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Planning for Family Formation


Ask any mature adult, say, over about 40 years old, if he or she would take a 1-time deal to go back to an younger age, and the answer is almost universally, “Sure, I’d love to be younger, but only if I can take with me everything I know today.” There is no direct replacement for experience in life. But, extensive learning and planning provide a healthy boost to the accumulation of wisdom that comes with age.

Perhaps the most difficult period of a young person’s life begins with the realization that it is time to get married and start a family. There is so much to do with so little cash flow, and so many concurrent demands to obstruct the path to a successful financial future. The early years of child rearing present young parents with constant demands for time and money, and conflicts are inevitable.

When presented with the reality that there will soon be three people in the family, a common and natural reaction is panic. Since this is a financial blog, here is a “short list” of financial obligations that will soon be competing for dollars of new parents-to-be.

  • Who should continue to work; one or both?
  • Can we afford today’s astronomical Day Care expenses?
  • Do we need life insurance; what kind, and how much?
  • What expenses will our health insurance not cover?
  • Should we keep renting, or is it time to buy?
  • How will we be able to retire our student debt?
  • Will our current vehicles be large enough and safe enough?
  • When should we start saving for college?
  • Should we make a formal Will?
  • Can we continue to fund our own retirement savings?
  • What changes are needed to our home?
  • How will this impact our social life?

While not an exhaustive list, it is nonetheless daunting. With increasing priorities demanding the attention to allocation of expenses and savings, managing money is a critical priority. Yet, most young adults have little-to-no experience doing exactly that.

Establishing a relationship with a competent financial advisor seems out of reach for most young people, as they believe they do not yet have sufficient net worth to justify professional wealth management. Fortunately, financial planning during this period is primarily a process of identifying and ordering priorities.

There are an increasing number of young couples seeking professional financial advice. The number one caution for young people should be to avoid commissioned salespeople calling themselves financial planners in order to sell insurance and/or annuities. Salespeople are not fiduciaries with respect to their clients of any age. The fiduciary standard, which you can reference using a simple search, is critical to avoid making seriously costly financial mistakes.

Start any search for a fiduciary planner using online resources, such as the Certified Financial Planner Board of Standardsâ (letsmakeaplan.org) or the National Association of Personal Financial Advisorsâ (NAPFA.org). These professional organizations will steer you to the right planner for your situation, and will help you avoid commissioned product peddlers looking for gullible young customers.

Free financial resources are invaluable, but only if they are trustworthy. That is the reason we started the Van Wie Financial Hour, our 1-hour radio program heard every Saturday morning from 10:00 a.m. to 11:00 a.m. on WBOB radio, 600AM and 101.1FM, and streaming on the Internet at wbob.com. You can also hear prior shows through our website, vanwiefinancial.com, where all past programs are archived. While on our website, look around for other solid financial information and guidelines.

Van Wie Financial is fee-only. For a reason.