Family & Marriage Finances 101: The 14 Essentials Everyone Must Know

There are two words that are very closely synonymous with the two words ‘family happiness’ – those two words are ‘family finances’! Notice I did not say ‘family wealth’ – happiness in a home, marriage, and family is most often directly correlated with the ability of the parents to properly manage (not necessarily accumulate) and budget their finances. It is unfortunately true that over 80% of all divorces result, in some way or another, because of finances. More tragic than the divorce is the fact that families are torn apart, children suffer, and society is feeling the negative ramifications of this all too common reality.

At the outset, it is absolutely important to note that the 14 essential principles described below are not designed to teach people how to accumulate wealth through the application of the principles described. The sole objective in revealing and explaining these principles if for one purpose – to help marriages and people everywhere experience the family happiness that results from the application of simple financial principles. Will applying these principles require effort and a change? Certainly! But does not everything good and worth while in life also require change and consistent effort?

Fortunately, with a little education, self-discipline, and effort, we truly can ensure that our ‘family finances’ result in ‘family happiness.’ May I suggest 14 ways on how to accomplish this:

1) Establish a budget and live within your means: First, do you even have a budget? If so, do you actually live by it? Do you actually record every expenditure, so that at the end of the month (when you sit down and go over finances … right) you know where every penny has gone? At the end of the month as you look over the finances, did you purchase something you did not need? Stick to the budget and live within your means!

2) Never accumulate consumer debt: Do you know the difference between Good Debt vs. Consumer Debt? Good debt is when you have to borrow money for some type of an investment: a house, your education, or to start a business, etc. Consumer debt is simply purchasing anything on credit outside of these three areas. If you don’t have the money to buy it – don’t buy it! 

3) Credit cards are NOT bad: Now, above on point 2 I mentioned to never purchase anything on credit you don’t need or have money for. That does not mean you can’t purchase your groceries or other expenditures on a credit card (in fact, I encourage you to do that). Using credit cards, properly, is essential to your financial success. What is the proper way to use a credit card? It is simple: never use more than 25% of the credit limit, make your payments on time, and pay off the entire balance at the end of the month. 

4) Understand the importance of building and protecting your credit: In my opinion, protecting your credit is just as important as protecting your social security number. Your financial future and success hinges upon that report/score. Do you want lower rates, better jobs, larger loans, better pay, etc.? Than you better protect your credit. I tell people all the time that investing in Identity Theft Protection is just as important as any Life Insurance program in our day and age. Now, do you know how to build and improve you score/report? It really is simple: never use more than 25% of the credit limit, make your payments on time, and pay off the entire balance at the end of the month (sound familiar)!

5) ‘Wealth’ is not the accumulation of money, it is the proper management of it: Our culture and society certainly has a skewed perception of what true wealth is. If, for example, an individual makes 1 million dollars a year, we assume they are wealthy. Well, if that person spent 1.2 million dollars that same year, that certainly is not wealth is it? In fact, the promotions and pay raises we all seek in our jobs will do little if we increase our spending as our income increases. Robert Kiyosaki refers to this habit as the ‘rat race.’ We need to learn how to properly budget, manage, save, and invest our money – not just spend it. Thus, true ‘Wealth’ is getting out of this ‘rat race,’ it is financial independence, it is passive income, and it is time freedom. Learn now how to manage your money before it manages you! Both men and women would do well to change their perception from ‘how much can my spouse make’ to ‘how well do they manage their finances.’

6) Self-Discipline and Self-Restraint are essential: Self-discipline in regards to money is far more important than any advanced course in accounting or financial management. Parents would do well to develop this ability, and they would be wise to teach this to their children. However, please don’t mis-understand – ‘self-discipline’ does not translate into self-denial or impoverishment. There is nothing wrong with buying ‘things’ that are fun, entertaining, or that the kids would enjoy. Where the line must be drawn is in the questions ‘can we afford this’ or ‘is this in our budget’ or ‘do we actually need this’ etc. And, ironically, self-discipline in financial matters will translate into self-discipline in other areas and aspects of life.

7) Saving Saves: That’s it – just save! Learn now to discipline yourselves and budget 10% of all earnings. Save for a rainy day, for retirement, for kid’s college funds, vacations, investments, etc. Avoid consumer debt, prepare for disasters or unemployment, and save 10% of all earnings – ALWAYS!

8) The importance of Insurance: Do you have proper and adequate home insurance, life insurance, health insurance, and car insurance? If not, you are potentially setting yourself up for financial disaster. And, in our day and age, do you have Identity Theft Protection? This type of insurance is just as, if not more important.

9) Wants vs. Needs: Wise is the wife, husband, parent, or child who can discipline themselves financially. The ability to sacrifice, go without, save, be patient, and determine wants compared to needs is an absolutely necessary attribute to develop; ironically, this attribute is not only necessary for finance-related issues, but every aspect of our lives!

10) Money is NOT Evil: Unfortunately, the majority of people have engrained into their minds that money is evil. Money is NOT evil; it is the pride people develop from possessing and accumulating money that causes others to perceive money as being ‘evil.’ A wealthy person’s snobbish attitude, condescending comments, assumed superiority, and arrogant actions are what is ‘evil’ – not the money! ‘But the money created the pride,’ some may wrongfully say; no, the choice to become prideful is what created the pride. Money is absolutely necessary for our daily survival; and if we choose, our excess money can also free up our time and create opportunities and resources that help and bless other people’s lives. We need more people who choose to acquire wealth for charitable purposes, and less people who develop the strength to financially suffer because they ignorantly believe ‘money is evil.’

11) Communication & Involvement is Essential: If you are married, are both of you involved in, informed about, and joint decision makers in the financial affairs of the family? If not, the very question should reveal the necessary changes needing to be made. Are children simply given money, or are they expected to work for and earn it? Grateful will be the child, and wise would be the parent for teaching their child this reality of life in the real world. And perhaps just as important, are children taught the very principles described in this article – saving, compound interest, credit, insurance, wants vs. needs, etc.? The fact that this article even needs to be written should suggest that our educational system fails to teach these important principles, which should suggest that if any parent is dependent upon others to teach their children these necessary financial principles – they will pay for it, literally!

12) Investing in Appreciating Assets, Not Depreciating Liabilities: How often are we personally guilty of ensuring that our car is loaded with the best features, our clothes are updated with the latest fashions, or our sheds and garages are filled with all the fun toys and tools? There is nothing necessarily wrong with having these (see point #13 below); however, how unfortunate it is when excess funds (or what’s worse – funds/debt obtained from credit) goes to obtain more toys, cars, and clothes rather than assets that will appreciate over time. The key to financial independence is not obtained through pay-raises, promotions, 401(k)’s, or even the lottery – it is obtained by applying the principles discussed in this article, and more importantly, buying appreciating assets rather than depreciating liabilities.

13) Be balanced and enjoy life also: Sometimes I read articles of couples who save every penny (literally) so they can retire at age 40. Some are able to do this, and good for them. But, let’s be realistic and also enjoy life as well.  Perhaps it is setting aside a few hundred dollars a month, or just $20 – but take your wife on a date, treat your kids to pizza, go out to a movie, etc.  Have fun and be balanced!

14) Give and you shall receive: Ironic that this is on the list – but it is not last suggesting it’s least important. In fact, it should be number one on this list!  Learn now the great truth that when you give, you will receive. The ‘giving’ will be different for everyone. For some, it may mean giving to a charity, giving to a neighbor, to a church, to a family member, etc. But, give with no expectation or thought of reward or return, and you will receive much more in return, somehow in someway, but it will happen!

In conclusion, never forget that this is not about saving, budgeting, or investing properly – this is about happiness in your marriage and family life. A great credit score, a large bank account, an excellent insurance policy, and even a healthy retirement account are comparatively insignificant compared to the marital and family happiness, which can be achieved by applying the principles above.