As year 2020 fast approaches, many of us rethink our past decisions and practices. Among these decisions and practices are the ones that greatly affected your finances. How did the past year influence your financial circumstance?
Discussions about assets, incomes, properties, and investments will come up whenever one thinks about wealth planning. A holistic financial planning approach can help improve your relationships in the coming year, including your family dynamics.
Katherine Dean, head of Family Dynamics for Wells Fargo Private Bank, once said: “When families communicate regularly and work on financial issues together, they often develop shared goals and a healthy sense of purpose.” An effective wealth plan not only helps with straightening out your household, but also with deepening your family relationships.
#1: SPENDING PLAN
Everything starts with a neatly laid out plan. Sit down together as a family to develop a household spending plan. You may opt to avoid using the word “budget” as it may highlight sacrifices and the pains of cutting back. Instead, focus on what is important to your family and the spending categories that you care less about. Cut down on the latter and explain to your family members why you must do so.
#2: CAREFUL USAGE OF WORDS
When it comes to conveying a message, it is vital to send out the proper signals. Choose your words carefully, especially when dealing with children. Saying “we cannot afford that” may send the confusing messages to young children. Some children may worry about their family’s financial state and its lack of capabilities to support the family’s necessities. Instead, try explaining why you choose not to spend your money on lavish toys in the aisle. Explaining the value of money and prioritizing expenses can help children learn more about managing money.
For instance, you may encourage your children to create wish lists when their birthdays come. Help them save for it by completing chores. This highlights the importance of saving and the practice of delayed gratification.
#3: IDENTIFICATION OF FAMILY VALUES
Recently, I sat down with my team to discuss the effect of having a shared goal fueled by our work values. Our personal work values affect how we work and how we interact with our colleagues. In the same way, our family values affect our family wealth plan. Having shared intentions and beliefs about money is one of the most effective ways to reach your long-term goals and to avoid making expensive financial mistakes.
Shared family values differ from household to household. For instance, one family may be committed to improving their eco-friendly lifestyle while the other is committed to improving their adventurous lifestyle. Once you pinpoint your common values, you will be able to direct your shared family wealth plan.
#4: SAVING AND SPENDING TOGETHER
You are a team – do not forget this. When it comes to tackling purchases that will greatly affect your household, it is best to spend and save together. Your new computer or your family trip to Bali can help show your kids the value of saving money. Get a piggy bank or a savings jar and add your loose change each week.
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Show your kids how savings can grow in time. When you have saved enough, teach your children how to get the most out of their money. Bring them along while you shop around.