I always wondered what it’s like to handle the household finances? Is it a simple task? A complicated operation? After interviewing my parents on their methods of household financing, here are some strategies which I will use to run my future household.
Strat#1: “Live within your means”
This is the “golden rule” that my parents use when managing the household finances. Honestly, I didn’t understand what it meant until my father explained it to me. He told me that it means that you shouldn’t spend more than what you are earning every month. For example, my parents would keep track on how much they monthly salary and discuss what are the things we need to buy such as groceries. I feel that this strategy would give me the right mindset to be more conscious of my needs and wants and help differentiate them.
Strat#2: Treat Household Finances as a Business/Company
Think of household finances as a business, without proper planning or financing, its annual income would go downhill. I find this strategy fun as it is a good way to learn accounting skills and also get a feel of what it’s like to be responsible as the owner of a business. How does this strategy work?Well, you create a family balance sheet to keep track of profits and expenses. This allows you to forecast your flow of cash, expenses, debts to be paid and more. Furthermore, you can set target growth for your family every year to see if your family is getting richer or not.
Strat#3: Save Your Money
A simple and commonly used strategy. My parents would put aside a bit of their salary into their savings and let it grow over time, only using it for emergencies. For example, when my uncle had to be hospitalized due to cancer, my parents used their savings to cover for his hospital fees. This experience taught me that you should always be ready for the worst by saving money to tackle it. By making a conscious effort to set some money aside, I would be able to be well prepared financially whenever anything bad happens to my family.