[I got this as a press release for a new book coming out, Your Life & Your Money, Putting Your Financial House in Order, and thought it was too good not to share :) Here’s an edited version.]
In every family, one of the great revelations in life is realizing that someone has to take charge of the family finances. Whether it’s the husband or the wife doesn’t really matter. They recognize that financial stress is a constant issue and they take responsibility for keeping the ship afloat. They deal with the issues that inevitably arise they make the money decisions.
That person is the Family Chief Financial Officer (or the CFO).
“Running a family’s financial affairs is like running a business. The family CFO needs to create a family mission statement, track monthly cash flow and expenses, review periodically to avoid overspending, take full advantage of legal tax breaks, and work with professional people hired to assist the family like accountants, lawyers, and financial planners.”
Here are a few tips and strategies on how to perform these family CFO duties:
Create a Family Mission Statement
Each family needs to understand what the family finances is all about so the first thing every family needs is a MISSION STATEMENT. As hokey and awkward as this may seem, writing down the goals and dreams of the family is one of the most powerful steps you can take. You get a notebook and you identify what you want your goals to be and be brave and even set dates for achieving those goals. You list things like paying off the house, putting kids through college, saving money for retirement, having money for one or two trips or vacations each year and so forth.
Know Your Expenses
The most important job of the family CFO is to know the family expenses inside and out. Open up your checkbook and review your credit card statements for the last three months or more. Study what money is being spent on. Figure out the monthly bills and expenses. Understand where your money is going.
Analyze Your Expenses
Once you’ve organized your expenses then you can identify every opportunity to lower the costs of each of those starting with the biggest ones first. Identify every interest bearing item. Then go shopping and go look for the very best mortgage companies, auto and student loans, and car, boat and homeowners’ insurance you can find. Don’t let old friendships or concerns about hurting someone’s feelings get in the way of saving money. Just remember that your old time insurance agent or financial planner doesn’t pay your bills. As CFO you get to fire people who don’t produce value or cost you too much money. You get to hire people who deliver best value and the best rates.
Hold Regular Family Finance Meetings
Every few months or so, the CFO must meet with the Vice President of Family Affairs (Your Spouse) and all employees (kids). The purpose of the meeting is to conduct a formal review of expenses and bank balances. Each family meeting should have an agenda that covers the review of each key component of the family mission statement and budget. The goal of the meeting is to make sure everything is going according to plan. The end of each meeting also includes a discussion of the question: “How can we save more money?” Decisions made are documented in writing with tasks, responsibility and dates for completion of actions identified.
Institute a Family Reward System
To get everyone in the family involved and committed to achieving progress, reward people based on the money saving ideas developed and deployed. Bonuses and rewards should be based on ideas, practices and decisions that lower expenses and actually save or make the family money. Examples: Make a list of chores and assign duties, then eliminate the cleaning lady. Study the Internet for quick and easy recipes, cook at home and go out to restaurants half as much. Take up walking or running and quit the health club. Do research to identify the best cell phone packages. Reward the family out of the money saved by making changes in how money was spent in other areas (water, garbage and recycling, or going to a better Internet TV package).
Manage the Family Net Worth
The Family CFO has the responsibility of managing assets and liabilities and to make sure that the family net worth stays healthy. One of the most significant and most difficult decisions to make is to be brutally honest with yourself and your ability to manage your family financial affairs. If you have numerous types of property and assets that you may best enlist the support and help of a financial advisor.
“Know what’s going on with your money, where it is going and how it is invested. That’s what you and your family deserves.”
Who is the Chief Financial Officer in your house?
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More info on Scott Feher’s book: Your Life & Your Money, Putting Your Financial House in Order (amazon link). Pretty good stuff! And obviously I’m the CFO in our household ;)
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We are a divide and conquer family. Not really by choice but by the way things ended up and a stubborn Significant Other.
If I had to choose I would say I am the CFO in the house. I make sure there is money for the boys school fees, clothes, camps, sports and Education.
Would be much nicer to have a happy team version of CFO but there is as much chance of that as there is pigs flying LOL
This is a totally kick-ass post J, borrowed as it may be (but expertly edited!). I just tweeted it (and emailed it to my old fashioned friends/clients) who I’m sure will appreicate the promotion to Family CFO….it infers a bit more respect than what they’re used to being called :-)
I’m definitely the family CFO. My husband is great at earning money but managing it is not his strongest skill. Fortunately, we realized last year that I do well at managing the family finances. In fact, in the last 18 months, we just completed paying off $108,000 worth of debt (both consumer and mortgage debt).
Did the author reach out to you for this blog post? Would be fun to see his comments on your blog post. Since I’m out of college, I guess I’m my own CFO.
I’m certainly the CFO in my house, but my wife is a strong VP. We are reviewing our budget on a monthly basis and have regular talks about it. We have started to involve our 3 kids. (11,11, and 8) in the talks as well. We want them to get off on a good start as they get older and deal with money.
This post was enough to get me to sit down and track my expenses for the last year. I’ve been putting it off because I didn’t want to see the results. They’re definitely cringe worthy. But the numbers are workable as long as I severely cut down on eating out… after bills that’s by far my largest expense. The lowest month was $281.11 and the highest was $724.19… that’s not for a family, just for me (and sometimes my girlfriend). It’s time to get this financial house in order.
Nice points. The key one is keeping the other spouse aware of what the family expenses and income are. But not only aware also making sure that the non-CFO is able to step in case the something happens to the CFO. Making sure other spouse knows where the information can be found and who to contact if needed.
I would say I’m the CFO, but my wife is definitely CEO, COO and Chairwoman of the Board. I’ll still pretend I’m the boss though!
I am the CFO and my wife is the CEO of Family Operations and Logistics! :-)
I took over as CFO two years ago. For over a decade I had tried to teach my husband how to do it, and it simply hadn’t worked out. So I’ve taken over, and we’re doing better.
We successfully sold the house in our last state, maintained the savings for a down payment on our new house, paid off some of our loans, mostly kept the credit cards paid off, and are looking to have the rest of the non-mortgage debt paid off in two years or less.
I was the CFO, but I have managed to get my wife more involved with our finances. I guess I am still the CFO and you could call my wife the assistant CFO. Our debt had gotten out of hand and now that the right hand knows wha’ts going on with the left hand things have gotten much better. We have paid off over $20,000 of our debt in 2010 and have a plan to be debt free in 1,825 days, which works out to be five years.
This was fun reading everyone’s responses :) Reminds me how much I love blogging – you never get this stuff out of people in “real life!”
@jolie – Haha yeah, there usually isn’t “Team CFOs” around as much as we’d like, but keep the dream alive!
@Chris Haviaris – Glad you enjoyed it ;) It’s a fresh way to look at things I think.
@momcents – Holy $hit, CONGRATS! $100k+ out of debt? That’s incredible. Wow, I’m kinda afraid to ask how you all did it, haha….
@Jenna – Good idea! It was just one of those press release kinda emails I get every day, but I just emailed him back and asked if it could be passed along to the author. That would be fun to hear his thoughts :)
@Techbud – Wow, good for you! Monthly is awesome, even we don’t do that :) I like sharing it w/ the kids too, not many parents do that but I think learning how it all works “in real life” make it much easier to understand.
@Brandon – YES! Well done, sir! It is scary, for sure, I remember that feeling myself when I first did it. Bleh. BUT now it can hopefully only go up, right? :) You have to *know* what you’re dealing with before you can start working on things – at least if you want to start tracking your progess.
@B Simple – Exactly – BOTH parties should be aware of at least the overall situation in case something happens to one or the other (Scary!!!). We try to “meet” at least once every other month to go over things a bit, but we need to be better about it too. Great reminder.
@Nick – Hahaha….I hear that brother :)
@FrugalGuy – Haha, looks like a bunch of us are in the same boat!
@Kim – See that? Way to take control! Congrats on all your success so far, that is wonderful :)
@John@FinancialElite – Haha, I love that you have the exact date down. Keep on knocking it out my man!!
@J
That’s right. And now that I have the spread sheet created I can just start plugging in the new numbers. I love living in the future.
Haha, amen to that brotha.
I like the comments! I too am the CFO, but the CEO is the missus. Luckily I am the only other employee so job security is good. But my performance has been average thanks to the economy and terrble stock market!
Haha, you’re not alone my friend ;)
We both are. :) He handles his own personal finances and calculating the groceries etc..
I handle my own finances and the rent (for now) and invoice him at the end of the month.
We don’t combine our personal money at all, so whatever I track on my blog is just what I have. That being said, I am not worried about him not having cash AT ALL. The guy is a machine at saving…
Gotta love a guy who knows how to save! There are a ton of us who do the opposite ;)
I was blessed to marry a woman who is open-minded and was willing to learn good personal finance with me, but I know that this is the exception rather than the rule. In the United States especially, the culture seems to be focused on consumption rather than planning, which can’t end well. Most people just don’t seem to know how to find this information, and it really is a shame. Perhaps if more families had a CFO, the US would have a drastically different reputation.
My wife and I went through the process of budgeting, trimming the budget, streamlining the cashflow into our savings and then establishing a means of divvying up that savings between an emergency fund, retirement, short term savings and long term (taxable) savings each month. Things are pretty much automated at this point, and I’m thankful that so much of this information is available on the internet where I could access it for free. Now, if only I could convince her family that being frugal isn’t being cheap…
@ J. Money – It is :) Looking forward to a positive net worth early next year… long as the stock market cooperates on my 401(k)
@William – Hah! Good luck with that fight, people just like saying cheap so it makes them feel better about themselves ;) Lazy bastards, haha…