Family Finance

Big three take aways for this month’s Family Finance challenge.

1. Finances have a big impact on how happy and fulfilled your life can be. 
2. Help your children understand money, interest, and goal setting.
3. Track your family expenses—all expenses—for thirty days (and beyond).

“The best things in life are free.” 

“Money can’t buy you happiness.”

Platitudes abound that downplay the necessity of money for happiness.  Such phrases highlight the important truth that your FAMILY and relationships that you build will be the source of your greatest joy in life. 

When I was 20 years old, I lived in a small town on Brazil’s Amazon river. I had the chance to play barefoot soccer with some of the happiest kids on the planet. Our soccer ball was old and worn. Our field was just a dusty footpath. There were no goals at all. Nevertheless, laughter filled the streets for hours and hours as these kids found joy in friendly companionship and competition. They certainly did not need money to buy their happiness.

Yet—still— idealistic expressions disconnecting money from happiness ignore an undeniable truth. Lack of money or unwise financial decisions can significantly complicate things, damage relationships, and impede your ability to get the most out of life.

Financial issues appear in the top ten reasons for divorce here, here, and in this big academic longitudinal study too. Ironically, the studies do not show that LACK of money leads to divorce, but LACK OF UNITY regarding finances drives a wedge in the relationship. Sadly, it is all too common for children to overhear an argument about finances between a Mom and Dad. 

Money CAN do a lot for you.

When a family has its finances in order (i.e. they spend less than they earn, remain out of debt, have some emergency funds, and invest for the future) they open up a world of opportunity.  

Here are seven benefits from having a plan for your finances. There are so many more.

1. Peace, knowing where your money is going.
2. Hope for the future, saving so that you can be financially independent.
3. Less stress, no calls from pesky debt collectors.
4. Funds to enable guilt-free memory making vacations and adventures.
5. Savings to help your children with college (or push them towards the military, worked great for me!)
6. Relief, as you step away from the all too common rampant consumer lifestyle.
7. Experience the joy of charitable giving.

Ammo’s Sacrifice

In our family, I—the wholehearted dad—am admittedly the stickler when it comes to spending money.  I track every dollar and usually vacillate over even the most mundane purchases. The candid mom is more balanced and helps tame my scrooge-like tendencies.  

One night I was reviewing the costs of Marek and Ammo’s Tae-Kwon-Do classes and was complaining to Sara that the fees, uniforms, and boards to be broken, when added up, were tantamount to HIGHWAY ROBBERY. Little did I know, just around the corner Ammo was sitting down listening to the whole conversation. His little mind absorbed all of my—unfortunate—belly aching and built an image of our family’s finances falling apart because he and his big brother were getting ultra-expensive ninja training.  HE was the reason our savings were lacking, that we were living outside of our means.

After a few minutes, Ammo entered the room and, when I saw his face, I immediately realized he had been listening in.  With big crocodile tears in his beautiful green eyes, he looked down and said, “Dad, I need to quit Karate.  I’m sorry I spend all of your money Dad.”

His innocence and humility melted my heart and I wrapped him up in my arms and told him his ninja training was not that expensive, that it was worth it, that I was being silly.  I realized that my over-zealous effort to steward our family finances had created a hostile environment.  Worse yet, the world of finances was largely a mystery to my children.  

Finances, to our kids, are a mystery no more, welcome #familyfinance.

Money Lessons

Children never cease to amaze me with their ability to comprehend topics that adults so frequently assume are beyond their level. I am lucky that my Grandparents made it through the great depression, and they taught their children some habits and pearls of wisdom that my parents passed on to me.  I don’t know the quotes’ origins, but I distinctly remember a few lessons from my Grandma that we are going to pass on to our kids.

1. “Never spend your money before you’ve earned it.”

Maybe Jefferson said it first, but I learned it from Grandma.  She could never understand the “must have it now” mentality of today’s generation.  If you want something, you save for it, you study it, and you find the best possible deal.  I never want to teach my kids that they can’t afford something, I want to teach them HOW to afford something.  But, if you really can’t afford it, you have no business buying it. Which leads to the next lesson.

2. “Interest is a funny thing, thems that understands it, earns it. Thems that don’t—pays it.”

We taught our kids that credit cards make purchases convenient, and that savvy use of cards can even get you points to pay for flights and hotels, BUT that convenience comes at a cost. Marek was appalled when he learned that we have to pay the credit card company interest if we don’t pay our bill off in full. Now, whenever I get a credit card out Marek tells me, sternly, “Dad, you better pay that off as soon as we get home!”

We also encourage our children to save.  For us, we have an “Allen Family Bank” that is little more than a spreadsheet for our kids that tracks their deposits, withdrawals, and—fascinatingly for our kids—the magical INTEREST EARNED numbers.  We apply an 8% annual interest rate to their savings and encourage them to continue building their lil’ nest egg.  Once they learned that money makes more money, they have been less inclined to buy that candy bar next to the cashier.

3. “Use it up, wear it out, make it do, or do without.”

Learning to distinguish between wants and needs is a continual process. Military life has been great to us because it forces us to move homes every couple years.  We enjoy the adventure of moving to new places, but we also enjoy the purge of excess junk that we find when we pack up our possessions. Our goal is to teach our kids to value the toys they have, to purchase quality items that will last, and to use money to create memories.  We will never own a gaming system in our home. Besides the countless hours that would pour into unnecessary #screentime (challenge and results here), I cannot imagine an argument where an XBOX would provide more value than tossing the football outside. When we do make a purchase, we encourage our children to take care of their item. This arena has plenty of room for improvement.

#familyfinance

This month’s challenge is for you to open up a dialogue with your children about finances. Take away some of the mystery. Develop a plan, share with them your family goals, and make money management a fun family affair.

For us, at the end of every month we gather around the table where I have placed a big poster board. The poster has every year plotted out, by month, until 2028—so twenty years on one sheet.  We have circled some of our goals, like paying off our home and getting a RIDGEBACK DOG in 2020, going on a CRUISE in 2022, Going to DISNEY WORLD in 2025. Each month we mark on the chart how much money we earned (in blue), how much we spent (in red), how much we saved (in green), and our net worth (in orange).

Here is our #familyfinance poster board that hangs on our wall. We put it in a place, in the middle of our stair case, where the family can see it everyday.

The kids know that we want to spend less than we earn, and that we want the orange, blue, and green lines to go up.  When we are out shopping, they have been less inclined to ask for a toy. If a younger sibling begs us to buy the latest lego set, a big brother will often respond with, “do you really need that?” or “can’t you wait till your birthday?” We don’t want our kids to be misers, but we are glad to seen them participate in the decision making.

The cornerstone of this month’s challenge is to track all spending for 30 days.

Yes.

Track ALL SPENDING FOR 30 DAYS.

No one is asking you to make an elaborate budget or cash flow plan.  We are not expecting you to go out and read every book on finance or spend hours on the countless online financial Bloggs. (Although that may be time well spent).  #familyfinance is simply asking you to keep track of WHERE your money is going.  The results may surprise you.  

At the end of the 30 day window, you can assign the expenses into different categories.  In the interest of simplicity for our kids, we simply break it down into the following; food, recreation, transportation, lodging, communication, donations, investments, and other.  Then we simply total it all up and compare how much money we made from how much money we earned. 

Boom. That’s all there is to it.

Where your treasure is, there will your heart be also.

When you see where your money is going you might start to see trends.  For example, we thought we were pretty good about making our own family meals. But after tracking our expenses for a few months we saw that we ate out more frequently than we assumed. Getting something at Costco or McDonalds was pretty expensive, but it was convenient doggone it. But, as a family we wanted to save money and make more quality memories eating in our own home so we targeted that aspect of our finances and deliberately ate at home. We loved the change.

Perhaps you too, will find an area where you can tighten your purse strings, save a bit more, and invest more. Yes, invest money for the future, but invest time and effort into educating your children on finances TODAY.

Do YOU have a favorite money lesson from your parents or grandparents? Please share in the comments!

The Wholehearted Dad

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