Family Finance Matters  

Somewhere in there personal finance turned into family finance…

People tend to think that to create wealth you have to make a lot of money - meaning monthly income. Yet it has been my experience - never having been a high income earner - that appropriately managing what I have allows me to keep more of it and subsequently multiply what I keep.

Family Finance – The Basics

Did you know that the personal savings rate declined from about 10 percent of disposable income in the early 1980s to 1.8 percent in 2004? [1]. Or that 36% of those who owe more than $10,000 on their credit cards have household incomes under $50,000? [2]. It is statistics like these that serve to highlight the importance of getting a hold of family finance basics.

What would be your answer to the following questions?

• How much total income did you have last month and how much of that did you spend and how much did you keep?
• What percentage of your income are you setting aside for investing and/or saving on a monthly basis?
• Where is the money in your 401(k) invested? And I don’t mean who is the custodian, I mean exactly what type of investment is it in (stocks, bonds, mix, large caps, index funds, etc.).
• What was you average monthly expenditure last year for groceries, healthcare, child care, gas, cash, etc.?
• What was the return on your investment portfolio last year? Did you join the crowd or did you fare better than most?
• Perhaps one of the most important personal finance questions; what is your net worth?

And so on…

The point is that when it comes to family finance if you are able to answer these questions then that means you are financially savvy about your stuff and better yet you probably have a plan and goals. If on the other hand you cannot, then very many things could be going wrong. Including but not limited to you not knowing where your money is going or if it is working for you or not.

Key Areas of Family Finance

You can imagine there are a hundred things you want to consider when dealing with family finance issues. However based on my experience and research they can be grouped into the following main categories:

• Financial planning. You probably might guess by now that I am big on planning. So having a plan to handle the many aspects of family finance is a given. You want to consider your short and long term financial goals and devise a plan to achieve them .
• Money management and budgeting. These two go hand in hand. The bottom line is that you need to know what your money is doing and where it is going. If you only have a dollar then manage that dollar. Consider your monthly expenditures, percent of income saved/invested, cash flow management [3], etc.
• Saving and investing. The cornerstone of creating wealth is accumulation of assets. Savings and investing is a vehicle of achieving that. There are so many investment choices that you need to educate yourself and seek advice to make a decision. A saving and investing strategy is a must for any family.
• Financial Education. The importance of knowledge and education is that it opens doors both in your mind and in reality. Where before you could not see how you can achieve wealth when you start educating yourself you gain knowledge and knowledge is power. You need to understand how things work so you can make good choices. Remember, debt preys on ignorance.
• Maximizing your income. It is great if you manage what you have and do your best to keep as much of it as you can. But if you increase your income, save more of it, an do it without disproportionately increasing your spending now you will start making larger strides. There are many, many ways to achieve this. What you want is to find one or several that will fit your reality, knowledge, skills and desires.

Family Finance Topics:

Proven Strategies for Building Personal Wealth
The hardest part of building personal wealth is getting started. There are so many unknowns and things to do, but if you follow these tried and true strategies you will be on the way to wealth and better yet you will be attracting wealth into your life.

The Road to Wealth
Debt management, real estate investing basics and personal finance education are three more strategies that you need to consider on the road to wealth.

The Best Personal Finance Tip I Ever Got
The best personal finance tip I ever got was responsible for creating a big part of my wealth. This tip should be part of your personal finance plan if you are wondering how to build wealth.

The Importance of Personal Finance and Why You Need to “Get It”
Why you need to understand the importance of personal finance or risk being broke forever. Personal finance budgets and basics that will help you build wealth.

Calculating Net Worth – The Quarterly Update
Calculating net worth is a key part of personal finance management. Knowing your tangible net worth is important but the real benefit comes when you track it over time.

Creating a Spending Plan
One of the best tips on budgeting I can give you is to create a spending plan - without a plan, nothing happens.

Thanks for reading.

[3]Family Finance Handbook. Frank Damazio, Rich Brott 2004.http://books.google.com/books?id=ZBZpIXUFrgkC&printsec=frontcover&dq=family+finance&lr=

What is your family finance story?

Every family is unique, do you have a great story about this?
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