Family Finances Just Like Business

Did you know that if your are the head of a family, you are a businessperson… we talked about it in the 2.5 million piece, it is part of learning how money works. You see a family possess all the elements of a business. It makes and sells something – usually in the form of the services of the breadwinner(s). The “family” business begins in income, has expenses, carries overhead, invested capital, working capital and surplus (sometimes).

This may not be the way you have ever looked at a family, with all of the wealth of relationships which go beyond material or financial items. Like it of not it is a reality – any family makes up to form of small business.

Truth is running a business may be easier than operating a family. A family can “get by” and at times even prosper with bad systems that would push a business to the wall. The family carries more flexibility. For this reason it is really not necessary for a family to manage its business practices as carefully as a regular business must. But it is desirable. It is a way of getting along better, and making the available family money go farther.

Over the next few days we will look at how any family can stretch their money and make it do more. The methods are essentially business methods. Some may be too complex for the average family or unsuited to the nature of the family. In this case, the full dose of guidance may be cut to half a dose. The whole thing need not be swallowed, but it would do no harm to swallow a little bit of it.

Young couples, especially, face the problem of learning how to finance a family. Eventually they learn it, usually by trial and error with a good dose of pain thrown in. When young couples get to be older couples, they think of the past of how much better off they would have been if they had followed certain stricter financial controls in their younger years. That’s the benefit of hindsight.

It is true not every businessmen runs their family affairs on a “businesslike basis.” They may be crack administrators at the office, but they often are loose with the personal and family budget.

As a first step, take a look at the way a business is run. It must make a profit or die – a family must learn to live within their means and not on credit. At the beginning of each year a business estimates its gross income, expenses and net profits, and then plans on how to use the profit most effectively. Month by month during the year, the businessman eagerly compares his accomplishments with his forecast. If he is doing better than expected, he may expand; if worse, he may have to trim his sails and set a new course. But at all times he knows where he is and what he is aiming for.

• Do You know the state of your “Family Business?”
• Do You make “profit” or live in credit.
• Study business, make a budget and begin to manage your finances like a business – it will change your life.