What Is Family Financial Management?
Family financial management involves planning and managing each of the different aspects of running the family household. This includes planning, budgeting, investment planning and managing credit, debt and bills.
Planning plays a pivotal role in family financial management. The planning process includes everything that has anything to do with money, assets, liabilities, credit and other bills. A family financial plan should be in writing and include all of the financial goals that the family has. The plan should be broken up into short-term and long-term planning. In other words, it should have milestones that need to be met in one year, two years, five years, 10 years, 20 years and so on.
Putting together a family financial management plan includes savings for emergencies. It also includes college planning for any of the kids in the household. It also includes retirement planning for the adults in the household. Planning also includes the day-to-day operations of running the family finances, which leads to the budgeting aspect of financial management.
Budgeting requires that a spreadsheet or some form of program be set up to track all of the income that comes into the household. Then the same program should be set up to record all of the money that goes out, including bills, putting money into various asset accounts or whatever money goes out of the house to reach the financial goals that are set.
Family financial management also includes choosing investment vehicles to put cash into to reach the short- and long-term goals written into the plan. If the family members are not savvy enough to manage the choosing of these types of investments on their own, then the parents can get advice from a financial planner or advisor.
Once a financial plan and budget is in place, family financial management is about implementing and managing the plan. These actions may include paying the household bills each month. It can also include applying for credit cards or loans required to purchase assets, including items such as vehicles, homes and furniture.
Family financial management also requires the adults of the household to check on and maintain a good credit history and credit score. Each adult in the household should pull their credit report from each of the three credit agencies at least once a year. Reviewing these reports for inaccuracies or clearing up any negative items helps to keep the family finances in good order and helps the family to achieve their financial goals.
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