Family Finances – How to win, together
No one looks after your money better than you, because no one cares about your financial security quite like you do. And even though you’re the best person to take control of your finances, we all need a few nudges in the right direction when it comes to handling our money in the wisest way possible. Vincent and Caren Heys have spent 23 years of marriage working on their financial management as a family and have some great insights to share with you.
🎧 You can listen to the podcast here if you prefer to list to the interview.
Whether you’re married, have kids or you’re single, we will give you real-world tools to implement in your financial planning and management. At Wealthstack, we know that it’s hard to know where to start when it comes to our family’s finances, so here’s 5 principles from Vincent and Caren that will set you up for success.
1. Everything Belongs to Everyone
We all know that when finances and family mix it can cause conflict, control issues or outright chaos. You can avoid that when you choose to be open with one another, work together and commit to deciding that whatever finances are in the relationship, they are there for the benefit of everyone. Everything belongs to everyone. It is not “your money” or “my money” but “ours.” The difference in earnings between two partners becomes obsolete and you’ll find greater financial freedom by implementing this key principle. Vincent and Caren suggest a joint bank account for the influx of all income and then transferring the relevant amounts to the person that does the grocery shopping or pays the medical bills, for example. However you choose to put this strategy in place, keep it simple, and be sure to be accountable with one another when it comes to budgeting and spending.
2. Seed Money and Bread Money
Always remember that you have bread money AND seed money. Bread money is the funds that cover your living expenses – food, travel, housing, holidays and other day-to-day costs. On the other hand, seed money is just as important, but it is not for today. Seed money is cash that you invest for a future harvest. Perhaps that looks like an investment account, saving your child benefit payment (towards your child’s RESP) or investing in a business that will grow in the years to come. Whatever shape it takes for you, it’s money that you choose to sow now, to build generational wealth in the future. It takes courage and dedication, not to mention discipline, to allocate seed and bread money in your budget, but the rewards are more than worth it.
3. Wants and Needs
This principle requires a good old fashioned chat as a family to take a good look at your principles and values and decide how you’re going to spend your money accordingly. Spending your money and the decisions that lead to that are very often led by emotions. And when your emotions and decision-making are not informed by your family’s values, you’ll easily go astray. So we suggest that you decide together as a family what your values are, what your non-negotiables are and, ultimately, what is a NEED and what is a WANT for you. This is an extremely personal process for each family. What is important for one family may not be for yours, and vice versa. But once you know the difference between wants and needs, you can choose to save up for the wants, and you’ll have conviction when spending on the needs. Bring your children along on this journey too – they can be included in the values discussions and in understanding why they can’t just have all of their “wants” right now, but need to save up to achieve them.
4. The 70/20/10 Ratio
Here’s where things get really practical! This ratio will come in handy as you set up your budget, manage your spending and boost your savings. Simply allocate 70% of your income to living expenses – the needs we’ve just discussed previously. Next up, set aside 20% of your income to savings. It’s critical to create emergency funds, save up for that holiday or the big “Want” you’ve had your eye on. And last but still imperative is giving 10% of your income away – generosity in action. Being generous and giving to others outside of your family only results in good. This is a great principle to rope your kids in on too – why not set up 3 jars and label them according to the 70/20/10 ratio. Then your child can pop their allowance money in each jar and have a physical representation of how they spend their income. You’ll be training them for when they are older, and they can do this in bank accounts of their own.
5. Contentment and Accountability
The final principle is that of contentment and accountability. Choose gratitude, teach gratitude to your children and find deep satisfaction in what you DO have instead of chasing after what others have. Be content with what you have, fight greed and ward off the fear of lack – gratitude is imperative! Also, choosing accountability is critical to wise and healthy finances for your family. In your relationship, be accountable to one another with every aspect of your finances. And whether you are married or not, find someone you trust to be accountable with too. This person will help you stick to your goals, remember your commitments and keep you on the “straight and narrow,” so to speak.
Our simple 3-step approach to help you get started
Now that you’ve got these practical principles, you might be wondering “how do I get this ball rolling?” You’re in luck! We’ve got 3 simple steps you can take today to get yourself and your family headed for greater financial freedom:
- Start talking openly about money to your partner or your accountability partner – start with how you really feel about money, how you feel about these principles and what you’re ready to start implementing. Get talking!
- Set out your family’s values – brainstorm, write them down, stick them somewhere everyone can see them – they’ll steer you towards your financial goals.
- Start Small and take one step at a time. For example, the 70/20/10 ratio might be out of reach right now, but you could take your next increase and start with that. Or you could start by saving just 5% and growing that number slowly. Whatever it is, you can start somewhere.