Family Financial Planning Made Simple

by Neal Frankle, CFP ®

Family financial planning is a topic that is very sensitive with me. Growing up, my parents didn’t do the kind of financial fire drills they should have. As a result, when calamity struck, we weren’t prepared. And as a result of that, our family was destroyed.

If people rely on you, I believe there is nothing more important than making sure everyone knows their financial battle stations. The best way to make sure your family is safe – no matter what – is to have a financial review together.

What is a financial review?

Basically, this is a meeting, first between the principles (you and your spouse) and then between you and your kids (if you have them). The first meeting is a thorough review of where you are financially, where you going financially and if that is different from where you want to go, how to get back on track.

You can find out where you are financially by simply creating a personal balance sheet. This shows all your assets and liabilities. Assets are everything you own that has financial value like your home, savings, investments, retirement accounts etc.

Liabilities include everything you owe like mortgages, credit card debts and student loans. If you add up everything you own and subtract out what you owe, that is your net worth. If it’s a positive number, congratulations – you have what’s called a “positive net worth”. If it’s negative, we’ve got some work to do.

Neal’s Notes:  If you really want to get your family finances together, get your family together on the same financial page.  Some families…..every family…..struggles with different members having different opinions about money.  Make sure you learn how to reconcile those differences before going too far.

You know where you are headed financially by simply creating an income statement. This shows how much money you bring in each month and how much you spend each month. You can also run this report over different time periods such as a year or longer. Subtract what you spend from what you earn. It is vital that this is also a positive number.

Right now, you might not know how much money you bring in or spend each month. Don’t feel ashamed about this but do something about it. You know I am a huge advocate of using inexpensive software to track your spending. If you decide you want financial security for your family, you simply have to know what it costs you to live. It is the building block and foundation for their future. Please read my “You Need A Budget” review to see what I use to track my spending and why.

Once you know what it costs you to live, you have to make a few projections in order to know where you are going. You make those projections by simply creating a financial plan. Don’t worry. You don’t have to be Albert Einstein to know how to do that. It is a very simple process you can do for yourself or pay someone (like me) to run one for you. There are also a number of places on the internet that allow you to run simple financial projections based on how much you have now, how much you save, how many years until you retire and what you assume you’ll earn on the money you have.

If, after you run these projections, you don’t like the picture, you have a lot of options. You can look for ways to earn more by getting a second job. You can spend less. Or you can plan on working longer. There is no magic here. It’s simple math.

But in order to solve the problem you’re going to have to take contrary action and get out of your comfort zone. Before you have your financial review with your family, you have to be crystal clear on what steps you think need to be taken, who needs to take those steps and when.

Meet with your spouse after you’ve done the homework I’ve assigned above. Show him the facts and your suggested course of action. Get his input and decide together on an action plan. If you can’t come to terms, go talk to your therapist, financial advisor, Pastor or Rabbi together. No matter what, you have to get on the same page financially or you might as well go watch “Sponge Bob” because you’re going to be spinning your wheels and getting very frustrated if you don’t come together on this.

Once you are rock solid on what you are planning to do, bring in the troops. If your kids are old enough to do math, they are old enough to understand. In my opinion, you will be doing them a huge favor by including them in this process. This is the best way for kids to learn about money that I can think of . Tell the kids where you are and what needs to be done and why. Have these meetings every six months and keep everyone updated on your progress.

My experience tells me that having a lot of money is not the key to financial peace of mind. Financial peace of mind is knowing you have the resources to have security. In order to have that security, you just need a workable plan and you can have a plan no matter who much or little money you have. All is takes is a little time and commitment.

How do you deal with family finances in your home? Is it discussed? Why or why not?


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{ 6 comments… read them below or add one }

Cherleen @ My Personal Finance Journey October 28, 2011 at 4:52 AM

For every decision that we make, we make sure the kids are involved. Though they are still very young, we realize they should know what the family is going through and where we plan to lead it so that they will do their share and understand why they have to do it.


Neal Frankle October 28, 2011 at 6:21 AM

@ Cherleen, I like it. When did you start this? We started when the kids were about 14


UltimateSmartMoney October 26, 2011 at 6:46 PM

Sharing your financial information with your children is a great idea. Obviously your children should be late teens or early twenties. I hope to do this later and use it as a teaching moment with them about money. Sharing any information with your kids is important and I’m sure they will appreciate it later when they get married.


Wendy October 26, 2011 at 1:38 PM

“Tell the kids where you are and what needs to be done and why.”

Are you saying parents should share their balance sheet and income details with teenaged kids? I’m not sure it’s helpful information to them. They already have a lot of stress! Besides, their natural inclination is to compare notes with their friends.

I want to model and teach good financial behavior, but I don’t give the kids my financial details.


Neal Frankle October 26, 2011 at 3:13 PM

@Wendy, I don’t think everyone should do this without considering the personality of the child. And I think, as you hint at, it’s a question of degree. As my kids get older, I share more and more information.

My kids in college have our complete financial picture. For us and for our children,this works. It gives them perspective and it provides an understanding of the relationship between assets/income/spending. While this sharing has it’s risks, our silence on this issue would have worse consequences I fear.

The kind of experience that you and I have with finance can’t be taught in school and you can’t buy a book that can replace your experience either. I would argue that it’s better to give too much info than too little. Once the child demonstrates a maturity with respect to money, give them even more information.

I will say that there are kids I’ve met that shouldn’t have any financial information at all. This is an individual case decision I think.


Lance October 26, 2011 at 9:08 AM

I really liked this post. I know where I am personally, but being in a serious relationship I really need to sit down with my girlfriend and have us both go over each other’s finances. I’ve helped her with her finances, but never really showed her how my plans work.


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