Money Tips: Be less personal in managing household finances


Posted at Jul 01 2009 04:18 PM | Updated as of Jul 02 2009 12:18 AM

 MANILA - Money is not a topic that families usually talk about, especially since it is a common cause for fights and squabbles. However, practical sense points to openly discussing money matters to prevent debt or running family finances down.

"Families always fight about money. So if they are educated, I think they wouldn't fight as much. Just like disease, debt prevention is better than cure," said Randell Tiongson, president of the Personal Finance Advisers Philippines Corporation, in a recent interview on ABS-CBN's "Shoptalk."

Tiongson, a personal finances coach, describes the household as having the same principles as that of a business, where families have to match revenues (household income and savings) with expenses. He said this is exactly why handling family finances should be handled in a less personal, but more business-like manner.

One business trick that can be incorporated into the home is proper asset allocation. In a household setting, this means spending for those that are necessary for the household's goals.

"You have to identify your budget, you have to identify your expenses, and then you manage it from there. Of course, if you don't stick to your budget, be prepared that you won't reach your goals," Tiongson said.

In fact, setting goals is a great way to determine how much a household should save, both for immediate and future expenses. A simple business rule to follow is that your cash flow output should never be bigger than your input. 

In other words, never spend beyond your means and always have money saved up, just in case life throws you surprises like an unexpected illness or a drastic rise in school tuition.

"Money is always good to have on hand for the different cycles of life. When you're younger, you want to raise your family. And then your kids go to college. And then later on, there's healthcare, retirement, and all of these things that require a lot of money. The cost always surprises a lot of people. Make sure those goals are achieved," he explained.

Important decisions

Another way to ensure that the household, like a business, is working properly is to determine clear tasks among members, such as who is in charge of monitoring expenses and who is in charge of keeping the money. 

Tiongson said that the decision-making process, as much as possible, should involve all stakeholders or members of the household, especially the husband and wife. 

"Everyone in the family should be in on it. Personally, when I coach people about personal finances, I always like talking to couples because money decisions are a couple thing. Like, I never make a decision without my wife's approval," he said.

Setting routine spending plans like deciding what to and what not to put in grocery shopping lists could help a family's finances in the long run. Tiongson personally sets a spending limit for every trip to the market, with a small allowance of plus or minus 10 percent.

Tiongson added that objectives, plans, and projects should always be practical and feasible. He said it is good to save money, but not by extreme measures like completely scrimping on the family's leisure or pleasure activities.

"There should always be a balance. Like, I always hear people who say, 'okay, I want to go to Europe at 50. So the family won't eat out and can't go out.' That's too extreme. There is always a price to pay. But the question is, are you willing to pay that price," he added.

Keep in mind that the goal of financial planning is to maximize a quality lifestyle (as much as you can afford) without breaking your back. 

"At the end of the day, I always tell people, when you die, you don't take your money with you. So financial planning is a tool to help you enjoy your life without going into too much trouble," he said. -- by Kristine Servando,

For more money tips from Randell Tiongson, visit his blog