Money is as essential to modern living as shelter or most other necessities. Family, of course, is what many of us live for. When these two vital parts of our lives come together, they help to improve family finances and relationships.
Why is this, though?
- 22% of failed marriages in the US are as a result of financial disagreements. This is captured in a survey conducted on 191 CDFA professionals drawn from all over the country.
- Financial matters are the least likely to be discussed by adult Americans. The subject of death, in fact, is preferred above money talk by a majority in the US.
Why Money is Such a Touchy Subject to Most People
First, let’s keep in mind that family finances include the totality of income and expenses, as well as bookkeeping about the latter two that accrue to a family unit. Only, practically speaking, it’s really not that straightforward. The concept of marital property may get in the way, causing uncomfortable feelings, resentment, and what some have termed “financial infidelity.”
Marital property is especially troublesome, as it is not always easy to determine wealth or liability that can be automatically attributed to the family. For instance, wealth and debt earned or incurred by one partner or spouse may be exempted from inclusion in any calculations of family finance.
Another research has shown that happy couples, 90% of these, are comfortable talking about money. This is in contrast to 38% of couples in a troubled relationship willing to discuss finances. It is obvious that, if handled the wrong way, bringing up the dreaded issue of money can place an even bigger strain on an already strained relationship. It is not always smooth sailing, even in a great relationship. However, there are simple and effective ways you can talk about money as a family, and still be a happy family at the end of it.
Break the Ice Around Your Financial Plan and Improve Your Family’s Finances
Once you realize that your family isn’t where it needs to be financially, then you need to make amends. And it all begins with communication. You can improve your family finances when you come together with your partner to discuss pressing financial matters. This will help you manage each other’s expectations and inculcate a healthy financial lifestyle.
Read on to discover some great tips that will help improve your family’s finances and strengthen your bond.
1. Set the Tone
The subject of family finances must be given the seriousness it deserves. Don’t be morbid about it, however. It’s a talk about your money issues, not the Spanish inquisition reborn. Even if the meeting is happening amidst dire financial circumstances, endeavor to strike a positive balance. In keeping with this, don’t just fall into a conversation like this. Deliberately schedule it and make sure everyone involved is free of distractions and interruptions.
2. Play the Blame Game, Lose the Dame (or guy)
Right off the bat, realize the purpose of the meeting is to identify areas where the family’s money machinery is breaking down and dreaming up ways to make it work better. Blaming either/or helps no one. Feelings of resentment, wrong entitlement, and defensive over-reactions can quickly become the outcome of tactless pointing of fingers. The keyword here is “togetherness.” You rise or fall as one, as a family.
3. Be Realistic. Don’t Cover up Foul-Ups, But Be Supportive
Don’t take the last point to mean that you excuse irresponsible past behavior. Not blaming does not mean not condoning. Each erring partner or member of the family must recognize the consequences of their past actions or inactions. While the other members or partner must play supportive roles, sugar coating issues almost always means that such conduct can be repeated.
4. Hear Them out, Even if You Don’t Agree With Them
Most financial discussions are between partners, spouses, adult children (if living at home), or other adult members of the family. It is important to respect everyone’s opinion even if the other family members find it wrong. In a family setting, not everyone is going to see eye to eye, especially concerning a sensitive matter like money. Still, hear everyone out. Eventually, the stronger argument will win, but everybody involved must be satisfied that it was a joint decision.
5. Make it a Habit to Talk Money
Finally, create a healthy habit out of discussing money with the family or your partner. This will help to ease off the pressure during subsequent discussions. Waiting until the next big financial crisis to pull out the big guns means that you will have to relive the agony of breaking the ice every time. To avoid this, incorporate a weekly or monthly routine, so everyone sees it as part and parcel of your family.
Getting Better Family Finances
The end game of a family fiscal discussion should not be just talking for the sake of it. A good financial lifestyle can go a long way to make for a balanced, happy family. After bridging the communication gap in your family finances, here are some tips for building a solid financial future for your family.
· Have a Major Vision and Minor Goals
Your finances should have a target. An ultimate vision is the chief guiding light in your money plan. It can be retiring at age 45 or starting a business. Minor goals are tid-bits that keep you engaged along the way: A holiday away, a romantic getaway, or just a simple spa day. When you give your financial plan a target, you become that much more invested in following through.
· Take Inventory
Talk about accounts, trusts, businesses, and debts. You need to realize that the IRS regards all debt that one partner incurs as a collective debt, as long as it was incurred after the wedding. Candor will do a whole lot of good here to arrive at an accurate financial picture.
· Plan a Budget
If a vision for your money is the guiding light, your budget is the work boots to enable you to walk the path. When designing a budget, you may as well borrow a little from Elizabeth Warren’s excellent tome on financial management, “All Your Worth: The Ultimate Lifetime Money Plan.” Specifically, her 50/20/30 guide in budgeting where income post-tax is divvied up 50% for needs, 30% going to wants, and the rest of it, 20% on savings. Of course, you may choose to toggle the ratios in your own way. Just don’t follow the often-made mistake of forgetting to live while you plan or save.
· Keep Track of Spending Through Your Budget
A budget helps best in placing you efficiently at a point in your family’s financial plan. Don’t be afraid to haul it out on a monthly or bi-monthly basis to see where you are with your plan.
Talking about family finances and then implementing the outcome is a great way of planning to avoid a financial emergency in your future.