that is always on my mind is how can we increase income? How can you make more money? I spend more time and effort learning how to make more money than I do which stock is going to win over the next six months. That's because there's so many things out there in the internet age with business ventures that I'm always looking for another opportunity. The easiest way to hit any of your financial goals is to bring more money in. It works every single time.

Next up, and I've alluded to it earlier, we have plenty of room to cut expenses. NOw there are plenty of videos on YouTube about the minimalist lifestyle. My family is never going to live that way, but there's plenty of things that we can do differently and try to save.

Investing, particularly the stock market, and business investments are going to be the way that we get to the million dollar mark. There's no way around it. Those things have to produce. So I have to make good decisions on where to put the money. And then if comes to a business venture or increasing our income, I have to make a good decision about which path we're going to take because we're not 22 years old anymore. We can't just start 700 businesses and see which one works. You have to be calculated at this step in your life. And that's what we're trying to do.

The last thing on my list of potential opportunities is credit leverage. We don't have a lot in terms of consumer debt, no student loan payments, anything like that, and we have outstanding credit. So there is opportunity there. As much as I don't really like debt for consumer spending, I am open to debt for business investments. It just depends on the case.

So these are our family financial goals for the next 10 years or so. I wanted to share with everyone what it is I'm marching towards. Why do I spend so much time on the stock market? Why do I talk so much about finance here on this channel? Ultimately it is because I am practicing it every day, and the rationale for 40 Finance is bring you some exposure to the money decisions that I make, whether good or bad.