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Family Finance Matters

Topics on Family Finance Issues

”It is not what you’d do with a million if riches should ever be your lot. But what you are doing at present with the dollar and quarter you’ve got”

- R.G. LeTourneau

If you are like us what once was fairly simple personal finance becomes more complicated once you get married. Then children come along and between ballet and karate lessons, insurance and mortgage payments family finance matters become a lot more complicated.

Whether it’s just the two of you or the two of you and three children the reality is that your family financial situation need to be planned for because they will be essential building blocks for creating wealth.

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.

This has been a basic philosophy that has allowed us to build wealth even on a single income.

Family Finance – The Basics

creating a Family finance plan

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?

  • What was your income last month? How much did you keep/spent?
  • What percentage of your income are you setting aside for investing and/or saving on a monthly basis?
  • Where is 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: do you know your personal net worth?

And so on…

If you can't answer these family finance questions then you might not know 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. 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 for building wealth.
  • Money management and personal 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 - These tried and true strategies will put you on the way to wealth...

The Road to Wealth - 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...

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...

Calculating Net Worth – The Quarterly Update - 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...

Importance of Financial Planning for Families and Individuals - and how it can be a major component of your overall wealth creation plan...

Personal Finance Basics All Families Must Know - when your family grows these are things you need to consider...

If you want to organize your bills this works like crazy...

The Most Recent Market Meltdown and Figuring Out How to Invest in Stocks

4 Smart Budgeting Tips For Families To Lead A Debt Free Life

Simple Net Worth Calculation - easy steps to calculate your net worth

Being a Stay at Home Mom or Dad- You CAN Afford It (Part 1)

Being a Stay at Home Dad or Mom - You CAN Afford It (Part 2)

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[1] Should Decline in the Personal Saving Rate Be a Cause for Concern?, C. Alan Garner. Economic Review, 2d qtr 2006.

[2] The truth about credit card debt - Liz Pulliam Weston.

[3]Family Finance Handbook. Frank Damazio, Rich Brott 2004.

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