As I discussed in last week’s post, a personal financial picture consists mainly of: what you own (assets), what you owe (liabilities), what comes in (income), and what goes out (expenses). If you have a good idea of these four things, I would say that you know pretty well the state of your flocks. I also talked about what net worth is (the “owned” minus the “owed”) and what it isn’t (the value of your life). But even though, as the Bible says, life is not about our possessions, it does matter how we manage them. So this week I will talk about the more dynamic duo out of the four: income and expenses.
This probably seems pretty obvious; for most families, it’s the paycheck(s). But there’s more to your income than how much goes into your bank account each week or month. (If your family’s income is seasonal or sporadic, you can calculate a weekly or monthly average.) It’s also helpful to know how much is withheld and deducted for taxes, health insurance, and other benefits. How could that knowledge help? With some research (consult your HR, tax, or other professional as needed), you may be able to give your cash flow an immediate boost, or make changes that have a longer-term benefit. For example:
- If employer-sponsored health insurance is available to both you and your husband, are you enrolled in the more cost-effective plan? Some employers impose a surcharge for covering spouses who can get insurance from their own employers. Would there be any benefit in switching from one spouse’s plan to the other?
- Are you contributing to your retirement savings plan to receive the maximum employer match? Or, is it possible that you are investing too much given your current situation?
- Could you benefit from increasing or decreasing your pre-tax contribution to your health savings account (HSA)?
- Are you withholding too little or too much income tax?
If you and your husband don’t typically talk about money, these questions could be great conversation starters. Or, if you’re like me, you like to say, “Hey! Look what I found!” In that case, go ahead and gather all the facts and figures, then present your marvelous, well-researched suggestions to your husband. 🙂
Knowing where your money goes every month can also boost your cash flow or impact the future for the better. So-called “fixed” expenses like rent/mortgage take a little more effort to change, but they don’t have to be permanent. Have interest rates or your credit score(s) changed significantly since you first financed your home or car? Would a re-finance be worthwhile? Does it make sense to sell a car, or to relocate? These are decisions you and your husband would make together, but you might have ideas that haven’t occurred to him (or that he doesn’t realize you are willing to consider).
If you do most of the family’s shopping for food, clothing, etc., you know that those expenses really add up. So you can make a big difference in the monthly balances. An important first step is keeping track. Spreadsheets have been my tool of choice for years. I have many times professed my love for spreadsheets, and there are links below to some real cuties (all Microsoft Office Templates). Have you ever heard anyone refer to a spreadsheet as a “cutie??”
But my husband and I are actually trying something new right now. We’ve signed up for the free mint software and I’m in the process of entering our budget. It is great for me because I can see all of the details, and my super-tech-savvy big-picture picture husband appreciates the UI (fancy IT term for layout). After using it for a month I will come back with a review. (I cannot begin to tell you how excited I am that we are budgeting together! Miracles do happen. :)) But you don’t need a fancy app or adorable spreadsheet to start keeping track of your expenses. And if your relationship is not in a budget-conversation place right now, that needn’t stop you either. When I kept track of what I spent on food alone, it was both humbling and eye-opening. Start with what flows through your own hands. Whether big or small, you can make a difference.
Thanks for stopping by,