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How to Create a Financial Health Checklist for Your Family

Is your family financially healthy?

Published on: February 27, 2019

family finances stack of quarters

Forty-four percent of Americans find talking about money more difficult than discussing death, politics, religion and sex.

Heck, even financial gurus admit to experiencing interpersonal discord when it comes to this topic. 

After 23 years of marriage — and working for 20 of those years as a certified financial adviser — Carl Richards says he and his wife still have a hard time talking about money.

“Talking about money means talking about feelings,” says Richards, who gives an example of how opening the American Express bill can lead a couple to fight. Or, if you’re single, reviewing that credit card bill might lead to feelings of shame, regret and guilt. Richards says these fights and emotional eruptions are like touching an electric fence.

“Have you ever run into an electric fence? It’s shocking every time, even if you grab it on purpose,” says Richards, who writes The New York Times’ weekly finance column Sketch Guy and has written books about financial planning, including “The One-Page Financial Plan: A Simple Way to Be Smart About Your Money.”

“Even knowing this metaphor doesn’t change the metaphor. Talking and thinking about money is hard and emotional. The point is, it’s electric, but you keep on talking about it,” he says.

Ten weeks in, you’ll be in a different place with money.

Luckily, we can learn to turn down the voltage on that electric fence. We asked financial experts how to adopt a practical money mindset and create a family financial health checklist. They shared a few insider tricks for thinking about and discussing money, along with the four essential parts of a simple family financial plan.

Get to a one-line values statement for your financial plan

If creating a financial plan feels hard, Chanel Reynolds wants to remind us that we do harder things all the time.

“We put together Ikea furniture, deal with computer crashes and pull retainers out of garbage disposals. Most people believe they are bad with money, yet we are all capable of looking at a spreadsheet,” says Reynolds, author of “What Matters Most: The Get Your Shit Together Guide to Wills, Money, Insurance and Life’s What-ifs.”

Working well with money is a learned skill, adds Reynolds. “Reframe any past agony with an aikido flip: We make choices about money every day, so you can start making new decisions based on new information and priorities right now. That’s pretty cool!” she says.

For those of us with partners, this decision-making involves working with another person. “Usually there’s one excited spouse and one not-so-excited spouse when it comes to discussing values around money. That’s why I suggest starting small, with one successful conversation during a walk or a dinner out,” says Richards. “Say, ‘Hey, I was reading this article, and it made me wonder, what’s your earliest memory around money?’ After they tell you, say, ‘Oh, that’s interesting, tell me more.’”

Conversations like this show us that we can talk about money calmly while helping us understand what baggage each person brings to the money conversation, says Richards. Then, he adds, it becomes easier to write one line that sums up your family’s values regarding money. He suggests having numerous conversations that start with the question “Why is money important to us?”

“When you come up with one answer, then ask, ‘But why?’” Richards continues. “I like to borrow Toyota’s 5 Whys technique, asking, ‘Why is money important to us?’ at least five times. The point here is not to just ask why, it’s to dig deeper.”

This isn’t about goals, and these values can change, notes Richards. Right now, his family’s one-liner is that money is important because it allows them to spend time with family and friends, mainly outdoors, while serving their community.

“I’ve heard many answers over the years, including one that surprised the speaker, who was an emergency room doctor. She said, ‘I really just want to have a family and I haven’t even had time to think about it,’” says Richards. “Once you have defined your family values around money, it’s much easier to decide how to spend money. Then, when you freak out because skis are expensive, your wife can remind you that buying skis is part of your financial plan.”

Examine your spending habits

Peter Polson believes that having a family financial plan makes him a better dad, spouse and person. “When my wife and I had two kids, the velocity of our spending increased, and it became incredibly important to stay on top of our spending,” says Polson. He founded Tiller, a company that creates automated spreadsheets for personal finances, based on the premise that money matters because life matters more.

“If the first checklist item is setting values around money that lead to goals, the second piece is getting on top of how we spend our money. Ask someone on the street to draw a pie chart of what their credit card spending is and often they shrug their shoulders,” says Polson, who recommends a weekly practice of sitting down and looking at the money going out.

“The goal isn’t to beat ourselves up, but to be aware. Just pay attention to how you spend your money each week,” says Polson. “Rinse and repeat, and do it together if you have a partner. It’s incredibly empowering: Ten weeks in, you’ll be in a different place with money. You’ll feel more control and a sense of liberation from taking the surprise out of your spending practices.”

The second step for getting on top of spending can be about creating a budget, says Polson — but only if that’s what works for you.

“Some people love the structure of a budget — it’s a fun riddle figuring out how much to spend on food and gas. But some people resent the restraints of a budget. Often people are able to adjust intuitively, say by packing a lunch next week after looking at their spending this week,” says Polson.

Plan for the unexpected and for the future, too

Perhaps you’ve heard the statistic that 78 percent of American workers live paycheck to paycheck and don’t have an emergency fund. That’s why the third part of a family financial checklist is creating an emergency fund.

“The general recommendation is to save up enough money to cover at least six months of basic living expenses. There’s an immense sense of relief when you have a financial safety net. As a widowed, single parent, I cannot express how much better I sleep at night because my son and I have a cushion if something happens. That’s why I call it my safety and security fund,” says Reynolds.

In fact, Reynolds recommends creating an additional savings account. She calls this non-emergency account her ‘Oh, crap!’ fund, for unexpected doctor bills or a last-minute trip to help a sick parent or friend.

Hang tight: There are only four parts to this family financial plan. After creating one line that sums up your family’s values about money, tracking your spending and saving for emergencies, the last piece of the plan is saving for financial priorities in the future. Of course, this looks different for every family. If your one-liner is about seeing the world, part of your plan needs to be dumping extra money into a travel fund. Education: college funds. Retirement: IRAs and low-fee broad market funds. Perhaps your family wants to put money in all of these categories.

This future wrangling is often helped by consulting a financial planner. Reynolds advises parents to find a fiduciary financial adviser, as only fiduciaries are required to act in their clients’ best interests. Those who aren’t fiduciaries can offer biased advice that earns higher commissions. Still, in this information age, apps and software programs like those offered by Tiller, Mint, Quicken and You Need a Budget can help you figure out how to allocate money for each priority on your list. (Rumor has it that you can even go old-school and plan by using your bank’s paper statements, a notebook and a calculator.)

Whether reading this article makes you feel as though becoming a financial wizard in 2019 is a possibility or it makes you tired just thinking about the subject, Reynolds points out that it is okay if organizing your finances feels both empowering and a little like a bummer. “The fact is, I don’t like getting a yearly mammogram, but I schedule one every year near my birthday, so I remember,” says Reynolds. “You can treat your family financial plan the same way: It may not be fun, like a birthday present, but like going to the dentist, changing the oil in your car or getting your annual exam, it’s super important — so you do it.” 

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