Managing your familys finances is a bigger job than many people realize. A familys finances work similar to a small business. You have cash flowing in and out, savings and investments, credit cards and debt, bills to pay, and people relying on you for their basics needs. Whether you run your finances like a Fortune 500 company or a mom and pop system, follow these steps to ensure you are fulfilling your family Chief Financial Officer duties each month.
Review Your Family Income Statement
In personal finance, there is a simple saying to help you manage your income and expenses each month: spend less than you earn. At the end of each month, do you know where you stand?
Thanks to modern apps, you can get this important information automatically. Connect your bank and other financial accounts to money management apps such as Mint, Personal Capital or Penny and the rest happens like magic. Check in monthly for a high-level review or login weekly for a detailed spending and budgeting analysis.
Update Your Family Balance Sheet
While Mint and Personal Capital track your spending, they also offer dashboards that show your assets, liabilities and net worth. It just so happens these are the exact same financial metrics used on a company balance sheet. Simply put, your net worth is what you own minus what you owe and is a great metric to track changes in your overall financial health.
Your family balance sheet shows how much you have saved compared to what you owe. That number should creep upward as you pay down debts and increase savings. A balance sheet is a snapshot in time, while an income statement is for a period of time. Though each is used differently, both are an important tool in your family finance management arsenal.
Discuss the Budget With Department Leaders
In a business, various managers and department heads are responsible for managing spending and budgeting in their team. In a family, every member of the family has an opportunity to act as a manager of their own spending.
Sit down with your spouse or kids to discuss their spending over the last month. Was everything on target? Did they spend more than expected? Maybe they came in below budget? Engaging everyone in the family finances helps kids learn smart money habits and keeps everyone in check while living under your roof. There are even some great online tools to help kids learn about savings and how to manage money, including Bankaroo, iAllowance, and PiggyBot.
Evaluate Your Family Savings Plan
Are you saving enough money for retirement? How about other financial goals such as a new car, college expenses or even a vacation? If you dont have financial goals and a plan to reach them, you will likely fall short.
Every month, take a look at your savings goals and progress to reaching them. If you use Mint, goals are already built in. Another great option to save without thinking too much is Qapital or Acorns, free savings apps that use rules to transfer funds from your checking account or rounding up your purchases to dedicated, goal-focused savings or investment accounts.
Make Progress on Debt Freedom
Are your debt balances A) growing, B) stable, or C) shrinking? If you answered anything but C, its time to get your debt under control and on track to pay off for good.
Pay more than the minimum on every loan, including student loans and mortgage loans, to save on interest every month until the loan is paid off. This student loan prepayment calculator works for mortgages and auto loans as well. Figure out how much extra you have to pay each month to reach your debt free goals. Visit Sofi.com if you have a student loan, credit card or personal loan debt that you need to consolidate.
Bonus: Annual Insurance Review
While you dont have to think about insurance every month, you should check in on your insurance at least once a year. Or assess when you experience important life changes – a new baby, an adopted child, a new home, marriage or divorce. Your insurance needs and rates can change over time, so getting a fresh quote for auto or home insurance may be a big monthly money saver.
Term life insurance rates are locked in once your policy is active, but it is important to have enough insurance to cover your family in the event of a worst-case scenario. An annual insurance review is a perfect time to check your math and decide if you want to add a new policy on top of what you already have, or get started with your first life insurance policy. Contact a licensed agent at SelectQuote to assess your life, auto, home insurance today to determine if your coverage is adequate or if you can save money on a new or replacement policy. Visit www.selectquote.com or call 888-787-3878 and get a free life insurance consultation with a licensed SelectQuote agent today.
Be the Boss of Your Money
Most businesses are not successful due to luck or serendipity. They are successful because managers guide both operations and finances to reach business goals. The same is true with personal finances.
It doesnt matter if you are in debt or rolling around in piles of gold like Scrooge McDuck, if you ignore your finances, they are likely to get worse. If you take charge, make a plan and stick with it, your finances will improve.
A family CFO cant succeed without the buy-in of all family members. It starts with one family member making finances a priority. If you are sick of money stress and want to get on track for success, crown yourself the family CFO and take your financial success into your own hands.