Guidelines for Practical Money Management

Here are a few guidelines which you will find helpful when you start putting your own method of money management into practice:

1. Spreading out expenses - Some of your biggest fixed expenses, such as taxes, mortgage payments, and insurance premiums may come due in one lump sum. Since you know that they are coming, set a little aside for them out of each paycheck. Handled that way they will be much less of a financial blow.

2. Balancing your checkbook - A major pitfall in keeping track of money in many families is the failure of husband and wife (or both) to make proper entries in the checkbook stubs. Don’t trust your memory. Fill out a stub every time you write a check and keep an accurate account of your balance.

3. Keeping records – Both husband and wife should know where vital financial and family information can be found. These include Social Security card, birth certificates, insurance policies, wills, certificates covering all investments, ownership certificate on car, bank books, safe-deposit key, and all information needed for your next income tax return.

4. Inheriting a standard of living – Don’t feel you have to start your marriage by living at the standard your parents have taken a lifetime to achieve. There’s no disgrace in driving a car less sumptuous than theirs, in living in a home more modest than theirs. It’s your living standard; just be sure you pick one you can afford.

5. Handling your personal allowance – You can spare the entire family the feeling of being boxed in by the restrictions of money management if each member (including children) is given a personal allowance for which he does not have to account to anybody. It gives youngsters valuable training in managing their own funds, and it gives everybody the liberated feeling that once in a while he can spend money spontaneously just because he feels like it. An occasional splurge makes financial discipline easier to live with.

6. Check your spending with “averages.” - Although we have stressed that each family should develop its own formula for spending and saving, it will be helpful to look at established “averages” for families of your size and income. For example, a family of four living in a city, with an annual income of $50,000, could allow 12% for taxes; 30% for food; 21% for housing; 10% for clothing; 3% for furnishing; 6% for auto expenses; 5% for medical; 10% for savings and insurance; 3% for miscellaneous.

That’s one possible way to allocate an income. If yours is allocated differently, this doesn’t mean you are “wrong” – your family may simply have a different set of values – but be sure you know why your spending differs from the “averages”.