In every family, one of the most important discussions is to appoint someone to take charge of the family finances. Whether it is yourself or your partner doesn’t really matter – whoever takes on the role recognizes that the financial stress will be a constant challenge and they have to take responsibility for navigating the waters and keeping the ship afloat.
Being the CFO of Home Operations can be tricky, can definitely be demanding and can seem at times almost impossible. Some people suggest you should run a family’s financial affairs in the same way you run a business. The family CFO needs to create a plan and set goals (mission statement), track monthly cash flow, review outgoings periodically to avoid overspending, and work with professional people hired to assist the family, such as lawyers and accountants.
Create a Mission Statement
Each family needs to understand what the family finances are all about, so the first thing every family needs is a MISSION STATEMENT. Yes, it may seem a little odd, but it is important to write down the financial goals of the family so a plan of action can be created. Perhaps the goals are paying off the house, saving for university or increasing voluntary contributions within your company pension plan.
Understanding your expenses
The most important job of the family CFO is to acquire a thorough understanding of the family expenses. Log in online and look at where the money is going and review your credit card statements: you must determine what the family money is being spent on and forecast future expenses.
Hold quarterly board meetings
The CFO must meet with the Vice President of Family Affairs (the spouse) and all employees (children) on a regular basis. The purpose of the meetings is to conduct a formal review of expenses, bank balances and investment performance. Each family meeting should have an agenda that covers the review of each key component of the family mission statement and budget. The goal of the meeting is to make sure everything is going according to plan.
With most organisations, if the company has had a good year then it rewards its employees with an annual bonus to thank them for all their hard work. The same principle should be applied to the family – bonuses and rewards should be based on not just the ideas and but also the implementation that has actually lowered expenses and saved money, helping the family reach its goal.
In every great organisation, succession planning is key. What happens when there is a new captain at the helm of the ship? The truth is that at some point during the course of your life you will become solely responsible for your family’s financial well-being, whether as a result of the death of your partner or through divorce. The transition to personal CFO is often bumpy, especially if you have not taken much of an interest during those years together. A surviving spouse (husband or wife) who has limited previous engagement with the family finances will be challenged by these new financial responsibilities. It is imperative that both the CFO of Home Operations and the VP of Family Affairs have an understanding of the family’s assets as well as the provisions to assume control of them in the event of a change in roles.
The reality is that successful businesses create business plans and action plans. They also control expenses, make calculated investment choices and have sound contingency plans to ensure their ongoing future regardless of the events that arise. At the end of the day, as a family we should all work together as a team and each be responsible for working towards the family’s financial goals.
Carla Seely is the Vice President of Pension and Investments at Freisenbruch-Meyer. If you would like any further details, please contact her at firstname.lastname@example.org or call +1 441 297 8686.