Running your household and raising your family are possibly the greatest investments that you will ever make. The more that you invest, the greater the returns, and even though the risks may be higher than anything on the stock market, the dividends that you will receive are more than priceless.
Indeed, when you are running your family’s finances, it may make sense to adopt the business model of managing your home like a company.
Think of yourself as the CEO and your household is your company. Your spouse is your co-director and the rest of the family are your shareholders. Like any company, your responsibility is ensuring the safety and security of your partner and shareholders.
Like any business, your home incurs running costs and expenses. A company’s efficiency is often evaluated in accordance with its income and expenses. Similarly, look at how much money is coming into your home and how much is leaving. Whenever there is a major expense, research and evaluate the most efficient and cost-effective way to cover it. Any businessman will tell you that his resources are valuable – and so are yours.
When there are surplus profits, a company will not simply spend them. Instead, the money is invested or put into research and development. Similarly, your surpluses (any funds not immediately needed for current expenses) should go into retirement and savings accounts – for the future, when production may be slower.
Just as a company continually audits its books, keep on top of your bank statements, savings plans, and investment portfolios. Record everything – money in and money out. This way, you are always in control of your financial situation and you can run your home a lot more profitably.
By planning your finances and efficiency like a CEO, you will hopefully be able to reap the dividends.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published April 9, 2012.