Financial woes are a common cause of stress, and a surprisingly common reason for divorce. When you lack ample funds, are buried in debt or have other financial concerns, your entire family can suffer. Managing your family’s finances responsibly may seem impossible at times, but there are a few sound principles that you can apply that can have a profound effect on your family’s financial stability and well-being in the future.

1. Live Below Your Means

Regardless of your current income level, it makes sense to live well below your means. By doing so, you can more easily manage extra expenses on reduced income when unexpected situations develop. In addition, you can more easily avoid debt while also saving more money for the future.

If your lifestyle is currently stressing your budget or preventing you from saving and investing, now is the time to scale back, and look for things to cut outgoing expenses.

Rule of thumb: For housing, spend no more than 30% of your gross monthly income on your rent or mortgage.

2. Always Look for Savings Opportunities

Even if you are already living below your means, you should never pay more money than you have to for various items.

Most items will eventually go on sale or may be purchased with a coupon. This includes everything from clothes and food to furniture, cars and more.

Avoid making impulsive or emotional decisions, and always look for ways to save on all types of purchases.

Rule of thumb: Before buying something online, search multiple online stores to see if other places are cheaper, or search Google for “[company] coupon” or a discount code for what you’re buying. Honey is a very helpful extension for the Google Chrome browser that automatically searches for and applies coupons to your purchases online.

3. Have an Emergency Fund

Having an emergency fund is essential for your family’s financial security. Without an emergency fund, you may have no way to pay for medical expenses, home repairs and other expenses that may crop up out of the blue.

Your family needs to have some extra money to fall back on. Save at least a small amount of money each month in this account so that the balance grows over time.

Rule of thumb: Have at least 6 months (preferably 12) of living expenses saved up as a buffer.

4. Avoid Debt

You should also avoid debt whenever possible. Some items, such as a house, are difficult to purchase without a loan.

However, many people go into debt to purchase TVs, computers, vacations and other items that are not essential. These are items that you could easily save and pay for.

Remember that debt costs money in the form of loan fees, interest charges and more, and these are expenses that can be entirely avoided if you pay cash.

Rule of thumb: Don’t take out credit on a depreciating asset. In other words, if the value of the item decreases over time drastically (TV, computer, vacation), don’t go into debt for it (including and especially credit cards). Houses (ideally) increase in value, as do businesses and (hopefully) educational purchases. Cars are a difficult one as it straddles the line; they usually depreciate, but we all need a car. Ideally, put at least 20% down (preferably 50%+) and pay it off over 3 years or less. You don’t need that fancy Lexus when the used Toyota will do just fine.

5. Save and Invest for the Future

Another important step to take for financial security is to save and invest for the future. This exceeds the money that you are saving in your emergency fund.

You may save for a vacation, a new car purchase, college education for the kids, and more, depending on your needs and lifestyle. You also need to invest so that you have funds available for retirement down the road.

There are many free robo advisors and automated investment tools that will help you get a good overall view of your finances. Use these tools to help! It’s hard to keep track of everything by yourself.

Keep in mind that avoiding debt and having more money to save and invest are easier to do when you live frugally. It may take time for your family to make frugal adjustments, but this effort will be rewarded by improved financial security.

References:

The Balance | 10 Ways to Avoid Credit Card Debt
List Credit Personal Loans | How Much Should I Have in an Emergency Fund?
Investopedia | 10 Ways to Effectively Save for the Future