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9 Best Ways of Managing Personal and Family Finances

Miriam loves sharing information about alternative sources of gaining income. Life can be messy without sufficient finances.

Understanding finance management is important for a happy family. One of the reasons married couples often quarrel is the mismanagement of finances by one party in the union. It is mandatory to consult each other in financial decisions if finances have to be managed properly. The following guidelines may help in finance management at home if followed well.

Open up about your finances

People have different financial statuses before getting married. This difference attracts a need to discuss finances before getting into a union. It is crucial to disclose the current financial status to your partner including how much is earned, credit history, how the money is used, any debts and any other commitment of which your partner is not aware. Secrets can kill a relationship due to a lack of trust between the parties. This openness sets the tone for your finances as well as the rest of your marriage life.

Talk about your finances regularly

Communication is one key factor to successful financial decision making. Set times when you can sit down and discuss your finances. These periods could be monthly or every time one of the parties makes extra cash, requiring planning. Probably you have some long term projects which require attention now and then, setting time to discuss the progress can generate productive experience in managing finances.

Both parties to be managers of family’s finances

Money should not be solely managed by one party in a marriage. Both of you should be involved in every decision ranging from large investment to small spending in the house. Attend meetings together with financial professionals. There is much information that is not disclosed when one party manages finances alone and in case of death or divorce, the family is at the stake of losing huge amounts of money. This happens when that party managing money involves themselves in dealings which the other partner does not know.

Account opening

The banks have various options for opening accounts. A joint account can be a very good way to manage money for married couples/partners. Both or either party can be a signatory to the account. If both are signatories to withdraw cash, money cannot be withdrawn without the signature of the two partners. Otherwise, each partner can withdraw money from the account. In the case where one party can withdraw money, limits should be set so that one partner does not misuse money. For personal expenses, the couple could come up with an amount that each partner should have. Then the rest of the money can be used for family expenses such as house rent, mortgages, utilities, school fees and shopping.

Support each other to build credit control

Credit control is an important aspect especially when it comes to borrowing. Each partner can have a credit card and combine efforts in paying for debts so that you build each other credit. In such cases, both of you will be eligible for credit and this will ensure faster growth for your family projects, especially if projects will be financed through borrowing.



Use a budget

A budget is a good way to track the spending of money. There are different methods to create budgets ranging from using a notepad and a pen to using financial software’s. There are the free software’s a couple can use to track their expenses such as mint.com and manila. Choose what is appropriate for you and get committed to recording all incomes and expenses.

Analyze current spending habit

The best way to keep track of your expenses is to record them. Recording every expense however small it is helps to compare spending patterns for different days, weeks and months. After assessing your daily, weekly or monthly spending helps the partners to know the variances in spending. These variances help them to discuss and decide how to reduce the large variances. If you use your credit card for all purchases, it becomes very easy because you only need to get a bank statement and compare your spending habits. Otherwise, keep a record of all purchases daily and cumulate them either weekly or monthly. It is advisable to break each individual purchase so as to evaluate which type of expense is dominant.

Set long term goals together with you partner

It is important to have open discussions for large investments such as buying a house, car, shares, retirement and any other financial draining asset. Discuss how much you should save for investment decisions. Most of these commitments require monthly payments plus interest. Therefore, it is beneficial if you discuss and know how much you will be willing to spend monthly. If you are not financially stable, do not commit yourselves to investments that are costly, live within your means to avoid unnecessary pressure.

Have an emergency account

You never know what tomorrow brings. Employment does not last forever. It is good to have an emergency fund where you save monthly a portion of your income to cushion yourself from uncertainties. This fund can also act as your retirement fund or you simply save in a registered retirement benefits organization. Saving with these organizations is beneficial because you earn interest every year. The only problem with these organizations is that the amount to be saved is fixed hence not suitable for unemployed persons. However, it is a great idea for salaried persons since they pay a portion of saving from their salary and the other part is paid by the employer. In case you are not employed and have a constant stream of money, this scheme can work well for you. Saving is not easy and requires commitment. Make saving a culture. If neither of you had a saving plan prior to your union, plan on having one. Save also for your children’s education, especially higher education which requires a substantial amount of money.

Managing finances is not an easy thing, but it is manageable. It is very crucial to discuss with your partner every purchase before you make them, especially if they involve large cash outflow. Avoid debts at all costs. Borrowed money is not easy to repay. If possible avoid large debts especially if financially unstable. Track your spending all the time. Save, save, save. You can never go wrong with saving. If you don’t know what to do with your money now, save as you figure out the best investment you can commit the money to. Avoid impulse buying. Always go shopping on a full stomach, which reduces the desire of buying unnecessary items to eat. Stick to your budget. Managing money requires discipline.

Comments

Miriam Syombua Mutisya (author) from Nairobi, Kenya on August 10, 2021:

Seasons change. So should you change in managing your finances. If you have not been a keen financial manager, this is your time. It is not too late. Get into action now.

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