Managing the Family Finances: How to Succeed

A recent study from Shelter has shown that one in three families are only a month’s pay away from losing their homes. It’s a worrying result, and is enough to make all of us question whether or not our family’s finances are in good order right now. Here’s some advice for improving your family’s chance of success:

  1. Understand your income and outgoings

First and foremost, you and your partner need to have a clear picture of the amount of money you’re bringing home, and the amount you’re spending too. So, talk frankly about money, and don’t keep any financial secrets from each other.

Then, sit down together with your last 12 months of bank statements. Total up your regular expenses, direct debits and non-negotiable commitments and make sure your take-home pay is covering it all.

  1. Divide and conquer (or share the lot)

Next, the two of you are going to need to decide how to run a home together. You might have very different spending habits or different attitudes to money, so you need to find a middle ground where you’re both comfortable.

Some couples like to pour all of their money into a joint account, sharing responsibility for ensuring bills get paid on time. But, if this sounds like there’s too much room for error or argument, assign one of you the job of paying all of life’s essentials after arranging for sufficient funds to be held in one bank account. Experiment with different structures and bank accounts until you find the system that works best for your family.

  1. Go beyond a monthly budget

One of the biggest mistakes many families make is that they don’t think ‘big’ enough. Typically, you’re probably only concentrating on a month-to-month plan, which unfortunately doesn’t account for major purchases such as a broken down car, Christmas presents, summer holidays, school uniforms, or replacing essential appliances such as an oven or fridge.

It’s important that you set aside a sum of money in your monthly budget to cover these kinds of expenses: the ones that arise at some point in the year.

  1. Consult each other on all major purchases

Another key to success is to lay down some ground rules with each other. For instance, it’s important that you and your partner consult each other on all major purchases so that you don’t feel stressed, restricted or unduly ‘put upon’ if one of you spends a sum of money.

You’ll need to decide what constitutes a ‘major purchase’ between the two of you, as for some families, major could mean £500, whereas for others it could mean as little as £50.

  1. Have a back up plan

Even with really good financial planning, things can go wrong. You might find that the roof needs repairing or that the boiler needs replacing, or that one of you is made redundant.

It’s a good idea to have a back up plan in place, such as a savings account, a relative you can rely upon, or a short term solution to not having enough money – such as a loan secured against something you own. Knowing where you’re going to turn in an emergency can really help to alleviate stress, and it will give you time to research what your best option is. 

So, take these tips and take a hard look at your family’s finances. Do you think your family is successful when it comes to managing money?

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