Taking control of your own finances or the finances of the family often falls to the most financially fit female. Let's gear up girlfriend!
You’re smart about a lot of topics, but when it comes to family finance, perhaps you feel you might never know enough.
Financially smart women control their money to get what they want; it doesn’t control them. But it takes planning and a little bit of work if you want to be your own or the family's chief financial officer (CFO). To beef up your financial chops, consider keeping these five factors in mind.
Spending is more fun but we know it may not always be the financially right choice. Reframe how you think about budgeting and saving to create spending plans that balance short-term and long-term needs.
“You’re either going to consume today or you're going to consume in 20 to 30 years when you’re retired,” says Melody Juge, founder and managing director of Life Income Management, a firm specializing in retirement income planning and the transfer of family wealth. “That's where the money is going. The money is going to future consumption.”
Find a rainy afternoon to itemize every single thing you spend money on, from buying flowers to commuting costs, and put it on a spreadsheet or in personal finance software. Label the items with a B for basic living needs and an L for lifestyle needs. This will show you where your money is going and help you focus on redirecting money toward your future consumption.
Have kids? Consider giving them an allowance and let them spend 50% and save 50% so they start to understand balancing short-term and long-term wants.
Your spending plan should lay out fixed costs, like rent, mortgages and loans, and variable costs, like going out for dinner. It’s the mindless spending that ends up defeating the best-laid plans. “Everybody's in a hurry, so we end up charging stuff and living beyond our means,” Juge says. A common budget-busting culprit? Eating out. So think twice before indulging too much during Taco Tuesday. As family CFO, you also might want to consider how your spending habits affect the future spending habits of your kids, if you have children. When you display discipline in your spending, some of it might filter down to them.
Retirement, college savings, student loans, mortgages—it’s a lot to handle. Consider making your own financial goals a priority by paying yourself first to help save for retirement. According to Dara Luber, Senior Manager, Retirement, TD Ameritrade, “Making regular contributions to a retirement account, even small amounts, can have an impact on your financial future. Studies have shown that there is a correlation between people who get in the habit of automatically investing for retirement and arriving financially prepared in retirement.” So if you have a 401(k) with an employer match, consider saving up to the matching amount. No 401(k) or employer match? Consider an IRA. Check out this retirement planning checklist to help you stay on track.
It’s easy to desire the newest of everything—phones, cars, and houses, especially when your friends seem to have it all. But it can become a trap if you fall into debt.
Feel the urge to splurge? Go back to your spending plan and weigh your goals between current spending and future spending. “We live in a society where we're bombarded all day long with advertising,” Juge says. “And we overspend. You have to be very disciplined and be aware. You're either going to give somebody else your money, or you’re going to keep your money for your future consumption.”
There’s nothing wrong with the occasional fun purchase, but remember as family CFO, you can help keep the household on the path toward financial responsibility.
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Financial Communications Society 2016
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