I am sure you already know, or at least heard, that financial problems are among the leading causes of marriage conflict and divorce. Growing up, I experienced firsthand the anxiety and pain associated with a lack of communication when it came to financial issues. When I got older, I promised myself that my marriage would be different.
Within the first couple of years that my husband and I were married, we were blessed to attend a financial literacy program called Financial Peace University (FPU) that was being offered by our church. Having been mostly a one income family since we got married, I can honestly say that participating in FPU was one of the most beneficial things we have done for our marriage and our family.
April was National Financial Literacy month and, although I am a little off on the timing, I could not pass up the opportunity to encourage you to invest in your family by participating in a financial literacy program. Also, I thought this would be the perfect time to share with you the 10 financial principles that have been extremely helpful to our family over the last few years:
1. Always make financial decisions together
Communication, communication, communication…
It is hard to stay financially on track if we are operating with different objectives in mind. My husband and I have occasional family meetings where we both share our goals and aspirations with each other. Where do we see ourselves in 10 years? 20 years? Do we want to go back to school? What are the places we would like to visit? The answer to all of these questions help us to trace out our financial plan for the years to come.
As our children grow, I plan to involve them more and more in these meetings so that they too can be part of our family’s financial planning process.
It is a lot easier to reach our family goals if we are all on the same page.
2. Have a budget and stick to it
As I have mentioned on a previous post, living without a budget is like throwing money out the window. A family budget is a concrete plan to help us make the most of our income. It is also the main tool we have to ensure we stay financially on track to reach the goals we established for ourselves.
If you need some help setting up a budget for yourself or your family, check out this FREE tool I have put together to help you get started.
3. Have an emergency fund
Financially disruptive emergencies will happen, it is just a matter of time. The sooner we understand that, the faster we can start preparing for them. Starting an emergency fund was definitely at the top of our priority list. It is very hard to reach our financial goals, follow a budget, pay debt, or save if we find ourselves unprepared when emergencies come up.
Dave Ramsey, the founder of FPU, recommends starting with an emergency fund of $1000. This money should be kept in an easily accessible account and ready to go whenever an emergency arises. Once all the debt is paid off, you can build your emergency fund up so that it covers 3-6 months of household expenses.
We do not see this money as extra cash we have lying around. We have agreed that this money is strictly for emergencies and not to be touched otherwise.
4. Get rid of debt and stay away
By the grace of God we currently live debt free and do everything we can to remain that way. The faster we pay our debt, the more freely we are able to give and the sooner we can apply our money towards reaching our family goals.
In this day and age we have to go out of our way to stay out of debt. Social pressures, tempting offers, the perception of “need,” and unexpected emergencies, are all factors that play a part in the decision to get into debt. We do our best to minimize the effects that those factors have on our family by being intentional with our financial decisions.
5. Save, save, save!
Most financial advice I have read, suggest saving 15-20% of your income towards retirement when we are in your 20’s and 30’s and increasing that percentage gradually as we age. It is never too early to start saving for retirement.
Saving is also a strategy that helps us stay out of debt. For example, our family is currently saving for a new vehicle. We have one car that has surpassed the 250,000 mile mark a while ago and will probably need to be replaced in the near future. However, instead of paying for a car loan, we pay ourselves every month and save the money to replace it when the need arises.
We use a similar method to pay for our car insurance. We pay ourselves the monthly installments and when it comes time to renew, we can save a few dollars by paying the full amount for the next term.
6. Don’t spend money we don’t have
This principle has a lot to do with sticking to a budget and staying out of debt. My husband and I have this rule of never spending money while relying on the next pay check or next year’s tax refund. If we don’t have the money now, it can wait until we do.
One strategy that helps us stick to this principle is limiting our use of credit cards. Ever since we got married, we have had only one credit card that we pay faithfully in full every month. This way, we never have to pay any fees or interest. In fact, the only reason why we have kept our card all these years is because we have a great cash back plan we cash in at the end of the year.
We do not see credit cards as a viable emergency back up plan, that is what the emergency fund is for.
We have also made it a point to never increase our starting limit. If at any point we reach the conclusion we are not disciplined enough in our use of the credit card to continue following this principle, we will cancel it.
7. Sleep on decisions to make big purchases
Taking the extra time to think and pray about big purchases, many times, was just enough for us to get the clarity of mind we needed to make sure we were making the right decision for our family. Sometimes that means we will go ahead with the purchase, sometimes it means we need to spend more time searching but, we are always glad we took the extra time to think.
8. Don’t let our vacations follow us home
We love to travel and visit new places but it is not really a vacation if we are going to have to be stressed about paying for it for 6 months after we come home. We either save and pay for it or we find alternatives we can afford.
9. No Impulse purchases
This one means we cannot go to a store and buy things we don’t need just because they are on sale. If they are not on the budget, they are staying at the store.
10. Have a wish list
Starting wish lists helps us put some thought into figuring out exactly what we need or want. It gives us an opportunity to check out reviews and analyze our options. It also makes it easier to monitor prices and make sure we are not buying anything impulsively.
If you would like to check out some more resources on personal and family finances, check out the list below:
The Total Money Makeover– Great book by Dave Ramsey that helped me get started on my first personal budget and opened my eyes to common financial pitfalls during my college years.
Financial Peace University– Financial literacy curriculum that is full of common sense advice to help you get started on your path to financial freedom. Check out this link to see the classes that are currently being offered in your area.
Financialliteracymonth.com– Website created by Money Management International to help educate and provide resources to help people get on a path to financial wellness.
What do you think of these financial principles? Do you have any others principals or resources to add? I would love to hear from you in the comments below.
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