Collective decision-making is not only honouring others' abilities but also accepting your own limitations. Making financial decisions with your loved ones leads to better planning, which in turn improves the finances of the family. There are many ways to achieve this.
Open communication with the family
The first step to family financial planning is openly talking about finances. In many traditional families, income is earned and managed by one sole member and is not generally discussed among everyone. However, with the rise of working couples and modern families, income is usually earned by two or more members. Hence, open communication about income and expenses is essential.
Goal setting
The sources of income for each family member are different and each member may also have individual expenses. This is where goal-setting comes in. Goal-setting requires the family to come together to discuss common expenses, life events and future planning.
Suppose you are planning a family vacation and your family decides the place and the itinerary collectively. Similarly, you must also decide the budget for the vacation and each member must start saving weekly to reach that number. When a number is attached to a goal, the results are measurable.
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Budget allocation
A great way to save is by spending less. Of course, you can also look for extra sources of income but that is not always an easy task. The wise thing to do here is to have a budget for monthly expenses, capital expenses, vacations, entertainment and major life events such as weddings or retirement. Having a budget and appropriately allocating the family finances will ensure better management and control over how and where the money is being spent.
Expense tracking
The individual expenses of each member of the family can lead to repetition errors or miscalculations. Moreover, you could be missing out on good deals, cashback or discount vouchers available on the Credit or Debit Cards of other family members.
When expenses are tracked as a whole, they can be better managed and savings can be increased by availing the best deals. Some examples include family plans for mobile networks or collective club memberships. Tracking also ensures that you are mindful of unnecessary expenses or any payment deadlines.
When you track your expenses with your family, you build a sense of accountability that can help you and your loved ones throughout your lives. It can also help you avoid debt traps or impulsive purchases and plan your expenses well.
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Saving for life goals
When your income surpasses your expenses, you are in a good position to start saving for a rainy day or a sunny dream. The next step is to decide on the various funds in which you would like to invest your excess income. You may also want to maintain an emergency fund, a medical expenses fund, a holiday fund, a children's education fund, a retirement fund, etc. for various events in life.
Monitoring your account statement
It is crucial to get down to the brass tacks and monitor your account statements. This can help you detect if there are any income leakages like a subscription plan you no longer need or bank / card charges that are erroneous or avoidable. Monitoring account statements also enables you to stay on track with your bills and plans.
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Also Read: How to maximise returns through your Savings Account
Conclusion
A family can progress when all the members of a family work toward common goals. Family financial management is no exception. Finances must be a part of dining table conversations, goals must be spelt out, a budget must be agreed upon, and expenses must be tracked. Saving for certain priorities and continuous monitoring of the roadmap is essential in the march towards great financial health.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
