Children of Debt: Using Your Financial Struggles as Tools for Teaching

All households can experience tough times, and some more than others. Having less to spend is not all bed new, though, and It’s actually quite common that children of low-income families grow up to be more financially savvy than their peers. If your family is going through a dip in finances at the moment, you can easily take advantage of this to teach them a few valuable lessons – just avoid the pitfalls.

Here is how some families use financial struggles to safeguard their children from similar problems, as well as a few words of warning on what to steer clear of.

Children of Debt: Using Your Financial Struggles as Tools for Teaching - parent and child image

Image credit: Pexels

Have constructive money conversations

Talking about money problems with children is on the top of the to-do list. When times are tough, and you keep it to yourself, it tends to cause a bit of confusion. Be open about it and you’re giving your children a chance to understand the situation.

Explain that you need to save money, as a household, and that they can be of big help by simply remembering to use less electricity. These conversations are healthy and constructive; the problems are presented together with a solution, rather than mindless worries.

Some parents take the money-talk too far and burden their children with it. The conversations about money are used to unload themselves of worries, and the parents may even feel a sense of relief afterwards – while the child is left with a sense of being unable to help.

Admit your mistakes

While we should all learn from our own mistakes, your children are in the unique position of being able to learn from your mistakes as well. Take responsibility for the situation you’re in, admit that you haven’t been as on top of your finances as you should have, and avoid blaming it on your circumstances.

However tempting it may be to point out that you’ve gone through a costly divorce or that the economy is tough, save these blame-shifting talks for your friends. When you’re talking to your children about it, it’s all about being the grown-up, and grown-ups take responsibility.

If your child or teenager ever find themselves in the same situation, they won’t spend time on pointing fingers but instead get right to work and sort things out; just like you taught them.

There are so many words of wisdom to be found in financial problems, and you can use the situation to teach them about the importance of budgeting, the code of practice 9, and general saving alternatives. By being stubborn and proud, you’re just letting a fantastic teaching opportunity slip away from you.

Growing up in a family that needs to save money rather than spend it can actually be quite healthy for their future finances. It teaches them to understand the value of money and how important it is to have a backup fund in case something should happen, so keep teaching the right kind of values while picking yourself up.

How to separate your family finances from business ones

How to separate your family finances from business ones - financial report image

Mixing work and our personal lives never ends up being a good thing in the long-run. Apart from the fear of having your two worlds collide, there’s also the issue of practicality. When setting up a business, it is considered wise to remove all and any traces of your personal life from the mix. This makes it easier down the line when the ol’ tax records are due and even before that. Separating these two makes it easier to track everything on either end and make sure that nothing gets buried in the paperwork.

Make it official

Simple as that, if separation is your goal, make your business official. Choosing what entity to go as is crucial because it affects your finances down the line and legal protection should you ever need it. Because of the gravity of such a step, it is paramount that you run this through your accountant, insurance agent(s) and your legal representative. Two options usually find themselves as a good fit for fresh companies, these are a limited liability company or LLC and an S corp. Both effectively function as pass-through tax entities, this means that taxes aren’t paid on a business level but passed-through to the tax returns of the company holders.

Open a separate account

How to separate your family finances from business ones - business bank account image

When that’s out of the way, the next thing that is recommended for any potential business is to open a separate account. This makes sure that all of your business expenses are separated from your personal ones, making everything transparent and easier to grasp once taxes are due. Another benefit is having the IRS deem your business as valid, as opposed to classifying it as a hobby if you kept everything on personal accounts. The idea of separate accounts can be expanded upon, making the process even smoother – investing in several accounts for the business itself, making each transaction visible in more than one spot.

Use different software

How to separate your family finances from business ones - accounting software image

This essentially ties into the previous idea. If you’re already focusing on separating the two, go the extra mile. It may be a hassle to get used to two different accounting systems, but it will grow into a huge quality of life improvement down the line. Ostracizing your accounts may seem a bit extreme, but it removes any possibility of having errors and mistakes pop up from trying to do your books last minute. Separate software leads to less opportunities for problems to arise and keeps you in good standing which is imperative for a business’ success.

Opt for a business credit card

This goes without saying, a business credit card is your best friend. Every expense, every transaction, every single solitary change in your finances is logged and kept. This may not seem like much, but having actual proof of a transaction is a godsend for anyone who’s had trouble with tracking finances. If you should ever be faced with an audit, these records will help back up your own logs and make the whole thing go a lot smoother. Should your business credit not be established enough to secure a card, work it out, at least try to use on of your personal ones for business to make it easier on yourself.

Consult professionals

How to separate your family finances from business ones - consult business and financial professionals image

Although mentioned above, it still deserves a segment of its own, consult a professional. No one likes to be the person asking for help, but this is our livelihoods we’re talking about. Seeking out professional help at the beginning is still cheaper than doing something wrong and have your business finances embody the concept of the domino effect. A plethora of companies like Darcy Bookkeeping & Business Services offer free quotes to help you get an idea of where your company’s currently at and where it could go. With a seasoned accountant on board, all of the aforementioned steps get kicked into high gear. Think of it as learning to ride a bike, we all started with training wheels.

Tread carefully

How to separate your family finances from business ones - mother and baby image

Even with all of these steps, the road will be difficult. By separating your accounts and keeping them that way, both sides of our lives are given equal opportunity to flourish without impeding the other. Make no mistake, business is all about playing the hand you’re dealt and seizing the opportunities you’re given. We may not be able to predict what’s coming over the horizon, but we sure can prepare for the worst. Just like any venture, a good plan will see us through and that is the point we’re trying to get across – be prepared.

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In!

When you have a family to take care of financially, you will want to do your best to avoid any pitfalls. However, even if you do take a tumble, there are ways of getting out again. Keep reading to find out what they are.

Buying a house that is too expensive

One the biggest problems I see families getting into is buying a property to live in that is far too costly to afford comfortably. This is because it’s all too easy to buy into the dream of getting that perfect home or forever house, no matter what the cost.  

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In! - luxury home image

Image here

However, when you have a family to take care of, there are other costs to include in your budget, not just your rent or mortgage. Unfortunately, when these take up most of your earnings it leaves very little left for other essential things like clothes, bills, and transport, and even less to pay for fun family times and making memories together.

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In! - Dollar bills image

Image source

I’m, not saying that your home it’s unimportant it, is. As it’s the base that keeps you safe and allows you to raise your family, but it’s all about balance. So, if you find yourself in a home that is a drain on your finances, it may be time to consider moving to something more reasonable. As all you are doing is taking money away from others areas of your life, often the ones that are vital to its overall quality.  

Not getting your taxes right

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In! - tax return image

Picture link

Tax, the dreaded task most of us have to do! The problem is that when you are busy, and you have a family to care for it can be pretty easy to put it off, or not be as accurate as you might if you were sitting in an office at work doing your return. However, not giving your tax return the proper attention is a big mistake, because not only can it cost you a fortune in unpaid taxes and fees, in some cases, you can actually get in trouble with the law as well. Something you will want to do your darnedest to avoid, especially if you have a family depending on you.

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In! - tax building

Picture here

So to avoid falling into this hole in the first place it best to keep excellent records including receipts, invoices, and notes on anything that is tax deductible. Then when you have to file your return, it will be a lot easy to make sense of everything.

If you have a problem with your return once you have filled it, don’t panic. Instead, schedule a free tax consultation with Joe Callahan, or another specialist and get them to help you assess the situation. Remember just because the IRS is making a case against you, doesn’t mean that they will win. So get as much information and help as you can to build your side of the case and give yourself a good chance of success.

Forgetting To Save For A Rainy Day

Rainy days, they do happen, and that is something we should all be aware of. That is why is so important to have something tucked away just in case it’s needed. After all, it’s unlikely you will foresee every problem that you come across in life!  

Dodge These Family Financial Pitfalls, And Learn How To Climb Out If You Do Fall In! - saving for a rainy day image

Picture source

To prepare for this, it can be useful to put away a certain amount each month into a saving account. This keeps it separate and also allows you to earn interest on your money, so it’s working harder for you.

Of course, you may get caught down this particular financial hole, without having an emergency fund to fall back on. In this case, to get out, you will need to find the money elsewhere. To do this, try selling something of value that you own like a piece of jewelry, some IT equipment, or a musical instrument. Another option is to take out a loan either from a bank, or payday lender if you only need the cash for a short amount of time.

Lastly, one of the cleverest ways of getting yourself out of this particular hole is by taking out a 0% credit card. This allows you access to the money that you need, while also ensuring you don’t actually have to pay back more than you borrowed, as you do with most other loans. Although it is worth mentioning that the 0% interest rates on most credit cards only last for a certain amount of time and usually don’t apply to cash withdrawal, only actual shopping purchases. Meaning they will only be suitable for some situations.

The Immense Benefits Of Being More Money Conscious Around The Home

There are so many benefits of becoming more money conscious around the home. Sometimes, when we’re simply living our day to day lives, it can be easy to forget that most things we do cost money. Putting the heating on costs money. Running the water costs money. Cooking dinner costs money. Absolutely everything, whether necessary to live (like eating), or for fun (like watching TV) costs money. Being more money conscious around the home doesn’t mean becoming a Scrooge or developing a negative mindset. It simply means being smarter. Here are some of the immense benefits of living this way:

You’ll Be More Friendly To The Environment

Usually, the ways in which we become more money conscious around the home mean we are being more eco-friendly. This really does matter, and many people must start making eco-friendly changes so that we can work towards healthier, more sustainable environment. Don’t you want your grandchildren to grow up in a healthier environment? By doing things like changing your light bulbs to LED bulbs, turning down your thermostat, and being more conscious about turning the tap on, you’ll help the environment. Every little helps!

You’ll Have More Money To Spend On Cool Stuff

When you become more money conscious around the home, you find you have more money to spend on cool stuff. Of course you don’t want to go out and blow all of your cash on gadgets, but you will be able to afford more of the stuff you fancy. The infographic below can give you some great ideas!

Credit to Sunny.co.uk