BECOME THE CFO OF YOUR LIFE AND HOME
You are more than humble household money managers, bill payers and check writers.
You are much more than that, you are the chief financial officer (CFO) of your life and household. You're the CFO of your finances and capital. No corner office is required, but you're welcome to make business cards if you'd like.
Your role as the household CFO will require some financial skills and a long view of your family's finances, experts say. The CFO is the driver, the one who has concerns about the long term. That includes looking at estate planning, retirement planning, looking at the investment portfolio, education for children or grandchildren and all types of insurance and more.
Although this may sound somewhat overwhelming the role isn't as difficult as you might think because you can always outsource tricky tasks. Continue reading for ways to become the financial leader of your household.
1. Manage your cash flow. Before you can make any long-term financial goals, you need an understanding of how you're spending your money. There's not a single company that has an unlimited budget, and there's not a single household that has an unlimited budget.
That means reviewing the budget you have for housing, debt, luxuries and other spending categories, then determining whether you need to reconsider your spending habits. If you're in a situation where your cash flow is negative ... you must first stop the bleeding. Restructure any debt so you can get on a payment plan where your cash-flow is positive.
2. Have a long-term plan. An effective organizational CFO looks beyond day-to-day spending to achieve long-term financial goals. As the household CFO, you should strive to do the same thing.
Place short-term finances in a long-term picture. Many of our clients often see themselves as the bill payers and the budget makers, but they haven't felt empowered to look beyond short-term planning. Taking that long-term view, which includes everything from retirement planning to building an emergency fund, is what makes a good household CFO.
3. Know how to delegate. Successful CFOs know that there may be people who are better suited for a specific task than they are. If you're struggling with an element of your financial plan, don't be afraid to outsource that element.
That might mean delegating tax-planning steps to a CPA or enrolled agent, which is a tax professional who can represent clients before the IRS. It could involve visiting a financial advisor or an investment advisor to come up with plans to control cash flow, investment decisions and retirement planning. When clients come to us we often end up being their personal and/or household CFOs.
Knowing when to delegate may even mean transferring certain responsibilities to your spouse as co-CFO in order to manage your finances together. A CFO does not work in a vacuum. They usually have a team.
4. Schedule a board meeting. Talking about money isn't fun, but top-notch CFOs don't hide from hard conversations. Instead, they schedule regular meetings with their peers and team members to ensure that everyone is up to date on the latest financial developments and financial goals.
When you have family discussions, treat them like a board meeting. You might schedule them quarterly – they don't necessarily have to be every month – but you should set time aside, outside of regular dinner conversation, to talk about your finances. In fact, this might be a conversation you plan to have in front of your financial advisor. And you should come prepared with printouts or at least an understanding of where you stand when it comes to earnings, spending, saving, retirement planning, insurance needs and other financial essentials.
5. Award bonuses. Being household CFO can be a tough job, but there are some perks, too. One benefit is that you can treat yourself when you do something right. Set up a 'reward' or 'bonus program' if you've succeeded at your goals.
That bonus might be a night out on the town or a vacation, depending on your budget. But give yourself and your family an incentive to meet spending, savings, debt payoff and other financial benchmarks.
6. Make a plan for succession. CFOs know that someone else will eventually take over financial management of the company. Whether retirement, a new job or an unplanned event removes them from their role, they'll inevitably need to think about their legacy.
Likewise, household CFOs need to keep in mind that one day, their children or spouse may take over the finances as caregivers or "dissolve" their company once they die. I realize this is not a fun thought but making plans now can save successors a lot of pain down the road.
Having a plan for succession requires estate planning, writing a will and organizing papers where a spouse, child or heir can find necessary passwords, phone numbers and other essential information. It requires taking care of not-so-pleasant tasks such as designating a medical power of attorney and springing power of attorney, which goes into effect after a designated event occurs, such as becoming incapacitated.
Once you pass away, your offspring or spouse won't necessarily take over your "company" as CFO. Instead, your finances can help support their "companies," which they've established independently or with their own families. The heirs will have their own set of financial problems, guidelines and goals, but it's no longer your company.
When you really take the time to think about your finances, you will realize that you are making all the same decisions as a corporate CFO, so why not put all of the above in action right away!
Take your personal finances seriously and know that you can have an awesome plan in action for your financial now & financial future!
By working with money experts such as ourselves & putting your plan in action you can alleviate stress & anxiety while building a solid financial foundation & exciting financial future!