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Why a Family Should Make Major Financial Decisions Together

The post Why a Family Should Make Major Financial Decisions Together appeared first on Penny Pinchin' Mom.

Whether or not you have the option to stay at home with your children or choose to work full or part-time, making major financial decisions with your partner or spouse can make a huge difference in your self-esteem and deepen your trust in each other. Having an equal voice in the big decisions, backed by the solid knowledge of what your joint investments and accounts hold, is a smart mom move.

Don’t be scared of the words “major financial decisions.” Keep reading. I’ll be gentle.

Don’t let fear guide you

Nothing used to make me more nervous than the idea of talking about money. And it’s not because I have a lot of it, quite the opposite. When I was single, I always paid my bills, but rarely on time. I racked up interest on my credit cards, wasting money I couldn’t afford to give away. I didn’t file my taxes for ten years, which cost about $5,000 to clean up.

I was at war with money. So, I was more than happy to hand over the management of the family finances to my partner as soon as we combined households.

This was a mistake. It wasn’t wrong for any nefarious reason. My ex-husband remains one of my best friends. Simply put, it was a missed opportunity. But, for someone with a less trustworthy partner, handing over responsibility could lead to a major disaster.

Making decisions means sharing responsibility

Let’s start with the best-case scenario. You and your partner have a good stable relationship. Money is okay. There’s enough coming in that you aren’t really worried about any of the basics. But who sits down and pays the bills?

If it’s you, then you know how much the taxes are and the utilities and the mortgage or rent. Maybe you balance out what you allow yourself to purchase at the grocery store by what you know is in the family checking account.

But, if your partner doesn’t know the cost of living, what’s to stop them from ordering an expensive new gadget. Maybe they make more money than you bring in, and they are super excited about the new iPhone.

Sounds like a tense situation brewing.

A new piece of electronics is tiny as far as major purchases are concerned. But spending nearly (or even over) $1,000 for the latest smartphone can set back a family making an average income when an out-of-pocket medical expense pops up in the same month. And, with a family, that’s bound to happen.

If both partners know the family’s finances, purchases can be coordinated and saved for. That’s the first step to bigger things, like buying a home, paying for college, and figuring out what kind of retirement you can look forward to.

How to get started with family finances

Talk about it. It’s family meeting time. Say you want to pay the bills or share them. I know couples who pass the responsibility of paying the bills back and forth every six months. They have a joint checking account and set up all the bills in an online payment system that needs to be monitored. Find a method that works for you.

You might think you are really good at saving money, because you only buy sale items, but that’s small potatoes. If you expand your thinking to future savings and layout purchases in a spreadsheet, you might have fun planning how much you can save in a month and a year. Then you get to plan what to do with those savings at your next family meeting.

For example, once you save $1,000, you can begin to think about opening an investment account, like an IRA, for retirement, or you could invest in stocks on your own.

Stuff happens: be prepared

No one wants to think about death, divorce, or disability. But, moms with kids stand to lose the most when these things happen. Knowing the state of your family’s finances ahead of time will save you time and stress when you can least afford to waste either.

Even the most civilized divorce is a tense process. To serve or answer a divorce summons you have to know every last detail of your own and your partner’s income, expenses, and investments.

Do you know how much your partner has squirreled away for retirement? Have a talk about what kind of future you want to have together and what expectations you have for your children. You don’t just get what you ask for; you get what you plan for, too.

And, if an accident happens, your husband or wife would want you to be OK. If you and your partner don’t know each other’s bank information and logins, exchange them as a shared trust exercise. It’s good practice, in case of an emergency and necessary should something terrible occur.

Take care of yourself

My college sociology teacher told the women in my class something I’m going to pass on to you.

Get your own bank account and credit card, separate from your partner’s. Pay bills on a credit card that you know you can fully pay off on a monthly basis so that you can build your own credit.

You never know when your credit score could become what saves your family from a disaster, like homelessness. And if you get used to making small and medium-sized financial decisions together, you’ll be ready for the really big things.

Build confidence

After your initial discomfort dissipates, you’ll find that having your family’s financial facts at your fingertips gives you confidence. When you don’t know how much you have and how much you spend, then your partner is your banker. And no matter how much love you share, money will always be a power issue.

A family financial meeting once a quarter or twice a year will save you from answering to your partner about your credit card bill or wondering why your debit card isn’t working.

By Nic DeSmet

The post Why a Family Should Make Major Financial Decisions Together appeared first on Penny Pinchin' Mom.

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