One way to mark the start of a new year is making financial resolutions that can help improve your family’s money journey and achieve desired goals. However, it is not always possible to carry everyone along and adhere to financial decisions in a family. A spending decision that is important for one family member may be seen as wastage by another; the saving schedule may seem acutely stringent to one and inadequate to another; there may be differences over the way to deal with a financial crisis or emergency. All these varied opinions can easily escalate to conflicts that linger over the years. However, if you keep in mind some basic rules while dealing with financial decisions, it will make living and the journey easy for all family members.
Joint decisions: The key to taking unanimous financial decisions, whether it is for children’s allowances, personal purchases, gifting ideas or saving for financial goals, is to sit and talk as a family. If the reasons for making an expensive home purchase is not conveyed to all, or a unilateral decision is taken by one parent for the children, it will result in resentment that can create bigger rifts. If there is a financial crisis, say, loss of job or salary cut, the implications must be conveyed to children as well so they can understand why their allowance has been cut. It will also make them feel important and part of a joint endeavour. So discuss the impending joint purchases or saving schedule, explaining the rationale for each decision, and considering the requirements of every member.
Same rule for all: If your budgeting requires you to cut down certain expenses or abide by a spending limit, it has to be followed by all members equally. A parent cannot claim adult privilege to make personal purchases, while disallowing children to do the same, or similarly, you cannot allow children exemptions because they are kids. This could create resentment not only against the rule, but also the parent, or it could encourage disrespect for financial boundaries. If a financial decision has to be implemented, it should be followed by all.
Be realistic: Many a times, in the zeal to achieve a certain goal or implement a particular financial decision, the strictness becomes suffocating for all. While it’s good to be disciplined, being too stringent can lead to rebellion against the decision. So it’s best for all members to let off steam occasionally or, better still, make a rule that is not excessively overbearing in the first place. Make a realistic budget or set achievable spending and saving limits to meet financial goals. Above all, understand whether every member is capable of implementing tough decisions or not.
Be specific: If you are saving for longterm goals like children’s education, it’s best to automate investments linked to the goal after calculating specific goal values. If you are saving blindly without a figure in mind, you may become miserly or overcautious about spending, constantly admonishing the family over unnecessary expenses. If you know how much needs to be saved every month, the disposable income will be clearly earmarked and not create stress for everyone in the family.
Big picture: Finally, it’s important to focus on the big picture and ignore minor infractions. Even as you save for your big goals, make minor exceptions. If your spouse wants a b’day gift that’s out of the budget, give it, or if a child wants a toy that is a one-time offer, buy it. They will be more amenable and agreeable to saving and achieving goals if they are happy.IF YOU HAVE A WEALTH WHINE, WRITE TO US…
All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at etwealth@timesgroup.com with ‘Wealth Whines’ as the subject.
Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.