Growing up, anytime I inquired about the family finances my mom would utter four words—none of your business! I had no choice but to accept this. However, as the resident financial fanatic it would have been good to understand the family finances in and out. This could have saved us money as a family in the long run because I didn’t know where we stood financially and my only job was to figure out how I could convince my mom to spend money on me; having no regard for any other household financial priorities. Now as a parent, I understand the importance of everyone’s input in family matters; not just the adults.
Ken Blanchard once said, “None of us is as smart as all of us,” and while managing a family may require some hierarchy to avoid chaos, running your family like a team may prove to be beneficial. Everybody’s input matters and the more information that can be shared, the better the chance you have of running a successful household. Teamwork makes the dream work and the following four tips will help you run your household finances more effectively in order to make your household income stretch.
Make Sure Everyone is Aware of the Numbers
One of my old managers use to always say, “Inspect what you expect,” meaning that if you want to get a certain outcome, you must make sure that you are checking in and doing what you need to do in order to get that outcome. With that said, if your goal is to run a lean household, it is important that everyone in the household is aware of the numbers. Many times, when it comes to paying bills, going over expenses and analyzing income, this is usually reserved for the heads of the household/bread winners. However, those involved in spending the money should understand all facets of the family budget as well. Doing this allows everyone in the home to understand what is coming in, what is going out, and what adjustments need to be made in order to reach the family financial goals.
Create Goals as a Family
Speaking of family financial goals, it is important that those goals are created together as a family. Doing so gives everyone a sense of responsibility to keep the goals intact. So next time instead of telling your child “no I don’t have it” you can say, “no we don’t have it because this money is allocated for xyz.” This may be a challenge at first because I’m sure your kids don’t care much about your electricity bill or how much the cable costs, but as you include them on things like family vacations, trips, and other things that will benefit them more directly they will likely start to be able to draw the parallel and understand why certain financial decisions have to be made. Not only is this a great money management lesson for them, but it also removes the temptation of them asking for extra since they’ll know what is available and what is not.
Begin to Plug Money Leaks as a Family
Whenever times get tough financially, there are three options 1) cut back on expenses, 2) make more money or 3) do both. If you are trying to stretch your household income, then you don’t have to wait until times get tough to exercise one of those options. Being proactive will help make sure that financial storms don’t happen unexpectedly and assures that when the storms do happen the family is well equipped to weather them. Sure, parents can take the lead and begin slashing expenses, but when it’s done as a family it allows everyone to feel included and responsible for the maintenance of good family financial planning. As you plug the money leaks, make sure that a financial freedom fund is being built as well. Show the family the importance of having 6-8 months of expenses in a free high-yield savings account.
Distribute Household Money Wisely
Now that the family is aware of the numbers, knows what the family financial goals are, and has played a role in plugging the money leaks and creating a financial freedom fund, it is time to allocate the household funds wisely. Let everyone play a role in knowing where money is going and why. This has a long-term learning effect on the family, helps keep the family budget intact and avoids anyone trying to stray in a different direction.
Congratulations! You are well on your way to financial family flexing and stretching your household income. Staying focused and having the perseverance to see this plan through will give you and your family the best chance to be successful. Additionally, utilizing free tools and resources, like the S.M.A.R.T. Financial Goals Worksheet, Budget Worksheet, and Daily Spending Journal we offer in our Best You Yet Experience, will help you tremendously on your journey to fantastic family finances. Simply take the Best You Yet Pledge to gain access to these helpful assets.
And don’t forget—a family that pays together, saves together!
The views and opinions expressed by the author are not necessarily those of BankMobile. The blogs are intended as general financial knowledge that may or may not be applicable to your individual needs. Always contact your accountant for tax advice.
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