Financial Tips for Young Families

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Obstacles abound for young families. Particularly in the current economic climate, times have rarely been tougher for families just starting out.

One of the biggest obstacle many young families face is managing their finances. Even before the recession, many young families found themselves fighting an uphill battle with respect to finances. Now that the economy has suffered so much, that battle has only become more difficult. For young families, the following financial tips can help weather the storm.

Don't allow debt to become overwhelming: Debt can quickly grow to astronomical levels if young families are not careful. Financial advisors often differ greatly as to how they define manageable debt. For some, overall debt, which includes credit cards, student loans and automobile loans, should not exceed 40 percent of gross income. Other advisors, however, find that amount of debt to be excessive, instead saying the most debt a young family should carry is more in the neighborhood of 30 percent of their net income.

While there's no way to establish an exact amount of acceptable debt, some debt is seen as better than others. Automobiles, for instance, are considered a depreciating asset, so borrowing as little as possible for automobiles is ideal. In some instances, this is nearly impossible. However, holding on to vehicles once the balance of the loan has been paid off, especially if the vehicle is still going strong, makes it a more worthwhile investment.

Save: Though this sounds simple, for many families it proves a lot more difficult than it sounds. Young families saving for a home should take the weak economy into consideration when saving. As unemployment rates rise, financial advisors across the country continue to emphasize the importance of saving as much as possible to ensure heads can stay above water in the case of an unforeseen layoff.

In general, emergency accounts should have somewhere between three and six months' salary. This can ensure young families can still eat and meet their bills should the main source of income suddenly be cut off. While a house is something many young families strive for, in the current economy where the future remains suspect, an emergency fund should take precedence over saving for a home.

Be budget-oriented: Young families often struggle with establishing and sticking to a budget. The spend first, save later mentality is most common among young families. Monthly expenses, including all debt and utility payments, should be tallied when establishing a budget.

But current bills are not the only things to consider when establishing a budget. Future financial goals, such as college funds and retirement goals, should be an integral part of the monthly budget as well. A family's longterm financial success and wellbeing requires more than just meeting their monthly bills.