Family finance basics
A good and fully comprehensive family finance planning exercise should ideally include items such as dreams, goals, resources and responsibilities of the entire family unit.
The Basics
This is to ensure all possible bases are cover for the long term planning, thus creating a better overview of the future direction the family should take. This is also a good way to design the path and work toward the goals set as a family unit. The positive element often enjoyed by this form of planning would include all parties working together and gaining good and practical experiences along the way.
In a lot of cases, the planning of the family budget both in long term and short term formats help to bring the family closer and more capable of handling hiccups along the way. Family finance planning basics should also ideally take on the element of creating a comfortable leeway for unwanted surprises that are almost certain to happen along the way as the family grows and evolves.
Learning how inspire the family to go along with the expenses prepared is also another important element that can be experienced with the planning exercise. The entire family will learn to adapt the respective needs and indulgences according to the financial plan drawn.
Having discussions and being clear on the financial situation of the family will help instill a sense of responsibility with each family member thus ensuring all work as one unit to make the financial commitment of the family manageable.
The other benefit of family financial planning is also to get the children involved at a very early age, in the various components, commitments and sacrifices the parents would be making on their behalf so that they are able to enjoy a better quality of life.
Put together a family meeting for financial goals
Getting the family involved at some level of the family financial planning and goal settings will be beneficial to all parties, especially the kids, as they will be able to see firsthand just what it entails to run a family successfully and comfortably.
Talk about it
The perseverance and commitment needed to create a suitable and workable family financial plan will also create a new appreciation by the children for the parents for their willingness to share the fruits of their labor with their children. Ideally this should be achieved through the arranging of a family meeting to work out the details of the financial goals for the family unit.
The key to raising children who are conscious and careful about spending habit is to inculcate very early on in life the merits of budgeting and sticking to the budget designed. Items such as college funds, car upgrades, large house expenses, retirement funds should all be discussed and clearly outlined for all the members to be encouraged to understand the general commitments of the family income.
Getting the entire relevant document such as financial records and then taking the time to evaluate the financial situation honestly will help greatly in the eventual financial planning stage. Getting all the family members to be willing to eliminate any unnecessary expenses and frivolous spending is also another positive attitude to encourage through the family meeting.
The following should be some of the elements included in the process of the family meeting for finance planning: A meeting should be called to discuss the aspirations and goals the family should be working towards as a unit. There should be some level of encouragement for all participating members of the family to be able to express their own individual opinions without reservations.
Evaluate your financial standing
It would be a good idea to practice periodic financial evaluation for the better understanding of the family’s financial standing. This is also important; as it will help the family make the necessary adjustments should there be a need for such changes.
Where are you
The net worth of a family is always changing and this is mostly due to outside factors that are beyond the control of the family unit. Therefore periodic evaluation exercises will help the parents better adjust to these changes and make informed decisions of the future of the family’s financial standing.
Sometimes this may include the need to make some cut backs on spending or it may also present some positive saving of which the family may decide to enjoy immediately, or even the prospect of reinvesting any access finances for further gain.
All these decisions can only be done when the whole family is committed to positively contributing to the general finances of the family. When the help of the whole family is enlisted, any small progress or saving can have quite a liberating effect on the family unit as a whole, as it will help to show the positive results of a family working together for the better good of all.
The motivation that can be gotten out of the family unit being able to manage their finances will is also another positive outcome from this type of family cooperation. Through the evaluation process of the current financial standing of the individual and the family unit as a whole, other decisions on investment can be made.
If the financial situation allows for a bigger investment portfolio without adversely affecting the current spending power of the family, then such opportunities should be capitalized upon. However as in all commitments, some caution should be exercised, so as not to over extend one’s self.
Excerpted from the book Family Finances.
This excerpt has been edited and condensed for clarity.
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