Published: Sunday, August 22, 2010
Families can limit money strife by selecting a 'CFO'
It takes a lot to manage a family's finances, but too often no one is leading the way. The result is husbands and wives fighting over money. Instead, families need to evaluate how they handle money to head off disputes. One way to do this is to make one person in charge.
The family's "chief financial officer" would be responsible for managing the budget and investments for the family. This concept is discussed in length in "Your Life & Your Money," a new book by Scott Feher, owner of an investment firm in Walnut Creek, Calif.
"Running a family's financial affairs is like running a business," he said. "The family CFO needs to create a mission statement, track monthly cash flow, review it to avoid overspending, take advantage of legal tax breaks and work with professional people hired to assist the family like accountants, lawyers and financial planners."
The mission statement is the cornerstone of a family's values in managing money.
This statement outlines the beliefs and goals the family is working toward. Is it paying off the house? Reducing debt? Saving for a vacation? It can even be non-financial missions such as health and volunteering. It all gets listed in the statement as a support to turn to when it's time to discuss money, if it's needed to remind a disputing family member why a certain decision is being made.
Analyzing expenses is perhaps the hardest part, especially having to hold family members accountable. The CFO must be given the power and support from family members to make decisions on what can and cannot be purchased, and to find the best deal on a purchase.
The second-hardest part is deciding how to invest the family's money. Working with a financial planner can help the CFO make better decisions. The CFO must be smart enough to know that making uninformed decisions can wreck a family's mission statement.
To help alleviate the work, Feher recommends a husband and wife take turns sharing the CFO role at agreed-upon intervals. That way one spouse can't accuse the other of being controlling. In addition, it makes both aware of the family's financial situation.
The family's "chief financial officer" would be responsible for managing the budget and investments for the family. This concept is discussed in length in "Your Life & Your Money," a new book by Scott Feher, owner of an investment firm in Walnut Creek, Calif.
"Running a family's financial affairs is like running a business," he said. "The family CFO needs to create a mission statement, track monthly cash flow, review it to avoid overspending, take advantage of legal tax breaks and work with professional people hired to assist the family like accountants, lawyers and financial planners."
The mission statement is the cornerstone of a family's values in managing money.
This statement outlines the beliefs and goals the family is working toward. Is it paying off the house? Reducing debt? Saving for a vacation? It can even be non-financial missions such as health and volunteering. It all gets listed in the statement as a support to turn to when it's time to discuss money, if it's needed to remind a disputing family member why a certain decision is being made.
Analyzing expenses is perhaps the hardest part, especially having to hold family members accountable. The CFO must be given the power and support from family members to make decisions on what can and cannot be purchased, and to find the best deal on a purchase.
The second-hardest part is deciding how to invest the family's money. Working with a financial planner can help the CFO make better decisions. The CFO must be smart enough to know that making uninformed decisions can wreck a family's mission statement.
To help alleviate the work, Feher recommends a husband and wife take turns sharing the CFO role at agreed-upon intervals. That way one spouse can't accuse the other of being controlling. In addition, it makes both aware of the family's financial situation.
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