You need to be in control of your finances. If corporations have Chief Financial Officers, then why can’t your household? After all, you are in the “business” of making smart financial decisions, right? In this podcast we give some tips to better manage your financial household.
Welcome to another edition of our CredAbility Podcast. Along with your host, Mechel Glass, here’s Steve Moore to begin today’s conversation on becoming a household CFO. Steve: Mechel, nice to see you again. Mechel: Thank you. Steve: Define this for me. What does it mean to be a household CFO?
Mechel: A household CFO is the person who is in charge of their family’s household budget. They’re the person that’s paying the bills. They’re the person that is checking the 401(k) statements. They’re looking at the credit card statements. They’re taking care of everything. Steve: Okay, in the typical American family, is that one person? Or would that be a combination of people?
Mechel: It can be a combination. But typically, it’s one person within the household that is responsible for making sure everything gets done. And whoever that is, then they’re the household CFO. Steve: Okay. Now, so it could be the husband, or it could be the wife. Mechel: Yes, it could be the husband, or it could be the wife. Steve: All right. Are the principles of being a household CFO different, depending on which spouse it is?
Mechel: No, it’s not different, but how they approach it could be different. So we’re not going to tell them how they should do it, meaning they should do only online banking, or they should always balance their checkbook at this point. We’re going to provide them with the tools, and then they can incorporate it in their household however they like. Steve: All right, well, you’ve mentioned two things already. Let’s run down the list. Where do we start?
Mechel: Well, the first thing is to make sure that you live within your means and follow your monthly budget. So someone within the household has to create that monthly budget that we’re all going to follow. And that person will make sure that all family members know how much we’re going to spend on groceries, how much we’re going to spend on entertainment, what the mortgage is. And they will make sure that it gets paid on time each month. Steve: Okay. But you need buy-in on this. One person sits down and puts the pen on the paper, but it’s not an authoritarian thing, right? We get some agreement, don’t we?
Mechel: Yes, you have to work as a team, or it will not work. And this way, if you work as a team, you’re going to prevent those arguments that may crop up, because we all know that sometimes there may be a disagreement. Someone’s a spender. Someone’s a saver. And there could cause a disagreement. So you have to get agreement from both parties of “This is what we’re going to do each month. And this is going to help the family as a household. Steve: And if you have arguments even while putting together your budget, welcome to reality. Most of us argue when putting together this budget. Hopefully, it won’t escalate into something even worse than that. But as you’ve already pointed out, we have different viewpoints. We were raised in different families. And everyone is going to approach the financial side of things differently, because it’s a control area. But hopefully, with the tools that we have available, you can get through this first step. Mechel: Absolutely. Steve: All right. Mechel: And they can always seek help or assistance if they need someone to come in and mediate that little situation about the budget. Steve: Okay, so now we have a budget. We have some agreement as to where the money’s going to be spent. What’s the next area?
Mechel: Well, the next area is to look at all the debts. If there’s debts like credit card debts or the credit card payments, the auto payments, the student loans, all of those things need to be looked at, because you have to put a plan together on how we’re going to pay those off, and pay them off as quickly as possible. Steve: Okay, next. Mechel: Then you want to make sure that we’re investing for the future. So the 401(k)s or the 403(b)s or the Roth IRAs, we’ve got to make sure that as a family unit, we are investing each month into our family’s future. Steve: Okay. What about major purchases, homes, automobiles, college education for the kids? And you already mentioned retirement, I think. Mechel: It just depends on the household. If you have the money available to invest for your kids’ college education, then you should definitely do that. But sometimes, many couples come to us for counseling, and they don’t have the money to set aside for their kids’ college education right now. And that’s okay, because we’re going to help them build a plan to pay down their debts so that one day, they will have the money available. And in regards to their home, you need to make sure that you have all the components in place to make sure that you pay your home on time each month and that you’re paying it off in a timely manner as well. Who says you have to pay your home for 30 years? You can pay your home off early as well. So that’s something that we’ll talk with the couples to see if this is something they want to do. Some couples say, “No, we’re not going to live here in this home for more than 10 years. So we’re just going to pay our mortgage, and then we’ll sell. And we’re going to move somewhere else.” So we need to know what’s the family’s plans for the future. Steve: Does being a household CFO have to be a burdensome thing?
Mechel: No. Being a household CFO is empowering. We are going to provide you with the tools that you need to make sure that your household is sound financially, that you have the tools in place to pay your bills, to make sure that you ask the right questions before you buy anything that you’re not sure about. We’re going to make sure that you have those tools so that you feel empowered to take control of your family’s household personal finances. Steve: But you know as well as I that people won’t do what they don’t believe. So are there some underlying principles or philosophies that one has to grasp in order to be successful in the long run?
Mechel: Well, again, like you stated before, all of us learned about our personal finances from different audiences. So we’re here to educate. That’s all we’re trying to do. We’re trying to give people the information that they need so that they feel empowered. Some of those principles are you’ve got to, and I have to say this again, you’ve got to live within your means. That’s number one. If you’re not living within your means, you are going to be living a nightmare in the future, because you’ll be running up your credit cards. You’ll be getting into debt. You’ll be buying things that you really can’t afford. You’re gambling on your future dollars that may never come. So you’ve got to get control of your finances by living within your means, making sure you have those sound financial principles in place, like a savings account for emergencies, that you’ve got your retirement account, that you’ve got your will in place, that you’ve got your life insurance in place, that whatever family situations that you have, you’ve taken care of all of those things. You’ve asked the questions. That’s to make sure that your family has stability. Steve: Mechel, always great information. Thanks so much. Mechel: Thank you.