Three Key Money Management Tips To Improve Your Financial Security

There are lots of ways you can improve your financial security as a family child care provider. Here are three suggestions.

One: Reduce your expenses and increase your income

Strategies for reducing your expenses

Make saving money your first priority each month.

Track your family's expenses for one month and identify a flexible expense that can be reduced to enable you to save more.

Pay off credit card bills in full at the end of each month.

Limit spending on business items such as toys and supplies by asking parents to bring items. Children need love and attention, not things.

Strategies for increasing your income

The rates you charge parents should reflect the quality of your program. Regularly review your rates and adjust them accordingly.

Charge for all the services you offer including: registration fees, late fees, vacations, holidays, holding fees, etc.

Identify additional sources of potential income such as charging parents for lessons (swimming, ballet, gymnastics) or your curriculum. Consider involving parents in fundraisers to help sell frozen food, candles, etc.

Two: Anticipate the financial consequences of business decisions

Too often providers do not carefully consider the financial impact of their decisions before they make them. Whether it's hiring an employee, buying a car or remodeling your home, you can make smarter decisions if you examine the financial consequences before acting.

For example, you will probably need to care for at least two additional children just to pay for the cost of hiring an employee. Buying rather than leasing a car is more economical, and the less money you borrow to purchase the car, the more money you will save. Remodeling your home to provide more space for children may sound like a good idea, but the tax benefits of doing so are very minor.

Three: Establish a retirement plan

Most providers are not saving enough to meet their retirement needs. The four major sources of retirement income are Social Security, pensions, earned income, and private investments. Most providers will need to boost their private investments to meet their retirement goals.

Identify how much money you need to save for retirement.

Contribute to your retirement on a regular basis throughout the year.

Take advantage of the many IRA plans available to maximize your savings over time.

Diversify your retirement investments in broad market index funds that represent U.S. and international stocks, fixed income assets such as bonds, and real estate.

Conclusion

Money management is not a favorite topic of most family child care providers. Make it a habit to set aside a few minutes each week thinking about ways you can improve your finances.  The small steps you take today will make a big difference over time.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://www.flickr.com/photos/68751915@N05/6793826885

For more information, see my book Family Child Care Money Management and Retirement Guide.