Reach your financial goals by taking a business leader’s approach to your family’s finances.
By Susannah Snider, Staff Writer |May 3, 2018, at 10:45 a.m.
How to Be the CFO of Your Financial Household
Consider it a promotion. From now on, you are more than a humble household money manager, a bill payer and a check writer.
Instead, you are the chief financial officer of your household. You’re the CFO of your finances, the C-suite executive of your personal capital. No corner office is required, but you’re welcome to make business cards if you’d like.
Your new role as household CFO will require some financial skills and a long view of your family’s finances, experts say. “The CFO is the driver, the one who has concerns about the long term,” says Kelly Graves, a certified financial planner and partner at Carroll Financial Associates in Charlotte, North Carolina. “That includes looking at estate planning, retirement planning, looking at the investment portfolio, education for children or grandchildren and all types of insurance,” Graves adds.
If this sounds intimidating, don’t despair. The job isn’t as difficult as you think it is, and you can always outsource tricky tasks. Read on for ways to become the executive leader of your financial household.
Manage your cash flow. Before you can make any long-term financial goals, you need an understanding of how you’re spending money, experts say. “There’s not a single company that has an unlimited budget, and there’s not a single household that has an unlimited budget,” says Shashin Shah, a certified financial planner and director at SFMG Wealth Advisors in Plano, Texas.
That requires taking stock of your budget for housing, debt, luxuries and other spending categories, then determining whether you need to reconsider your spending. “If you’re in a situation where your cash flow is negative … just stop the bleeding,” says Eric Dostal, certified financial planner and advisor-vice president at Sontag Advisory in New York City. “Restructure the debt to where you get on a payment [plan] where you’re cash-flow positive.”
Don’t forget to automate any savings, debt payments and other important bills, experts say.
Have a long-term plan. An effective CFO looks beyond day-to-day spending to achieve long-term financial goals. As household CFO, you should strive to do the same thing.
“Put short-term finances in a long-term picture,” says Lili Vasileff, a Greenwich, Connecticut-based fee-only certified financial planner and author of “Money & Divorce: The Essential Roadmap to Mastering Financial Decisions.”
Vasileff, who routinely works with women going through the divorce process, says her clients often see themselves as the bill payers and the budget makers, but they haven’t felt empowered to look beyond short-term planning. Taking that long-term view, which includes everything from retirement planning to building an emergency fund, is what makes a good household CFO, she says. “The game plan is what counts,” Vasileff says.
Know how to delegate. Successful CFOs know that there may be people who are better suited for a specific task than they are. If you’re struggling with an element of your financial plan, don’t be afraid to outsource the assignment.
That might mean delegating tax-planning steps to a CPA or enrolled agent, which is a tax professional who can represent clients before the IRS. It could involve visiting a financial advisor or an investment advisor to come up with plans to control cash flow, investment decisions and retirement planning. When clients visit Shah at his firm, “we [often] end up being their CFOs for them,” he says.
Knowing when to delegate may even mean transferring certain responsibilities to your spouse as co-CFO in order to manage your finances together. “A CFO does not work in a vacuum,” Shah says. “Usually, [he or she] has a team.”
Schedule a board meeting. Talking about money isn’t fun, but top-rate CFOs don’t hide from hard conversations. Instead, they schedule regular meetings with their peers and underlings to ensure that everyone is up-to-date on the latest financial developments and money goals.
When you have family discussions, treat them like a board meeting, Dostal says. You might schedule them quarterly or biannually – they don’t have to be every month – but you should set time aside, outside of regular dinner conversation, to talk about your shared finances. In fact, this might be a conversation you plan to have in front of your financial advisor. And you should come prepared with printouts or at least an understanding of where you stand when it comes to saving, retirement planning, insurance needs and other financial essentials.
Award bonuses. Being household CFO is a tough job, but there are some perks, too. One benefit is that you can treat yourself when you do something right. “Set up a ‘reward’ or ‘bonus program’ if you’ve succeeded at your goals,” Shah says.
That bonus might be a vacation or a night out on the town, depending on your budget. But give yourself and your family an incentive to meet savings, debt payoff and other financial benchmarks, experts say.
Make a plan for succession. CFOs know that someone else will eventually take over financial management of the company. Whether retirement, a new job or an unplanned event removes them from their role, they’ll inevitably need to think about their legacy.
Likewise, household CFOs need to keep in mind that one day, their children or spouse may take over the finances as caregivers or “dissolve” their company once they die. It’s not a fun thought, but making plans now can save successors a lot of pain down the road.
Having a plan for succession requires estate planning, writing a will and organizing papers where a spouse, child or heir can find necessary passwords, phone numbers and other essential information. It requires taking care of not-so-pleasant tasks such as designating a medical power of attorney and springing power of attorney, which goes into effect after a designated event occurs, such as becoming incapacitated, Shah says.
Once you pass away, your offspring or spouse won’t necessarily take over your “company” as CFO. Instead, your finances can help buoy up their “companies,” which they’ve established independently or with their own families. “The offshoot will have its own set of financial problems, guidelines and goals, but it’s no longer your company,” Shah says.