Dear Kim,
Since Thanksgiving is next week I wanted to first thank you for all your sage and thymely (pun intended) advice. Although we have two incomes, with two kids and a third one on the way, money can be tight. As our family gets ready to gather and celebrate, my partner and I wanted to discuss initiatives to cut on spending for 2025 and wanted to get our whole family involved. We feel we are spending too much right now, and rather than using most of our year-end bonus on holiday gifts (around $1200) we wanted to invest it. Do you have any good ideas for starting the conversation about spending and the need to save for a rainy day? And what strategies do you favor for getting the maximum bang for our 1200 bucks?
Happy Thanksgiving from Worried about Cost of Living
Dear Worried about Cost of Living,
Trying to balance meeting your family’s needs with saving can be a tightrope walk. I would suggest beginning by looking at your current budget and finding any extra expenses you no longer need, like subscriptions to streaming services you no longer need and things of that nature. That is found money and a great way to begin saving.
Do you currently have an emergency fund, and how much have you saved for that purpose? Only when you have a sufficient amount saved for emergencies, can you begin saving for the future. The $1200 you reference could be used to add to your emergency fund and then the remainder could be invested. How you invest those funds to get the ‘maximum bang’ would depend on the purpose of those funds. If they are to be used for educational purposes, or retirement you might invest for a longer period, depending on the age of your children and the time until retirement. If they will be used for a new car in a couple of years, or a vacation, the investment will be much different.
I always suggest beginning with the end in mind, and that will inform your investment choices. I think the idea of including your children in the discussion is a great one. They can have input on ways to cut current spending to save for a future goal. It’s a good way to get them away from the prevalent mind set of instant gratification.
Happy Thanksgiving and as you and your family gather for the holiday, take time to have each person express what they are thankful for. I think sometimes we forget just how blessed we are and this is a good time to remind ourselves.
Kim
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