“To put the world in order, we must first put the nation in order; to put the nation in order, we must first put the family in order; to put the family in order; we must first cultivate our personal life; we must first set our hearts right.” – Confucius
What Get’s Measured, Get’s Managed
What if you thought of your household as a small business?
- it has one or more sources of income (from you and partner’s employers or businesses) which these days could easily be $250K p.a. or more
- it has a pattern of expenditure, from living (variable) to more operating (fixed) expense
- it needs to spend money on repairs and maintenance for your major facilities, like your home and cars
- it benefits from running an incentive program in the form of holidays, special events and gifts
- it hopefully invests a percentage of its net monthly cashflow into product development (education, training and development for you and your children) and assets (investment products) that help replace earned income with passive portfolio income in the future
Consider running and reviewing a P&L and Balance Sheet each month to help you and your partner plan and adapt the way you manage the flow of money in your lives. These days cloud based accounting platforms like Xero coupled with automated bank feeds make this idea easy and inexpensive to implement:
- Once you’re setup, it only takes an hour a week (say on a Sunday morning or evening) to reconcile transactions and monitor your progress towards achieving your lifestyle and financial goals.
- If you then take the opportunity to sit down as a couple once per month, review your numbers and learn together, you’ll be taking proactive steps to avoid one of the biggest areas of potential conflict in your relationship – money.
- $50 per month will allow you to enter and reconcile an unlimited number of transactions per day
Furthermore, if you already (or want to) engage the professional assistance of a financial planner, you’re in a position to provide them with an invaluable “window into your wealth”.
It’s Our Money vs His & Her Money
Having previously served as a Non-Executive Director and the Chairman of a financial services business, one of the things I came to understand was that many couples don’t lay the foundations for achieving unity when it comes to their financial affairs. In simple terms, they don’t primarily operate their household using a set of joint bank accounts. They continue to use individual bank accounts, like they did when they were independent individuals, keeping their spending patterns opaque, rather than transparent, from each other.
Many couples can’t tell whether their household is:
- Cash flow negative
- Cash flow neutral
- Cash flow positive
They may have a sense – but they don’t really know their numbers. They have not taken the time to ensure their spending (resource allocation) matches their values and purpose. In this way, they make the same unnecessary mistake many business owners make, which inevitably leads to the demise of their business. However, it is important not to trivialise the leadership required by one (or both) people in a relationship required to initiative the ideas I am suggesting herein, on behalf of your household. It’s easier to procrastinate, to avoid conflict and remain blissfully ignorant of the truth when it comes to the finances of your household than confront the task at hand. Nonetheless, remember you can enlist support – in the form of coaching or advice – to help dedicate uninterrupted time to welcoming in new ideas for your growth and expansion.
The Cycle of Adapting – In Action
The benefits of putting your household in order (using the four stages of The Cycle of Adapting) from a financial perspective, are:
- Measuring the financial performance of your household leads to greater clarity about the gap between your current and desired realities.
- This allows you to learn together by bringing your decision making closer to the facts, rather than allowing them to be governed solely by feelings.
- Which results in better choices that translate into improved focus and sense of direction.
- This culminates in engagement, rather than disengagement within your relationship, which supports you both performing at your best – in both your personal and professional endeavours.
This is a great example of how The Cycle of Adapting model that I wrote about in my article Adapting to Change can be applied to the intersection of your personal and professional habitats. So remember, set your heart right and your household will flourish.
Explore Additional Resources
In this blog post we mentioned the following resources:
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If you enjoyed this Blog you can continue reading Part 2 here