8 Money Management Rules for Families
by: Remie Longbrake | published: April 27, 2019
Many families are in a situation where financials are less then stellar. Fortunately, opportunities for a successful outcome are within reach, and the information in this article can assist with those solutions.
The lack of sufficient money management in the family is the cause of many headaches. Many families lack a plan for unknowns and live at the whim of the next paycheck, which only invites disaster. Unfortunately the lack of proper money management also leads to family crises and sometimes breakdown of the family itself. It's sad but a true reality. Most do want to be financially well off, but the circumstances around their environment often leads to frustration and discouragement. The lack of a strong financial education compounds the trouble many people face, and too often that education is not taught to the children growing up in both the school system and at home.
So often due to budgeting pitfalls and overspending, families are not living where they should be. It is encouraging that anyone can establish sound money principles no matter their present state or income level.
It's important to not allow finances to drag the family to hardship. Those who are able to take charge of their financial outlook can often change not only their own destiny but make a large impact in their communities and elsewhere. In fact generations can be defined by these very principles so it's important to start doing all we can.
So what exactly can a family do to ensure successful money management?
Here are 8 tips:
1. Prepare a budget
When funds are clearly allocated for bills and expenses, there is less likelihood of impulsive and regrettable purchases. Get the spouse involved to help prepare a simple balance sheet. Identify what bill are due and when so that you both are in the know. Also prepare a list of the expected earnings in a given month. If you are not sure, you can evaluate the last few months pay stubs or look at your bank records for the expected income and expenses for the family. Make sure to include all income sources, even second or part time jobs if they are still applicable.
There are various free resources on the Internet that you can use for proper budgeting. You can also create your own in Microsoft Excel or similar software programs. The take away is to log all your income and expenses each month so you know what is left over.
At the end of each week is ideal, but no less then once per month review your budget to keep it updated and on track.
2. Have regular family ‘board’ meetings
As businesses have "board" meetings, so should the family. Having meetings to update everyone on the money front is important. Check and identify if the spouse or children are going to need additional funds for upcoming events or anything else that is outside of customary. This includes school expenses, trips out of town, scheduled car maintenance, oil changes that are due. Expenses that are annual, such as some membership dues or credit card annual fees let them be known and write those down in your budget as you are aware of them. As statements arrive in the mail review them to make sure they are accurate.
If expenses come forth that someone is not satisfied with, this is the time to discuss them. Especially with kids, there are fees that are bound to come up whether it's a school function or friends having a birthday party. Things happen so it's important not to get carried away with emotions in times of stress. When there are disagreements take time to talk them out in a manner that is level headed and sincere and come up with a solution that is appropriate. If there isn't sufficient money to cover an activity let it be known. From there come up with a solution to cover the cost or let it go and explain why.
3. Encourage family members to come up with new cost saving ideas
It's important for the family to take time to relax. With everyone's busy schedule it can be easy to let life's moments overrun both time and money resources. It's key to understand your family's long term financial strategy before giving in to impulse spending. Dinner and a movie for a family of four and easily cost over $100. An idea would be instead of going out host dinner at your home and have a movie night with your family, invite neighbors or friends. Enjoy yourself and time spent with family but try to plan ahead. There are opportunities to save in many ways. Think of alternative ways to have fun, your stress level will be less as will you financial security.
4. Review your retirement vehicles at least yearly
Regardless if you have a retirement professional who manages your portfolio, it makes no difference in how you should look at your retirement. After all it's your money. You need to know how it's performing and what it is doing for you and your goals. If you don't have a retirement professional it is even more important to review this information. Make sure you are getting statements and information online from your investments as soon as it's available. Understand however that growth does take time and depending how you are invested the chance to lose money is real. It's keen to have short and long term financial goals to ensure your money approach is within your expectations. If they are not then you should consider making up the difference by working more, saving more or review those expectations completely.
Keep yourself updated, especially after major life changes, such as home buying, moving, having a child, a new job, and other important life moments. Depending on your age, financial situation and goals in place those needs will change so it's important to understand them at life's various stages.
5. Evaluate your home mortgage and other costs
Just as you review your retirement accounts you must also consider your expenses. It's important to have a financial goal in place. Regardless if you are hitting those financial goals you should look into the cost of fees and interests rates to ensure you are getting good rates for your current situation.
Before taking action and dinging your credit score, you should simply ask your bank or credit union what their rates are. Many times this info is posted online. Of course you are not bound to your current bank, check around and take your time. If you do find a savings, consider all the cost involved first, especially when it comes to a refinance or second mortgage. It should only be done if it makes complete sense to your financial circumstances.
Look into your insurance rates for your vehicles and home. Many times you can save money by bundling both policies with the same insurer. Ask for special discounts to see if you apply.
Look at subscriptions and memberships. Review what you actually use and what are luxuries. Four dollar coffee each day at the local shop is a luxury item no matter how you see it. Going to the movies every weekend is not priority to a long term strategy. That new or newer car is not needed. The two thousand dollar golf membership is not a requirement unless you're going professional. There are so many things we do every day that at the end of it do not serve well for our future selves and families. Not to say you cannot have things of value but do consider where your money is going is the point to take home.
6. Pay down debts
Possibly the most important topic here is controlling those debts. Specifically credit cards. Those high interests cards are trouble and is what can and will destroy a family's livelihood. It is very important not to let balances get out of control. The interest will continue to build and it is very hard to keep up without a solution in place. If that is your present situation don't loose hope. First contact your credit card company and explain the situation. They should be able to work with you to get together a repayment plan. If they will not work with you or if they hassle you then you can consider contacting a debt management agency who may be your best resource moving forward. It's important to consider all aspects of repayment and make sure you can afford what is being offered as a solution.
There are debts other then credit cards however. Loans, whether its car loans, student loans, home loans, and others, always strive to pay on time and pay more then the minimum amount due if you can afford to do so.
7. Consider your insurance needs
It's certainly worthwhile to protect assets and your family. This is true for the stuff you own, but also the lives you work for. Having the proper life insurance in place is important. It will allow the spouse to continue to pay for expenses after the hardship and make life easier to bear at least in the financial aspect.
For the assets it is also important. Review with your insurance agent and get proper protection for the property and your contents. If you live in a low area that is prone to flooding, look into flood insurance. Do what it takes to protect your lives and your asset in order to prevent financial losses.
8. Write a will
Lack of a clear-cut will often lead to disputes in the family on the distribution of money and assets as well as resolution of your debts. A will helps relieve your family from these difficult questions. It makes an already challenging time more stressful. A will should be properly prepared and updated as family circumstances change.
I hope you enjoyed the tips that have been presented. This is an overview of the major topics you and your family should consider to be doing to be successful at money management. It is a life time journey, but the better you do the more sound your financial situation will be.
If you would like more information or a copy of a simple budget I recommend, please reach out via email or use LinkedIn information provided below.
*Please note this article is for educational purposes and should not be considered investment advise. Please consult your financial professional regarding specific solutions unique to your situation.