6 Steps to Make Finances a Family Affair
6 Steps to Make Finances a Family Affair
The Consumer Price Index, which tracks changes in the prices of certain goods and services and is often used to measure inflation, showed a slight drop in April. That’s notable because it marked the first decrease in the inflation rate, on an annualized basis, in six months.Nonetheless, the U.S. Bureau of Labor Statistics reports that prices continue to climb for just about everything your family purchases on a regular basis, including food, gas, clothing, utilities, transportation, dining and entertainment.1 Whether you’re seeking ways to stretch your current budget, or save for retirement, a new house, or a vacation, you need a plan—and everyone in your household who’s affected should be involved. That includes kids and grandparents if you live in a multigenerational household. So, how do you get started?
1. Begin with your values
Whether you’re single, married or somewhere in between, think about what matters most to you and your family when it comes to your money. Are you comfortable with your current saving and spending habits? Where can you cut back on spending to help pay for current expenses or save more for longer-term goals? If you’re saving for a new home or car, how soon do you hope to reach that goal? What are your goals when it comes to retirement? Is charitable giving important to you? How do you feel about debt?
If you have a spouse or partner, it’s important that you present a united front before sharing financial goals with other family members. Often, partners have different attitudes about money, based on upbringing, cultural differences or competing financial goals. Maybe you grew up in a household where it was taboo to talk about money, or one where discussions frequently centered around money. Either way, recognizing these differences and finding common ground is the first step toward getting everyone on the same page.
2. Make a plan
If you don’t already have a financial strategy that clearly outlines your goals and priorities, schedule time to meet with a financial professional to put one in place. A strategy will not only help you remain on track as you pursue competing objectives, but it will hold you accountable to your goals. Keep in mind, the more specific your goals, the better your chances of achieving them. For example, a goal to “save more” is too subjective and won’t hold you accountable. Committing to save $200 each month in an emergency fund is a more attainable objective, due to its clarity.
3. Establish a budget
A budget is an important part of any financial strategy since it provides a clear picture of your cash flow—what’s coming into your household versus what’s going out. It helps to optimize savings and spending to remain on track toward your goals. Choose one of the dozens of free apps available online or through a financial institution you may already work with to help take the complexity out of budgeting. Many allow you to aggregate data from accounts at different financial institutions, providing real-time account values. To stay on track, review your budget at least once a month and keep an eye out for any spending trends that need to be addressed or reined in.
4. Take the conversation to the next level
Once you have a strategy and a budget you agree on, schedule time to share this information with other members of your household at a time when everyone’s relaxed and not rushing to make a meal, get out the door, finish homework or complete chores. To gain buy-in from family members, ask for ideas on ways to save money or work together to pursue specific financial goals. This reinforces the concept that this is a family effort and their opinions matter.
5. Assign responsibilities
It’s important to delegate tasks to different family members, based on their age, capabilities and interests. Think about ways everyone can chip in. Considering turning family pizza night into a competition for the best home-made recipe once or twice a month, in place of carry-out or delivery. Do you have space for a vegetable garden? Even small children can help plant and maintain a garden, which can save money on store-bought produce. Think about whether there are tasks or chores that you currently pay for, such as household cleaning, dog walking or landscaping. How much could you save if everyone pitched in to share these responsibilities instead.
6. Reward contributions
There are many ways to reward family members for their contributions, such as a special night out for you and your partner when you hit an important goal, or a trip to a favorite park for young children who complete all their chores. Grocery shopping can be a great way to help young children learn important lessons about the value of money while choosing their own reward. Begin by assigning each child a snack budget and help them shop for their favorites. If they come in under budget, give them a say in how to use the savings. Will they donate the extra money to a community food bank, roll it over to next week’s grocery budget, or keep it to spend as they like? This is also a great way to teach valuable lessons about tradeoffs and compromise.
However you choose to make managing your finances a family affair, be sure to inject some fun. By celebrating both the big and small milestones, you’ll not only reinforce the importance of everyone working together as a team to pursue shared values, but you’ll also help the next generation develop a lifetime of positive money management skills.
To learn more about pursuing a lifetime of financial goals, call the office to schedule time to talk.
This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.