[I got this as a press release for a new book coming out, Your Life & Your Money, Putting Your Financial House in Order, and thought it was too good not to share :) Here’s an edited version.]
In every family, one of the great revelations in life is realizing that someone has to take charge of the family finances. Whether it’s the husband or the wife doesn’t really matter. They recognize that financial stress is a constant issue and they take responsibility for keeping the ship afloat. They deal with the issues that inevitably arise they make the money decisions.
That person is the Family Chief Financial Officer (or the CFO).
“Running a family’s financial affairs is like running a business. The family CFO needs to create a family mission statement, track monthly cash flow and expenses, review periodically to avoid overspending, take full advantage of legal tax breaks, and work with professional people hired to assist the family like accountants, lawyers, and financial planners.”
Here are a few tips and strategies on how to perform these family CFO duties:
Create a Family Mission Statement
Each family needs to understand what the family finances is all about so the first thing every family needs is a MISSION STATEMENT. As hokey and awkward as this may seem, writing down the goals and dreams of the family is one of the most powerful steps you can take. You get a notebook and you identify what you want your goals to be and be brave and even set dates for achieving those goals. You list things like paying off the house, putting kids through college, saving money for retirement, having money for one or two trips or vacations each year and so forth.
Know Your Expenses
The most important job of the family CFO is to know the family expenses inside and out. Open up your checkbook and review your credit card statements for the last three months or more. Study what money is being spent on. Figure out the monthly bills and expenses. Understand where your money is going.
Analyze Your Expenses
Once you’ve organized your expenses then you can identify every opportunity to lower the costs of each of those starting with the biggest ones first. Identify every interest bearing item. Then go shopping and go look for the very best mortgage companies, auto and student loans, and car, boat and homeowners’ insurance you can find. Don’t let old friendships or concerns about hurting someone’s feelings get in the way of saving money. Just remember that your old time insurance agent or financial planner doesn’t pay your bills. As CFO you get to fire people who don’t produce value or cost you too much money. You get to hire people who deliver best value and the best rates.
Hold Regular Family Finance Meetings
Every few months or so, the CFO must meet with the Vice President of Family Affairs (Your Spouse) and all employees (kids). The purpose of the meeting is to conduct a formal review of expenses and bank balances. Each family meeting should have an agenda that covers the review of each key component of the family mission statement and budget. The goal of the meeting is to make sure everything is going according to plan. The end of each meeting also includes a discussion of the question: “How can we save more money?” Decisions made are documented in writing with tasks, responsibility and dates for completion of actions identified.
Institute a Family Reward System
To get everyone in the family involved and committed to achieving progress, reward people based on the money saving ideas developed and deployed. Bonuses and rewards should be based on ideas, practices and decisions that lower expenses and actually save or make the family money. Examples: Make a list of chores and assign duties, then eliminate the cleaning lady. Study the Internet for quick and easy recipes, cook at home and go out to restaurants half as much. Take up walking or running and quit the health club. Do research to identify the best cell phone packages. Reward the family out of the money saved by making changes in how money was spent in other areas (water, garbage and recycling, or going to a better Internet TV package).
Manage the Family Net Worth
The Family CFO has the responsibility of managing assets and liabilities and to make sure that the family net worth stays healthy. One of the most significant and most difficult decisions to make is to be brutally honest with yourself and your ability to manage your family financial affairs. If you have numerous types of property and assets that you may best enlist the support and help of a financial advisor.
“Know what’s going on with your money, where it is going and how it is invested. That’s what you and your family deserves.”
Who is the Chief Financial Officer in your house?
More info on Scott Feher’s book: Your Life & Your Money, Putting Your Financial House in Order (amazon link). Pretty good stuff! And obviously I’m the CFO in our household ;)
PS: Some of my favorite tools:
|Personal Capital (FREE) -- If you’re looking for a robust financial tracker, Personal Capital is the way to go! They’re like Mint, but on steroids and have much better tools for investment and net worth tracking. // Full review|
|Digit (FREE) -- A super easy (and automated) way to save. Every day Digit analyzes your income and expenses and will push money aside for you any time it sees extra sitting there. I've saved over $4,000 myself using them so far! // Full review|
|Acorns -- Having trouble finding money to invest? Check out Acorns – they round up all your transactions to the nearest $1.00 and drops the difference into an investment portfolio for you. Easy way to start investing! // Full review|