Family Finances – A Role For Both Spouses

Dad mows the yard, cooks all the meals, and handles all repair jobs. Mom does all the grocery shopping, is in charge of taxiing the kids to their ‘practice du jour’, and takes care of the laundry.

Division of household duties such as these sounds all too common these days. In most cases, the handling of family finances falls to a particular spouse as well. However, when it comes to the family finances, it is imperative that both spouses play a role. If not, the result could be a devastating blow when a spouse is left to pick up the pieces.

The primary risk faced by a household which has one spouse managing the family financial affairs alone is that the other spouse is left completely in the dark. Being the financial decision maker in the family, if something were to happen to you would your spouse be able to step in and manage the family wealth? More times than not, the death of a spouse is the immediate situation people think of. But the same can be said about being a spouse of a soldier being sent half way around the world for the next year, or someone who is too ill to continue handling the family finances. Even if you expect your spouse will turn to a financial planner or advisor for help when you are not available, will your spouse even know where to look for such help much less what questions to ask?

Taking a proactive approach to bringing your spouse up to speed on your family’s finances will pay huge dividends in case the time comes when you are not around to assist. Most financial advisors will agree that there are six questions your spouse needs to be able to answer regarding your family’s financial picture.

1. Who Do I Need To Contact?

This first step is the most critical. Your spouse needs to have a well prepared list drawn up for him or her listing your important contacts. These include, but are not limited to, financial planners, accountants, attorneys, insurance agents, and bankers. Anybody who has a role, as slight as it may seem, in your family’s finances needs to be on this list. For each person on the list you should include their names, company names, addresses, phone and fax numbers, and email addresses. A brief overview of what each one of these individuals has done for your family would be beneficial as well.

2. Where Is Everything Located?

Your next step is to outline what assets are held and where they are held. These assets include not only any personal investment accounts, but also company retirement accounts and insurance policies. Other documents of equal importance are your wills and ancillary documents, such as your Power of Attorney documents and Living Will. If you currently do not have these documents in place, it is critical you do so as soon as possible.

Organization is critical. A well-organized filing system will lighten the already mounting stress felt by your spouse or loved ones forced to pick up where you left off. Start by creating folders for each investment and bank account, estate planning documents, insurance polices, etc. and be cognizant in what information is contained in each. For example you will want to keep investment account statements and trade confirmations, but you can throw away annual reports, prospectuses, and marketing material. With insurance policies you will want to keep the policy statement that is currently in force, but you can throw away older policies that have lapsed.

Once this has been done, consider creating a master directory that lists all of your accounts and account numbers, names and numbers to the appropriate contact person, any website addresses and login/password information to gain access to your accounts. Store this information in an ultra-safe place such as a home safe, safe deposit box at your bank, or in a password-protected file on your computer (and make sure your spouse knows that password!).

3. How Are We Doing Financially?

Your spouse does not need to know about every trade you make and every stock you may own; however, you should sit down as a couple from time to time and review your current financial picture. How much do you have now and how much of that is liquid (how easily can it be converted to cash in an emergency) are just a few items to discuss. Are you on track to reach your shared goals? If not, what steps need to be taken now to get you pointed in the right direction?

Deciding how much to spend, save and invest each month is a basic discussion that every family needs to have, and both partners should be involved in those decisions. There is a saying: It is best to discuss your finances on the 1st than to argue about them on the 31st.

4. In What Order Should I Access Our Assets?

While some of your assets can be accessed at any time, drawing on other assets may result in unnecessary fees, penalties and taxes. Your spouse needs to know which accounts and assets to tap into first should the need arise. He or she will need to know which assets are more liquid and those that are not. The standard rule of thumb is you will want to have at least three to six months of living expenses in a highly-liquid account for emergencies. Ideally, this will be held in savings accounts, money market funds, or certificate of deposits (CDs). If you are retired and are dependent on your portfolios for living expenses, a good target to shoot for is two to three years of living expenses in highly liquid accounts.

5. Who Do I Turn To For Help?

You may be the go-it-alone type when it comes to your investments and family finances, but it may be unrealistic to expect your spouse to follow in your footsteps. It can’t hurt to assume the possibility that your spouse will be in need of a financial planner or advisor. Start asking your friends and co-workers if they are working with an advisor or could refer you to someone.

As with most professions, numerous professional designations exist in the field of financial planning. The most widely recognized is the Certified Financial Planner (CFP®) designation. Financial professionals who carry the CFP® designation have been educated and tested in all areas of financial planning, including estate, insurance, and tax planning – not just investments. Additionally, they must maintain a required amount of continuing education each year and adhere to a very strict code of ethics. Other designations in the industry include the Chartered Financial Consultant (ChFC), Chartered Life Underwriter (CLU), Certified Personal Accountant (CPA), and the Personal Financial Consultant (PFC), and most of these designations carry education and continuing education requirements as well to maintain the credential.

In the end, however, you will want to find a financial professional who shares your philosophies on life and your finances, and has experience working with others who have needs similar to yours. Professional designations are important; finding someone you trust is critical.

6. Where Can I Learn More?

Even with a financial planner or advisor in the wings, it is important for your spouse to know where to turn to build a basic foundation of financial literacy. For a spouse that is not used to finances, more times than not any book on basic investment and financial topics won’t fall into the ‘I just couldn’t put it down’ category…..it won’t be a fun read. Having a handful of commonsense investment and personal financial planning books will, however, provide a lot of useful information in an easy-to-digest format. A few examples are The Only Investment Guide You’ll Ever Need by Andrew Tobias, and A Random Walk Down Wall Street by Burton G. Malkiel.

Another option to consider is taking a personal financial planning course at your local university or community college. Non-credential courses are very affordable and are offered at various times and days of the week to conform to your schedule. More importantly, it can provide enough information to make the transition from having never touched the checkbook to actually running the family finances much more seamless.

Nobody wants to think about life without their spouse. Not having your financial ducks in a row, along with a financially-educated spouse who will be able to pick up the baton and run, will only make the transition that much more difficult…..both emotionally and financially. Take the time to sit down together and start this indispensable process.

Handling Family Finance

Family Finance – What has this got to do with LOVE?

Yesterday, at a couples’ dinner that was put together by our organisation, We had different sessions that dealt with relationships, sex, communication in marriage, what to do when communication breaks down, handling family finance e.t.c.

The session on Family Finance attracted the most comments, questions and heated arguments. And I felt I should share some of my views with you today.

The following are some of the symptoms of wrong financial system in the family:

Regular quarreling: between you and your spouse shows that you are operating a wrong financial system in your family. More importantly, it reveals that there is a disparity in financial views and probably a lack of trust. Continuous misunderstanding in the area of finance at home is a sign that both of you and your spouse are not mature in the area of family finance; you need to improve on that.

Family Replacement: If you hustle for money at the expense of your family, if all you do is to look for money all day long with no family time, no time for your spouse or your children; then money is working against you and you are working on a wrong financial system. The best gift you can give to your family is your time. How can you prove to them that you love them without spending time with them? You have to create time for your family.

Wrong Money Usage: There are good and bad ways to use money. That is why you need to sit down and take stocks of your life. Check where your money is going; if it has been going into negative ventures then you should know that the future is bleak as your spending will definitely affect your family negatively.

How do you ensure that money works for your family?

Making money work for your family is not a one-day event, it is a life-long experience.

Yet, the importance can never be over-emphasized.

It will not only ensure that you have enough to meet your family needs and obligations, you will also be able to even build wealth for your family. When you do it right, you will also build trust in each other.

START AT THE BEGINNING…

Both of you will now have to sit down and develop a marathon mentality for investment.

It is a decision that both parties must take. if only one person is committed to a better financial system and the other is indifferent, the one person who is desirous of change will eventually feel frustrated.

You need gut and graft: You need gut, you need determination, you need to close your eyes to present accolade and look up to the future ovation, move forward at a time and win the race for your family TOGETHER.

Discipline Yourself: One thing you need more than anything else is discipline, when you are setting a new course for your family finance. Discipline is the mother of distinction.

Don’t buy what others are buying because they are buying it and never buy to impress anybody because the people you want to impress are not really impressed.

COME TO THINK OF IT…

Can you imagine running any company, business organisation or your home-based business without any form of financial system in place? Yet, that is how we, often times, treat our finances. That is definitely not good enough.

One principle that has worked for my family and that I recommend to people is that you should handle family financial issues OFFICIALLY. I know that may sound kind of boring to many of us, but it works. It is the first lesson in financial eduaction and intelligence that you and your spouse must learn.

I have realised that those who handle even personal financial issues officially fare better than those who don’t have any structured plan on how to make, spend or invest. The same principle apply to your family’s finance.

Standard Cost Concepts Applied to Family Finance

Standard costs serve as benchmarks that represent expected future costs required to achieve an objective or goal. In business, these costs are mainly used for decision management and decision control. The same control applications can be employed for family finances. The related concepts that are exercised in business prove beneficial to several areas of family finance described below.

Families operate very similarly to businesses, working together to reach common family-related objectives through setting goals. Similar to businesses maintaining mission statements, families develop unofficial, unwritten family standards and themes. Within the overall family objective are many smaller objectives that change with time, economic demands and other internal or external factors. Standard costs provide businesses with a mean for decision management and control in order to assist them in reaching their objectives, and thus, the principles can be applied to family finance in the same manner to achieve common objectives.

Family Savings

The application of standard cost systems provides businesses with the incentive effect to achieve costs less than or equal to the standard costs required to achieve the business objectives. When these costs are used as a basis for performance evaluation, incentives are created for management to control their costs. With this incentive comes the possibility of discouraging cooperation when individuals are not rewarded in the same manner as the whole unit.

Let us examine a family of four attempting to save money to reach a family objective: going on vacation to California next summer. This objective is set when the parents have a discussion on how to spend more time bonding as a family, equivalent to a board of directors setting a top-down objective. In order to reach the objective, the family realizes that they must save $5,000 in the next year and that they must achieve this through decreasing their family spending since there are no anticipated increases in family income. In order to achieve the objective, the family must work together to achieve increased savings. In a business, if an individual is rewarded based only on what they produce then they may not be motivated to work with the other individuals in the department to ensure they are also attaining the same levels of productivity. However, if the same individual was rewarded at multiple levels, both individual and departmentally driven, then there would be more incentive for cooperation. The same must occur for the family in the example. In a case where the vacation itself is the only reward, if the children are not as excited with the family vacation destination then they may not be as motivated to work towards the family’s savings. If other individual level rewards are set (i.e. stickers, one on one time with the parents, or an hour extended curfew for teenagers) then the unit would be working together more cooperatively to reach the overall objective of the family vacation.

Family Budget

Family budgets have a direct impact on the savings available for the family. In discussing the same family of four with the objective to save $5,000 to acquire enough funds for a family vacation, cost concepts can be applied to the family’s budgeting function. The family should use the basic concepts of a standard cost system to set an overall budget for the year. The budget should then be drilled down further to set costs that must be met in each budgeted category. For example, if the family calculates that it can only spend $300 on groceries bi-weekly then they should apply standard costs to each grocery item to ensure that overspending does not occur. If the family sets a standard cost for cereal at $2 then the concepts should be applied so that cereal is not purchased if it is above $2. If purchasing were to occur above the $2 cost then the vacation may be sacrificed.

Another incentive effect can be applied to this situation; building inventories when price discounts occur. The recently popular occurrence of extreme couponing illustrates this incentive effect. Extreme couponing is a pop culture hobby with the goal of stocking up on items when they are below the standard cost. This strategy involves meticulous planning and monitoring of standard costs for household items, clothes, groceries and even vacation packages. Utilizing this strategy to stock up on goods or build inventories when prices vary below their set standard cost range can assist the family in reaching its end objective. Prices and costs can change because of inflation, demand, resources and many other economic factors. Therefore, it is important to mention, especially in the case of long term objectives, that standard costs should be constantly examined and updated.

Standard costs concepts are a beneficial approach for families that function similarly to a business where they are one unit working towards a common objective. Many related concepts can be applied to family finances. If these concepts are understood properly by the family the overall family’s finances including short and long term objectives will be improved.

Tighten Up Your Family Finances

If times are tougher for your family than they were in years past, you may be having a hard time making it from paycheck to paycheck like you use to do. It can be hard to go from one standard of living to something less without making some mistakes. Once you are used to living one way, cutting back and getting rid of some of your costlier habits is harder than one might think. Your family finances are not going to get any better if you don’t adjust a bit. The good news is that you can make some inroads towards saving money while still enjoying your life.

Eating out is one things that may families and couples enjoy, but can be a problem when family finances get tight. If you go out a few times a week, you can spend a hundred or more dollars than you need to on food. Giving up on eating out can be hard, but you don’t have to completely give it up. For the sake of your family finances, go just once a week and choose a lower priced menu or restaurant. It is not the same as you are used to, but you can still go out and then eat in the rest of the week, saving money on your food budget.

Think of ways to lower your clothing budget for the sake of your family finances. This means that you should be aware of how much you spend on clothes as opposed to what you have to spend on clothes. You may find that you are spending way more than you should be when money is tight. If there is nothing wrong with the winter coat you wore last year, don’t buy a new one this year. Buy new accessories, which are much cheaper than new clothes, to change up the wardrobe you already have. This is one great way to save a lot of money in your family finances.

Think about what you spend each week on your way to and from work if you need help with family finances and spending too much money. Do you purchase a coffee to go each morning? Fill up at home with a reusable mug each morning on your way out to save up to ten or twenty dollars a week per adult in your home. See if you can car pool with someone, even a few days a week, to save on gas. Take your lunch instead of eating out (business lunches excluded, of course) to save a lot on your work-related expenses.

All of these small changes can be an adjustment, but you will find it easy to stick with them once you try them out. You can then put your extra money into your family finances to pay your bills and pay back debts. You may soon find that you have more money for savings, and you may even be able to add an extra night out once in a while because you are saving so much money otherwise. You will soon love what this does for your family finances so much you will wonder why you didn’t think of it sooner.

Top 5 Tips to Keep Your Family Finances in Great Shape

Your goal to provide and maintain your family relationship at a perfect level correlates with the way you want to maintain a stable family finance. This is not really a big thing to ever dream of as we can all keep up with our family finances as long as we monitor everything closely regarding the family’s financial activities and concerns.

A careful planning is your key to keep your family finances in great shape at all times. To carefully plan your way to an effective family finance issues and stability, here are the simple but incredible tips for every family to adhere.

1. Establish a bookkeeping record or system. A popular tool here is the Quicken software. It helps you keep track of your expenses on a weekly, monthly or yearly basis.

2. Keep all receipts intact. Whether you bought a single item for a small amount or a bulk product, do not let any of each day’s receipts slip in your hands or be thrown directly to dust bins. Every receipt counts and you should have an agreed place or storage to keep all receipts to be posted into your online bookkeeping system intact.

3. Enter all receipts being covered for the week. Your weekly receipts may be classified as expenses or income or may fall into another sub-category.

4. Select a category that best fits each receipt for faster access and allocation.

5. Update your records weekly. Since your account is being reconciled online, it is best to enter additional details and receipts on a regular pattern each week. This gives you more time to review weekly finances and lets you prepare carefully for next week’s financial activities.

Valuing the Bookkeeping System

Following a careful and strictly maintaining a regular bookkeeping system online keeps all bills on track. It even makes every bill easy to pay without any delay.

There are other reports that this system generates. These are the itemized categories report and the cash flow report. This bookkeeping system automatically updates your account and provides innovative real-time solutions to your family’s finance puzzles.

If you are new in fixing your family finances or still in doubt about its efficacy, a regular 15-minute session with your online bookkeeping system could help you catch up very well with your financial issues. Once you feel stable and at ease with the system, work out your family finances and record keeping activities on a regular weekly pattern. Soon, you will greatly see its real positive and delightful impact on your family relationship, money matters and even to your health.

Maryrose Malinao is an internet marketer, researcher, teacher and an online supervisor for international services. She loves to share current trends in the online world especially about international business concerns on the road to quick wealth and success for lasting impact.