Managing your money as a family

Wouldn’t it be great to win the lottery or inherit a fortune and suddenly have enough money to pay off all your debts and enjoy being rich for the rest of your life! If we are realistic, it is not likely to happen.

And even if the dream came true, you would probably find that having a lot of money does not end financial concerns. Even millionaires need to know how to manage money.

Money management skills and good practices are needed no matter how much or how little one has. Financial planning is important. While it’s hard to think about planning for the future when pay day is a week away and your wallet and checkbook are empty, you can learn to manage dollars carefully.

What’s important to you?

Why do you spend your money the way you do? If ten people were given a $100 bill, they would most likely spend it in entirely different ways. Why? Because different people value different things. The deep-rooted beliefs you have about what is desirable and good are known as values. Values grow from personal experiences. You make choices based on your values. Values are not necessarily right or wrong; they express what is important to you.

Families set goals based on their values. A major reason why many couples argue about money involves differing values and conflicting goals between partners.

Don’t clash over cash

When asked how much money is enough, a wealthy individual replied, “Just a little bit more.”

Most families find there is never enough money so, sooner or later, they squabble about how to spend the limited dollars. Meshing different styles of handling money doesn’t just happen because people love each other. It takes effective communication, time, and effort.

If your money discussions escalate to shouting matches or tearful sessions, changes are needed. Realise each of you will have different attitudes and values. To one, money may represent power. To another, it may mean security or status. One may be a spender, another a saver. The concern is not that you always agree about money, but how you disagree and that you come to a suitable compromise.

— What is an argument worth? Save arguments for important issues and major expenditures. Decide amounts each person can spend without reporting to anyone. It might be $5, $10, $25 — whatever fits your budget. These regular allowances provide a sense of spending freedom and eliminate discussions over personal items and incidentals.

— A time and a Place. Talking about money “later” or promising to discuss it “some other time” may never happen. Schedule regular meetings to discuss financial matters. This keeps you and your co-spender informed and can prevent minor concerns from becoming major problems.

The particular time you decide to meet will depend on family schedules. Try to avoid meeting between 5 and 7 pm when people are usually tired and hungry. Meeting just before payday or when bills are due is often a good choice.

For your meeting, choose a place with minimum distractions. Do not let the television, radio, and phone interfere with your communications.

Include all family members when appropriate. Children can learn from this process. Allow everyone a chance to express feelings, wants, and needs without interruption or criticism. Family members are more likely to support a decision if they are included in the decision.

— Listening habits. Effective communication requires good listening. What kind of listener are you? During a disagreement, do you find yourself planning your defence? Does your mind wander? Do you stop listening if a subject is hard to understand?

Listen for key points. Ask questions if you don’t understand something. Be careful not to criticise, argue, or give feedback that keeps someone from expressing feelings.

Solving money problems

If a problem is worth arguing about, it is worth solving. Combine good communication skills with the following steps:

— Acknowledge that there is a problem. Get feelings out in the open.

— Identify the real problem. Money issues are often emotionally charged. Organised, written records give objective information rather than guesses. Be sure the issue is really money.

— Discuss only the identified problem. Keep personalities, past complaints, or other problems out of it.

— Brainstorm alternatives. List all possible actions/solutions no matter how ridiculous. No one should comment on suggestions until the list is complete.

— Discuss each alternative and agree on a possible solution. Write it down. A compromise may be the best solution. Everyone should feel their wishes were considered.

— Make every effort to support the solution. Identify and avoid obstacles. Recognise necessary sacrifices. Perfect solutions are rare.

— Keep communications open while working out the solution. Each person needs to feel understood, appreciated, and loved.

What do you want to do with your money?

To manage money, it is necessary to take a look into the future, see where you want to be, so you can plan how to get there. Families set their financial goals based on their values. One family’s goal list will be different from another family. For example, family goals can include owning their own home, paying off all debts, higher education for the children, taking a family vacation, or setting up an emergency fund.

• Think about your goals. Financial goals are the specific things you want to do with your money within a certain period of time. Goals give you purpose for the way you will spend your money today and tomorrow. Goals give targets for different periods in the future.

— Short-term goals can be done soon. Perhaps in a week, or a few months, but no longer than a year. Examples: Buy new clothes, save for a vacation.

— Intermediate Term Goals can be accomplished in one to five years. Examples: Buy a new car, pay off debts.

— Long-term goals look ahead five to ten years and longer. Examples: Buy a house, put children through college, retire.

To increase your success, follow these principles:

— Set realistic goals. Ones that are set too high may frustrate you and cause you to give up your plans. Maybe it is impossible to save $100 a month right now, try for $25. If a new car is beyond your means, would a used model meet your needs?

— Be specific. State your objectives in detail. If goals are vague, they may never be achieved, and others in your family may have different ideas of what the goals really are. An example is: “If we save $100 a month for the next 12 months, we would have $1,200 for the emergency fund.”

— Be flexible. Plans may require adjustments as your income and life cycle change. Don’t be so rigid that you have to start over with an entirely new plan. For example: An unexpected expense comes up. You can’t save the entire $100 this month. Don’t let that get you off track. Continue to set aside something towards your goal, no matter how little it might be.

More thoughts on goals

You and your family probably have some ideas about the things you want in the future. An advantage of setting goals is that you have something to work towards. People can get so caught up in day-to-day problems they end up accomplishing very little towards intermediate and long term goals. A lack of financial planning can mean problems sometime in the future.

A goal may require resources other than money to achieve. Your resources include: time, talents, and abilities. In order to achieve some goals you may decide you need to earn more money; and in order to do that you may need more training or education which requires time and talents, as well as expense.

Setting your family goals

How many goals will you list? It just depends on your family’s needs, wants, and desires.

Take time to write down your goals so you can see what is really important to you and your family and what you want for your future. One example of an important goal in all households is the emergency fund.

A specific amount should be set aside each month. It is important to identify the obstacles and involve the entire household in the commitment to the goal.

Obstacles to overcome:

other demands for current expenses other goals and priorities current spending habits limited amount of money coming in each month an emergency fund has not been a priority before defining what is an emergency.

In order to further contribute to your emergency fund, you can:

Save all loose change for the emergency fund.

Use coupons and put savings into emergency fund.

Pack lunch at least twice each week and put savings in fund.

Put half of all cash gifts received into fund.

Take time to seriously think about and discuss what you want for the future. On a separate paper list the goals important to you and your family.

Listing goals is usually not hard. The more difficult task is to rank your goals. Identify your highest priority goal and label it “1.” Place a 2 on the second highest and continue until you rank each goal on your list.