Figuring out how to do it

What are the key components of Household Financial Management? Well, the example described in previous entries indicates that the following elements should be on the list:

  • A decision about where income should be placed (in the example, all income went into the joint account);
  • Information (in the example, this included the joint account and credit card statements, and the amounts previously spent on Items of Expenditure);
  • Actions (In the example, this included the creation of an annual budget, the allocation of statement line items to the budget items of expenditure, and the monthly update of the budget sheet and discussion between the partners);
  • Tools (In the example, an Excel spreadsheet was used to create and manage the budget, and to perform the allocations on the bank statement);
  • Discussion (in the example, all financial decisions were discussed by the couple – particularly during the monthly budget update session).

Of course, there are many different ways in which these can be addressed. A few of the myriad other possibilities are listed below:

  • A decision about where income should be placed (in the bank account of the individual that earned it; in a safe in the house);
  • Information (online check of account transactions; payment slips and receipts; personal memory of what was spent);
  • Actions (moving money to ensure the account doesn’t go into the red; giving one partner money to do the housekeeping; putting an amount every month into a savings account; planning how much to spend on next year’s holiday);
  • Tools (various software packages and apps; cloud-based budgeting services; paper and pencil);
  • Discussion (conversations when: a major spend is contemplated; when the account is about to go overdrawn; when a major loss of income is imminent; when income is received).

So, how should people setting up a household decide what approach to use? Well, the obvious thing to do these days is to check the net. A search on ‘Household Financial Management’ in May 2017 produced a whole range of web sites offering advice, insights and tools. At the top of the list was the very helpful and thorough ‘Beginner’s Guide to Managing Your Money’ from the UK’s Money Advice Service. As well as providing extensive guidance, this includes an online Budget Planner tool which goes through a very comprehensive list of types of expenditure.

Adding ‘Tools’ onto the end of the search term again produced a plethora of hits including PC Magazine’s ‘The best personal financial services 2017’. This highlights 7 applications including for spending analysis; Quicken and YNAB for budgeting; and Doxo for bill payment. Another site – Techradar – identifies the five best free personal finance software programmes 2017 as being: Money Manager Ex; Gnucash; Mvelopes; HomeBank; and AceMoney Lite.  No doubt there are many more software packages, apps, and cloud services out there.

There is clearly no shortage of practical advice and guidance available for those who want to seek it out; and there are a whole variety of digital tools that can be employed to plan and track household money. However, advice and tools on their own are not enough to make a success of household financial management. The critical element is down to the individuals concerned: they must have a determination to avoid financial difficulties and to change lifestyle if such difficulties are encountered.  Furthermore, the way that household finances are actually managed not only dictates a particular lifestyle, but also reflects the type of relationship that those in the household have. These two critical implications need to be born in mind by those who set out to establish how to run their own household finances.

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