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Financial planning, family style
Between shared family plans, competing priorities, and different attitudes towards money, figuring out how to divide – and conquer – family finances can be a challenge. When you’ve been promoted to CFO of the Family, managing money comes with a whole host of responsibilities. For starters, you’ve got to dress the part. Just kidding, sweatpants are still fine for this corner home office.
Here are six common finance obstacles Family CFOs face and advice on how to overcome them.
1. Not everyone on the board sees eye to eye
Just because you love someone doesn’t mean you agree on everything, and money is certainly no exception. According to a money.com study, 70% of couples fight about money (more than chores or sex).1 Priya Malani, millennial money expert and the founder/CEO of Stash Wealth, stresses the importance of getting on the same page with regards to money. She recommends having an honest conversation around goals and being open with both your partner and children about money.
Hear more of Priya’s insights about family finances on the “One Big Happy Family Plan” episode of our Friends Who Talk About Money podcast.
2. Deciding between the chicken or the (nest) egg
As CFO, you’re probably pretty adept about budgeting basics, like making sure you’re living off your balance sheet, not your income statement. But what about when things get a little more complicated, like figuring out whether to prioritize saving for your own future or your children’s education? Ideally, you can save for both your retirement and your child’s future, but as the saying goes - adjust your own air mask before helping others. Your retirement should come first.
3. One person is hogging all the data
One cell phone plan, four very different people, what could possibly go wrong? Financial expert Priya Malani says it’s actually no big deal for adult children to be on their parent’s phone plan, as long as it’s not putting anyone in a precarious financial position. With any kind of shared plan, the key is transparency and communication, so that neither the parents nor child is being taken advantage of. As the Family CFO, ask yourself: does my child’s reliance on me put my financial future in jeopardy? Ultimately, Priya notes that part of parenting is providing your kids with the tools to be financially independent.2 The family cell phone plan could be a perfect first teaching experience.
4. Some of your business partners are acting like children
With great power comes great responsibility. As CFO, you have the opportunity to instill some basic money values in your children. A few ground rules are:
Allowing them to earn their own money via chores and allowance
Teaching them the spend/save/donate rule
Covering their must-haves but letting them pay for their want-to-haves3
In “One Big Happy Family Plan,” Priya encourages parents to be honest with their children, especially about prior money mistakes. Getting past the taboo of talking about money is important; according to a recent study, while both parents and adult children consider financial conversations to be very important, very few of them initiate a conversation about any financial topic (just 11% of parents and 37% of adult children).4
5. Financial nearsightedness
It’s easy to get caught up in your family’s day to day finances—“Who spent $8 on fresh-squeezed orange juice?!”— and lose track of a long-term vision. However, a savings account may not be enough to help you reach your long-term financial goals like retirement.5 While investing may seem daunting, understanding the basics can help you gain the confidence to get started: stocks vs bonds vs mutual funds, weighing what makes the most interest and which investments carry the most risk, and deciding what makes the most sense for you. Here’s a good introduction to investing to get you started.
6. You’re the family CFO but you’re not actually a CFO
Sure, you’re the head honcho, but you might not have all the tools at your disposal like corporate c-suite executives do. When in doubt, delegate. For example, have a CPA help with your taxes, or talk to a financial advisor about long term planning.
Overall, being the family CFO is a pretty good gig; after all, you’re already personally invested in your “company.” Plus, one hidden perk of the job? Getting to dole out bonuses. Depending on how well the family delivers on the bottom line, maybe that means ice cream for everyone, a family vacation, or a sweet home office makeover. (After all, you are the CFO, right?)
Financial planning and investment advice provided by John Hancock Personal Financial Services, LLC (“JHPFS”), an SEC registered investment adviser. Investments: not FDIC insured – No Bank Guarantee – May Lose Value. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Diversified portfolios and asset allocation do not guarantee profit or protect against loss. Nothing on this site should be construed to be an offer, solicitation of an offer, or recommendation to buy or sell any security. Before investing, consider your investment objectives and JHPFS’s fees. JHPFS does not provide legal or tax advice and investors should consult with their personal legal and tax advisors prior to purchasing a financial plan or making any investment.