How to renovate and repair your family finances
Are your family finances a battleground?
You may as well send out invitations that read ‘welcome to the show’. The battlefield where good and bad financial habits collide, goals differ and different spending and savings habits meet, leads us down a messy, and frustrating path. And according to a new study, the new top reason for divorce is money.
But it doesn’t have to end in disaster. Find out how you can support your family towards better financial well-being without risking your relationships.
Money is a confusing, testing topic. It can cause unease, and drive a wedge between family members. When you have a parent, sibling, child or partner with differing values and opinions, it can seem like they are sabotaging your best efforts. It’s a difficult road to travel, and it’s hard to know where to draw the line.
The Top 4 money issues families face are:
1. Not having enough money | Lifestyle spend
A recent study states that not having enough money to make ends meet is the biggest financial issue families are facing. The simple truth is that many Australians today live beyond their means and carry a large amount of stress as a result. There’s no quick or easy solution… you need to simplify your way of living, and learn to live off less. Make a budget, stick to it, and start paying off debt.
2. Job loss
Losing a job doesn’t just affect the person who lost it, it affects the entire family. The working spouse may have to pick up extra hours or a second job. Besides being extremely stressful for the adults, it’s often very scary for the children. It’s important to try to keep a positive outlook (especially in front of the kids) and remain attentive and loving toward the children. If they’re old enough, be honest and explain to them what is going on — and reassure them that you’re in this together, as a family.
3. One’s a spender… One’s a saver
Sometimes this can be good – because it helps balance the other out. But differences arise when you’re partnered with someone who prefers to spend while you prefer to save (or vice versa). If you’re the spender, you may feel the need to hide purchases to prevent arguments, or if you’re the saver you might set strict rules, and be controlling with the money. Communication is key. Make sure you set realistic expectations and meet in the middle. Compromise, compromise compromise. And don’t forget – make a budget you can both agree on and stick to!
4. Too much debt
Many of us are overcommitted financially, and drowning in debt, which is scarily similar to not making enough money. You’d probably be able to support your family if you had little or no debt, right? But where do you start? It’s simple. Start with credit cards or debt with the highest interest rate. Once you’ve paid that off, put that monthly payment towards the next credit card and so on, until they all have a zero balance. Next, work towards paying off any car payments or personal loans you may have. With discipline, diligence and structure you’ll be living debt free before you know it.
Here are some things to think about when it comes to handling family finances so you can keep your relationships and finances healthy and stable.
Understanding the issues…
It can be a confronting, difficult experience talking to a family member or spouse about why they’re bad with money. But if you tackle without blame or judgement, you will build a more equal and understanding relationship. Showing genuine interest in why someone struggles with financial hardship can go a long way towards resolving the tension and conflict that often comes with talking about money.
How to manage gifts and handouts
There may be times you want to help a family member family with a cash gift or loan of some kind. Sometimes, giving someone a handout can be just what they need to get them out of a negative spiral or just take the pressure off so they can make a plan and a budget they can stick to.
If it’s a cash handout, it’s vital you both understand whether you’re making it a gift of a loan, or it could turn nasty later on. If it’s a loan, discuss and agree on a realistic payment schedule, and sign a written agreement. It’s also a good idea to talk about what will happen if they don’t pay you back. Even if you’ve helped in the past, it doesn’t mean you have an unlimited budget for gifting or lending to family members.
And remember, whatever type of financial help you’re offering, you should be confident you can afford it, whether they pay you back or not.
When to say no
Sometimes you have to say no and that can be tricky. You may be worried that refusing will cause a rift in your relationship, or create problems for someone you care about. But gifting or loaning money when you can’t afford to will put a far greater strain on you and your relationship.
You can help in other ways too. Let your family member know you care and want the very best for them. Lend them your time, tools, appliances, cars… and help with the children or housework. After all, that’s what families do – they help.
Budgeting… and other good money habits
If you’re the budget savvy and budget conscious one in the family, help educate as much as you can! Being a budget mentor is one of the best and easiest ways to help a family member who is struggling to make ends meet. Sit down with all their bank and credit card statements, bills and payslips and take a good look at how much money is coming in and where it’s going. Talk about what they value and how to prioritise that in their spending and save on other things. Set goals, short and long term.
And introduce them to some budgeting apps to make it easier for them to track their spending, after all, the smartphone has more to offer than just Facebook and SnapChat.
Be a bargain hunter – a comparison queen! Sometimes people need a little nudge to hunt down a bargain rather than take the first price they’re offered. Just by introducing your family member to comparison tools for things like energy bills and insurance you can begin an important change in their approach to spending.
When to get help
Sometimes, despite all your best efforts, you still may need an expert to get your family finances on track. You don’t need to have a lot of money to see a financial planner. There are many ways good financial advice can make a difference to you and your family’s lives.
And having someone step in and provide impartial advice can be just what you need to make sure you’re getting support without putting extra pressure on your relationship. By defining your goals with a financial planner, you can be certain you are on the very best track for financial success.
Get ahead, stay ahead
If you’re ready to renovate and repair your family finances… and walk off the battlefield, contact a MoneyLink Financial Planner for valuable advice on budgeting, loans and debt, investment strategy, superannuation, retirement and more.
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