Managing finances can be a stressful task in any stage of life, but may seem especially daunting as you get older. If you’ve noticed your parents making unusual purchases, leaving unopened mail to pile up, or complaining about money more frequently, it may be time to jump in and offer them a hand with their finances.
No matter how involved you are in assisting your parents with their finances, consider the following tips to ensure a successful financial management system.
To start, you’ll want to talk to your parents about who will have control over their financial moves. This can be a tough but important discussion between you, your parents, and your siblings, if you have them. However, ensuring your parents have proper documentation and a power of attorney is a great way to settle who will be handling the financial matters. Once an agreement has been made, it’s a good idea to have written consent that touches on all potential matters that may pop up moving forward.
Setting financial goals is a great way to help your parents stay on track. Whether your parents are still working a part time job to keep themselves busy, or if they are fully retired, it's always smart to discuss their financial goals. If you are becoming more involved in their finances, this is very important for you to know. This will allow you to have an idea of what next steps you need to take in order to help support their financial goals.
Work together and set money goals. These goals should be measurable, attainable, and realistic. They can be anything from how much money they plan to save each month, how much they spend each week on groceries and necessities, whether they want to pay bills on time each month, or even how many months or weeks it may take to pay off any debts they may have. Make sure they are having intention when setting these goals and have an actionable plan on how they are going to achieve them.
Through organization, budgeting, and providing your parents with financial assistance, you can improve their chances of attaining their goals.
When you think of money and finance, many moving parts come to mind. Staying organized financially and having everything in order is a great way to achieve financial goals and can increase your potential for positive outcomes.
To start, assess current financial standing. Get a folder together and organize paperwork, bills, credit card statements, and other financial statements. To see a spending path, develop a Microsoft Excel spreadsheet or Google Sheet to get an idea of where money is being spent and used. You can even develop a section for a budget and list out monthly payments that need to be made.
Next, consider automating bill payments through online banking and set up reminders on your parents' smartphones or on their laptops and tablets. That way, you can make sure they are making payments on time and can take the hassle out of going into the system and scheduling a payment or even writing a check and mailing it to the provider. If they aren’t technologically savvy, put together a physical copy with payment due dates, where the payment needs to be made, and how it could be made to take out any second-guessing that could happen on your parents’ end.
Always remember that having clear and open communication is of utmost importance. When it comes to money, there’s no room for questioning. If you have ideas or see issues within your parents' finances, talk to them about it. If they are not happy with things, they will need to bring it up with you as well. Have transparency with one another to ensure success.
Lastly, if your parents have mobile banking, turn on transaction notifications that they can receive from the bank. This will allow both you and them to be aware of any suspicious payments, get balance notifications, and see if their account is trending to the low end of the spectrum.
Budgeting is one of the best ways to gain control over finances. Having an idea of what type of budgeting method works well for your parents’ situation can promote financial success. Reflect on the spending path you created and understand the flow of money along with how much is currently in savings and what is owed in debts. There are a variety of budgeting methods you can test out to help your parents. Here’s a quick overview of some popular methods.
50-30-20 Budget: This is good for individuals who have a stable income. As you divide up your salary, 50 percent of it will go towards needs, 30 percent towards wants, and 20 percent toward savings.
Zero-Based Budget: This method is ideal for those who have a predictable monthly income. This may be a good idea for your parents due to their steady income from retirement money, social security, and their savings. Use spending habits from the previous two or three months as a guide. From there, map out the budget and subtract expenses from income until it reaches zero. Remember to put priority expenses at the top of the list.
70-20-10 Budget: This budget is ideal for people who don’t tend to overspend their money, who have a good grasp on their finances and who like to donate. Divide income after taxes by 70 percent for spending, 20 percent for savings, and 10 percent for debt repayments or making donations.
A user-friendly method of budgeting is downloading an app that does all the heavy lifting and number crunching for you. Research various apps to see what would work best for your parents and which one would be easiest for them to use and navigate.
There may be a time when your parents need extra financial assistance. Although it’s usually ideal to keep your finances and theirs separate, supporting them in any way possible is a great way to help them navigate any difficult financial situations and achieve their financial goals.
If you’ve decided it’s best for your parents to move closer to the rest of the family, you may want to research a personal line of credit or a credit card to help pay for the relocation. A move can be stressful as well as expensive, so supporting them throughout this process could ease the burden and lift the weight off their shoulders.
It could be that you’ve taken ownership of your parents’ home and now need to make updates because you’re looking put it on the market. Considering a personal loan, a HELOC, or dipping into your savings are great ways to finance those bigger home improvements.
If you’re looking to provide regular financial assistance, speak with any relevant parties and thoroughly consider whether or not you want to provide your parents with an allowance that helps them pay bills and purchase necessities when needed.
Whatever the financial journey may be with your parents, do your research and talk to your financial advisor to discuss smart money moves you can make to help support their current and future financial goals.
While many parents have plans for their finances as they age, there are others that might be a little less organized. Either way, providing your assistance and support through the next phase of their’ lives will help them stay on track with the regular payments, savings, and budgeting habits that were once part of their regular payday routines. No matter their financial situation, these tips can help support your parents and keep them financially sound for the long-term.