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Family Finances: The Faux Pas to Avoid

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It is a sad fact of life, but one of the main reasons why couples break up is because of finances. There are of course a whole magnitude of reasons that play into this, but this fact at least indicates that the world of family finances can be blighted by a whole host of mistakes.

This is the topic that today is going to tackle. You might be part of a couple, or the advice might apply to your entire family. Regardless, keep an eye out for the following mistakes, as they can wreak havoc with you for years to come.

Mistake #1 – They keep secrets

This isn’t about the morals of keeping secrets, but it’s more about the repercussions. Taking out a loan here, or an overdraft there, without your family’s knowledge can be something that creates significant problems down the line. It can paint a false sense of security and suggest that the family as a whole is in a stronger position than they really are. Clearly, this is dangerous territory.

Mistake #2 – They just think about the here and now

Another mistake focusses about just living in the present. Sure, we’re all for living life to the full, but when it comes to finances you need one eye on the future. For example, let’s talk about getting older. It’s at this point in life where you might need to pay for a funeral, or even elderly care.

Quite often, families don’t think about this. They just think about the current daily costs, whether it is the mortgage, car or groceries. Step back and think about the big picture and what expenses you will need to cater for in the future.

Mistake #3 – They live beyond their means

Unfortunately, this is something that far too many of us do. We have a budget to buy our next house, but we see one slightly better and we push it. The same tends to apply with most purchases.

There’s nothing wrong with occasionally stretching yourself but making this a habit across a family can be hugely detrimental. It increases the amount of debt that you take towards retirement and leaves you in some difficult predicaments when it comes to this era of your life.

Mistake #4 – They don’t have an emergency fund

If you’ve performed any sort of financial research over the last few years you will know all about emergency funds. They are something that all of the high-profile financial experts recommend and for very good reason.

If something goes wrong, and it quite often does in life, an emergency fund is there to support you through the worst of it. For example, if you or a family member loses their job, this kitty is designed to act as a temporary fallback.

A lot of us just don’t legislate for this fund though. It’s not expected to deposit the recommended 6 months’ worth of expenses into a bank account right now, but at least put a plan in place so you can get there eventually.

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