7 Secrets to Having a Financially Healthy Family
© Copyright 2005 Lori RadunHow many times have you replied "We don't have the money for that" when
your child asks you to buy him something? His innocent reply is "Get some
from the machine or the bank". You think to yourself, "If only it were that
easy".
Managing money is a tough concept for children to grasp, and sometimes
equally as challenging for parents. In order for your children to develop
healthy money habits to take with them into adulthood, you, as their parent,
must manage your money wisely and be diligent about teaching the concept
of money to your children.
So what are the secrets to having a financially healthy family? I had the
pleasure of talking with my dear friend Thea, who happens to be a financial
planner for A.G. Edwards, and an expert at managing money. Together we
compiled 7 secrets to having and teaching financial success in your family.
1. Having a monthly budget to work with is a must. If you have never sat
down and figured out how much money you spend in the various categories,
now is the time to do that. For two months, actually record every penny you
spend and assign it to a category. Typical categories include utilities,
housing, entertainment, education, automobile, groceries, health and beauty, dining
out, savings, etc. Many people are amazed to discover where their money
actually goes. To develop a budget for your family, you need to know how
much income the family brings in and your required expenses to live. Assign
a specific dollar amount that you will spend for each category. Having a
budget is not about limiting yourself - it is about making choices and deciding
what's most important to you. If having a fancy car is very important to you,
then you cut back in areas that aren't so important to you. If you want to be
able to eat out once a week, then consider making cuts in your grocery
expense.
To teach your children about budgeting, here are two exercises you can do. At
the beginning of the month or whenever the family gets paid, cash your
checks and lay all the money out on the table for your children to see. Get out
all your bills and work together with your children to match up the appropriate
amount of money with each bill. Let them see where the money goes and
how much it takes to manage a household.
Another thing you can do with children who are a little more mature is give
them a budgeted amount for a specific event, shopping excursion, or vacation.
For instance, if you are taking your children to a theme park for a day, give
them $75.00 (or whatever amount you want). Then you tell them that
whatever they don't spend they can keep! Let your child pay for his own
admission ticket, food, souvenirs, etc. Children will learn quickly how to
manage their money.
2. Keep your total housing cost to 30-35% of your total income. Some
people say the housing cost includes your mortgage or rent and your utilities.
Others say that it includes only your mortgage or rent. Either formula you use,
if you have a household income of $50,000 per year, then your housing
expenses should not exceed $1458.00 per month.
3. Do not carry any consumer debt. The American culture reinforces
instant gratification and that is why so many Americans have huge credit card
debt. There is nothing more damaging to your financial success than credit
cards. I realize credit cards may be a lifesaver for people who are really
struggling financially. Believe me, I've been there. But I tell you from
experience, use credit cards for emergency purposes only. If you have big
ticket items you would like to spend your money on (furniture, vacation, car,
remodeling), make a list of those items and put it on the refrigerator. Decide
what's most important to you and start putting money away every month so
you can pay cash for those items. How do you teach your children this
concept? Do not let your children borrow money from you unless they can
pay it back right away. If they don't have the money to buy something they
want, make them save their money until they do.
4. Strive to put away 10% for emergency savings. I know many people
who live from paycheck to paycheck, and putting away money for savings is
unheard of. Try really hard to put something into a savings account, even if it
is just a small amount. If you have the ability to have money deducted from
your paycheck for a 401k or retirement, take advantage of that. Once you get
used to that amount being gone, you will adjust and you'll never miss it. Open
a savings account for each of your children at a very young age. Take them to
the bank and encourage them to save some of their money. Let them
experience the thrill of seeing their bank balance rise. Another fun way to
teach kids about money is help them decorate 3 separate jars or coffee cans.
Label them "Spend, Save, and Donate". Given them a weekly allowance and
encourage them to contribute a certain amount to each of their banks every
week.
5. Never go over the breadwinner's income. This is advice my mother
has given me often and when I was younger, I baulked. Now that I have
become wiser and actually made the transition from a two income family to a
one income family (with the same set of expenses), I know this is good advice.
I know this can be a tough example to live by, but it is worth the effort. You
never know when one person may lose their job. If your expenses don't
exceed the breadwinner's income, then the rest is gravy.
6. There should be no financial secrets between husband and wife.
Each partner in the marriage should know exactly what is happening with the
family finances. Funds should be merged and each person should be
accountable to the other for financial decisions. Decide between the two of
you what dollar limit needs to be discussed first before purchasing. Pay the
bills together or at least communicate the financial picture after the bills
have been paid. Too many couples divorce over money issues. Do your best to
work together on money.
7. Have an "abundance attitude". What does this mean? Realize that
money is just a tool. It is not the answer to happiness in life. If your
tendency is to hang on tight to your money, try learning to let go. When you have a
giving spirit, you will be blessed tenfold.
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Lori Radun, CEC-certified life coach for moms. To receive her FREE newsletter
and the special report ”155 Things Moms Can Do to Raise Great Children”, go to
http://www.true2youlifecoaching.com
