Karla Dennis, EA, MST & CEO of The Award Winning Tax Accounting Firm Karla Dennis and Associates Inc. — Specializing In Tax Planning
It’s always a good time to sit down with family and make decisions to positively impact your financial health. There are six tips in particular that can help you in this process that I’ve found useful throughout my career helping tax accounting clients.
1. Identify financial goals and how to achieve them.
The easiest way to organize family goals is to first establish what you are trying to achieve financially. If I have a number to aim for, then chances are I am going to hit that number. For example, when I am planning a family vacation, I come up with the cost of the vacation, then I start saving weekly or monthly to hit that goal. This requires me to do some advance planning and have some thoughtfulness behind my numbers.
2. Create a budget with monthly income and a plan on how to allocate your income to pay off expenses.
Once you set your goals, track your monthly expenses. Now it is time to allocate all money to a category, and I do mean all your money. There shouldn’t be one dime left over after you set up a budget. Why? Because you should allocate money to savings, money to buying clothes, money for hanging out. A budget does not mean broke. That is why I like to call it a spending plan.
3. Track expenses.
Ditch the shoebox method and stay organized with online services. Tracking expenses is huge. When ATM cards became popular, I think we as a society lost track of how much money we were spending. We would just swipe the card, and as long as there was money in the account, we were good. Now with so many apps to track your expenses, there is no excuse for neglecting to get it done. It can be eye-opening when you see how much money you spend on certain things. I want to give you an example. Karrington, my youngest son, and I tracked how much we were spending on delivery food services. We found out that it was enough for him to save up and purchase his favorite car, a Dodge Hellcat. The amount of money we were spending each month on these services could have bought the Hellcat multiple times over.
4. Establish a bill-paying system.
Separate bank accounts for different expenses. Having a good bill-paying system is important. I have an account for paying my mortgages, an account for Christmas funds, an account for vacation funds, etc. The reason I do this is that it is easy to see how much money is allocated toward a certain expense and how much money I spend on certain items. It also makes it a harder spending decision when I have to move money from one account to pay something else.
5. Double check your account statements for fraud, mistakes or term changes.
Look at your monthly spending among your bank credit card statements. Make sure to shred old financial records as well. How many of you are guilty of starting a free trial that requires your credit card and you never cancel it. Or a notice hit your account and you ignore it. It could be $10 or $100, but most importantly, it is still your money. Can you imagine if a company took $7 dollars from 700 peoples’ accounts every day? That would be $4,900 per day. Pay attention because small charges add up.
6. Communicate with your significant other.
If you decide to open up a checking account or commingle finances, then be prepared to speak with your significant other about what’s going on. If you are both swiping credit cards without informing the other, your expenses will add up. I personally believe in the concept of “mine, yours and ours.” An account for me and solely me. An account for your significant other, and if we want to get fancy, we can have a joint account into which we transfer a certain amount of our money.
Remember when it comes to organizing your family finances these six points: Identify financial goals and how to achieve them, create a budget with monthly income and a plan on how to allocate your income to pay off expenses, track expenses, establish a bill-paying system, double check your account statements for fraud, mistakes or term changes, and communicate with your significant other.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.