Family Finance Basics

“I ain’t rich,” begins the popular country song “Buy Me a Boat” by Chris Janson. Janson continues, saying he’d like to be rich, and wishes he “had a rich uncle that’d kick the bucket.” But he acknowledges:

“I know everybody says

Money can't buy happiness

But it could buy me a boat. It could buy me a truck to pull it.

It could buy me a Yeti 110 iced down with some silver bullets.

Yeah, and I know what they say

Money can't buy everything

Well, maybe so,

But it could buy me a boat.”

Janson is on to something here. Research has shown that increasing income does grant most Americans some level of increasing life satisfaction and emotional well-being—but only up to a point. After that point, satisfaction and well-being actually start to decrease. The authors of the study speculate that although money is useful in paying for daily needs, repaying debt, and providing some basic “extras,” after this point, “people may be driven by desires such as pursuing more material gains and engaging in social comparisons, which could, ironically, lower well-being.” Additional research shows that Janson’s desire to “buy a boat” is well-founded. Experts agree that spending money on experiences, versus things, are more likely to boost happiness—and a boat is a thing that provides days of experiences. So how as a family do you find that happy medium wherein you have enough, feel in control, can afford a few extras, and yet aren’t obsessed with your money? What does money mean for the family? 

Finances are tied to a family’s values, vision, and goals in very tangible ways. Let’s say that as a family, you agree that one of your top values is “service.” The time you spend serving—taking food to others, serving in a kitchen or homeless shelter, participating in a volunteer clean-up—is lost opportunity cost for making money. You probably don’t see it that way, and that’s good. But it’s true nonetheless. Furthermore, you probably make choices about whether or not to drive to specific locations to serve; that’s gas and wear and tear on your vehicle. Or perhaps as a family you identify “fitness” as a top goal. Are you going to join a gym or a pool? Do you need to buy extra shoes or other gear? You probably also have specific financial goals that you’ll need to achieve your vision and live according to your values.

Whatever your values, you’re also going to start thinking about some basic money ground rules for your family. Below are some suggested things to think through:

1) The whole family needs to be involved in the money process. There may be different owners for various tasks, but there is continuous discussion and negotiation. One partner may pay the bills, but the other is aware of the amounts, and how daily decisions are impacting those amounts. Another partner may be managing the grocery expenditures, but the other is contributing meal ideas and participating in planning, and keeping track of the spend. Both partners really need to have a handle on understanding investments and long-term savings strategies. One study has found that over half (53%) of Americans admitted to keeping financial secrets from their spouse—lying about the purchase price of an item, hiding expenses or debt, spending money on the kids without telling the other partner. Needless to say, this isn’t good for your relationship. Don’t let it happen to you; be transparent.

2) Think about the realities that money represents. Chances are, you and your spouse both operate with some basic root assumptions about what money means. To the saver, money may represent security, and perhaps there’s been some real insecurity in his or her life to deal with. For the spender, money may mean fun, risk-taking, adventure. To have honest discussions about how you spend your money, you need to understand why your spouse feels the way he or she does, and try appreciate the emotional connection to money.

3) Get on the same page regarding what you spend your money on. You’re not going to agree entirely, and that’s OK—in fact, it’s good to have some checks and balances in place. But when you go to the Apple Orchard this fall, are you the family that spends $200 on apples, fudge, pumpkins, and gift items? Or are you the family that buys a bag of apples and maybe a donut and some cider? You both may agree that travel is really important—one survey found that 92% of families got along better and felt reduced stress and worry after vacationing together. But are you the type of family that saves for five years for a trip to a tropical paradise? Or are you happy just spending a week at a campground together, but more like twice a year than every five years? Total alignment isn’t necessary, but keep thinking and talking about these things, and you’ll quickly find you fall into a “we’re a family that does X” type of routine.

4) Establish a family budget. This is crucial—so crucial that we’ll have a whole post dedicated to it later this week. How can you get where you want to go without a roadmap?  

5) Remember that no matter what your income level, you can take control of your finances and make your money work for you instead of the other way around. And talking about money regularly helps you as a family to work through the problems, instead of letting them ruin your relationships. One recent survey found that couples who reported they had “great” marriages were almost two times more likely to talk about money daily or weekly than couples in “okay” or crisis marriages. Don’t let yourself think that unless you make X amount, you’re doomed.

Taking charge of your family’s financial future is one key component to living out your values and vision and achieving your family’s goals. Money is often the means to the ends that you’ve already established. So be intentional, purposeful, unafraid, and start having some important conversations about how to make your family’s finances work for you.