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7 Keys to Taking Control of Your Family’s Finances for the First Time

Written on October 3, 2011 at 9:46 am, by admin

Are you a passenger when it comes to the family finances? With busy lives, household chores are often dived up to help families muddle through the chaos of daily life.  That is why it is not uncommon for one partner in a relationship to manage the day to day household spending, savings and other financial affairs.

If we knew for certain that no hardships lay ahead (divorce, death, physical/mental disabilities) then leaving our financial well-being in the hands of our trusted spouse might be ok. Unfortunately, life is rarely that ‘crisis free.’ None of us know what lies ahead or when we may have to take the reins of the family affairs. It is best to be reasonably knowledgeable and up to date on the family finances.

 So do you know the state of your family’s financial health? If your spouse were no longer in the picture would your financial situation deteriorate? If a sudden change in your health made working implausible would you have enough disability insurance and savings to get by? What if you die, would your family be able to financially continue on intact?

Understanding the family’s financial affairs doesn’t mean you need to be an economic expert or a stock market guru it just means you need to have a good understanding of the big picture of your financial house. These seven keys will help.

• Wills & powers of attorney- You need to understand what they are and ensure they are always up to date and relevant.
• Insurance - It is vital that you have regular insurance ‘check-ups’ to ensure that at all times you are more than adequately covered for any of life’s misfortunes.
• Emergency funds- Do you have any and if you do, do you have access to them? If you don’t have enough savings to cover at least 6 months of your monthly overhead costs then, at the very least, make sure you have access to a line of credit.
• What’s coming in and what’s going out- You need to have a general understanding of what income the household is bringing in and how much is going out each month. If you are constantly in the red then it’s time for a family meeting to discuss necessary cutbacks or ways to make more money.
• What is the family’s networth? What do you own minus what you owe? - Your house, savings, RRSPs minus your mortgage, line of credit and credit card debt = your networth. If in the negative big time then a good financial goal could be to reverse this position so one day you own far more than you owe.
• What are your family’s financial goals and do you have any savings strategies in place to achieve these goals? -As time consuming or uninteresting the annual visits to your financial advisor may be it’s really important to show up and participate. You don’t want to find yourself all of a sudden divorced at 55 or widowed at 60 and in a state of panic because retirement at any age is no longer plausible. Plan as a couple while ensuring your financial health will remain intact should something happen to the union (death/divorce).
• Finally, know where all the above documents are kept-Will, Powers of Attorney, Insurance papers & documents of all your assets and of your debt. You never know when you will need to access them and quickly. It is best to have a safety deposit box for such papers. If you are really organized, scan the documents and store on a USB in a safe location outside the home. Again, a safety deposit box is the best place.

Image credit: Images_of_money