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Would you invest your hard-earned money in a company that gave no thought to profit and loss, or accounts receivables or payables? Would you have confidence in a chief financial officer who couldn't produce, at any given moment, a detailed overview of the company's financial health?
Of course not. Well, then again, maybe you would. Maybe you already do. You may not realize it, but your family unit operates much like a corporation and unless you, as CEO, take responsibility for managing its resources, you could end up losing your assets. |
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| Reality vs. Fantasy |
If your family financial picture looks more like a maze you can barely negotiate than a path toward a specific goal, it's time to review your procedures and maybe take a close look at how you handle your money.
"Every Saturday morning my husband and I sit down together to 'do the money stuff', as he calls it," explains Ellen Macy, a mother of two teenager daughters in Santa Barbara. "I don't look forward to it, in fact, I hate it, but I do it with him anyway because it keeps everything going smoothly."
Before Macy and her husband James, an engineer, began the weekly ritual a few years ago, Ellen had complete responsibility for the family finances.
"I paid all the bills, did all the shopping, mailed off insurance forms, everything. My husband had his paycheck deposited directly into our checking account and didn't get involved in any of the spending," Ellen Macy says. When anyone in the family needed anything - clothes, shoes, books, a new bicycle - it was up to Ellen to decide whether the family budget could accommodate the expense.
"It was really hard because I didn't want to say 'no' to anyone. It was impossible for me to say we couldn't afford something. I'd find a way to pay for it and then deal with the consequences later."
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| Step By Step, Week By Week |
Finally, after years of financial turbulence that included bounced check charges and regular late fees, Ellen acknowledged she couldn't "do it all" and pulled her husband into the process of bill paying and planning. "You just can't have one person doing everything all the time," she says.
"There are no checks and balances, you know, someone to say 'Wait a minute. We can't buy a new lawn mower, a new suit and pay for car repairs all in the same week. The lawn mower has to wait.'"
So every Saturday morning, before the family begins its weekend activities, Ellen and James sit down at the dining room table with two mechanical pencils, a big eraser, a calculator and file folders and binders containing their entire financial picture. First they take a look at their overall situation, figuring out what they owe to whom and when it is due.
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| See the Big Picture By Using a Matrix |
"We created a matrix that lists all our regular bills and the date they're usually due. During the week we collect the bills that come in the mail in a folder and on Saturday we check them off on the matrix. That way we can tell if we should be expecting something or if we haven't received a bill we should have."
In addition to the matrix, the Macys have a list of what they call "Near Term Expenses" with corresponding due dates. These include the monthly bills for things like utilities, gasoline, credit cards and their mortgage. When bills have been checked off on the matrix, they're listed on the Near Term Expenses sheet.
"We devised another form we use week to week to figure out what money we have and how we're going to spend it. We use information from the Near Term Expenses list. At the top we list all the money we have on that particular day and what we know will come in during the next week. Then we look at the Near Term Expense sheet to see what will come due that week. We subtract what we have to pay that week from the money we have for that week and then decide how we're going to spend what's left over."
Sometimes the amount is substantial and they might earmark the funds for a special event or item such as a birthday party for one of the children or the new lawn mower Ellen insists they need. "We just figure out together how we're going to spend the money. Sometimes there isn't a lot left over and we know we have to be thrifty during that week. But that's okay because we know we have a handle on things and everything that needs to be taken care of is." |
| The Side Benefits of Communicating |
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The team budgeting and planning has had a positive effect not just on their financial situation, Ellen said, but on their marriage as well.
"We do this as a team. It makes us have to listen to each other and compromise when we need to. We're communicating and not frustrated with each other." |
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