Managing Family Finances

Thank you to TurboTax for sponsoring my writing about household finances.Learn more about how TurboTax can help you find every tax deduction you deserve. I was selected for this sponsorship by the Clever Girls Collective, which endorses Blog With Integrity, as I do.

I am one of the most absentminded people I know. I can never find my keys or my phone. I perenially miss play dates, birthday parties, school volunteer hours and after school pickups. I'm also messy Not exactly a winning resume for the family CFO, yet I'm stuck with the job.

Yet Alfie has entrusted me with CFO responsibility and somehow we've managed to make all our house payments and keep our kids in shoes without running into loan sharks named Guido. Here are six strategies I use to manage our family finances and make sure we stay in the black:

Auto Pay is my friend
If it weren't for the modern-day miracle of Auto Payments, I would either be paying a fortune in late fees, or be a walking nervous wreck. All fixed monthly payments, such as mortgage payments, life insurance payments, the kids' college fund contributions, ballet school tuition, etc.. get debited directly from our bank account. Also, I put most variable payments like phone bills, utility bills, insurance bills (i.e. the premiums change from year to year) on my credit card so I can review them all together on my credit card bill.

We never let our bank account balance get too big
I know, that sounds counterintuitive -- of course you should be saving lots! -- but what I mean is, we've set ourselves a "working capital balance" in our checking account, we add a buffer, then we periodically reroute any extra cash to a high-yield savings account or cd, or invest it in the stock market. We indulge ourselves with little treats only if we have enough money in our checking account; we don't have easy access to the money in our other accounts, so we're not tempted to blow it all on a weekend in Vegas.

We maintain a home equity line of credit (HELOC)
If we ever do need to get our hands on a significant amount of money for some emergency, we maintain a HELOC that we can draw upon at any time, at a far lower rate of interest than credit card debt. We've never used it and I hope we never have to, but I'm glad it's there.

We (try to) stay organized
I keep a filing cabinet with folders for bank statements, bills, and anything we'd ever need to reference. With the advent of e-statements, my files have grown considerably thinner, but I still keep paper copies of things that don't have electronic copies. For example, I every year I compile a tax folder with W-9 forms, INT-99 and other forms sent by banks, brokers, etc.. , mortgage forms, charitable donation receipts, vehicle registration forms and a ledger of my blogging expenses, so on the off chance that I get audited, I'll be ready.

A tax software program
Speaking of taxes, if your tax situation is simple then there's absolutely no reason to do your taxes by hand, given the ease of the software programs out there. I've used TurboTax every year since 1996, with the exception of 1999, when I was at business school and wanted a tax professional to give me advice on whether I could deduct the cost of my laptop as a business expense (in hindsight, I probably could have figured that out using TurboTax, but hey, I was up to my ears in case studies), and I've been very happy with it.

We treat credit cards like debit cards
This is probably the most significant way we keep our finances in control: we only spend what we can afford. Yes, we do use credit cards, but only for the convenience and the perks (i.e. cashback, miles, etc..). We pay our credit card bills in full each month (okay, I admit I've procrastinated or forgotten to pay -- usually when I'm on vacation -- and I've ended up paying a late fee plus a couple of dollars for a couple of days' worth of interest, but that's only happened a couple of times in my life). The only time we'd make an exception to that would be if we needed a new car or if we had a medical emergency.

Disclosure: This is a compensated post. The views and opinions expressed here are my own.

1 Comments, Leave yours here:

Elizabeth @ My Life, Such as it is... on February 1, 2011 at 9:12 AM said...

I love TurboTax! We've used for years and it hasn't steered us wrong yet. I love the ItsDeductible feature for our noncash donations.

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