When we opened oXYGen Financial back in 2008, we introduced two very important financial planning concepts. Number one; in order to be successful with your personal wealth you need to take ownership as the CEO of your family’s finances. Number two; all successful CEO’s surround themselves with an effective CFO to help run the company, which is why oXYGen Financial pioneered and trademarked the term Private CFO®. Between the combination of an effective CEO and CFO, you can focus on the key performance indicators in your “business” to help you reach your goals. I was most intrigued this week when almost five years after our founding, the Wall Street Journal finally ran an article called Family, Inc. (http://on.wsj.com/12YfX8z), which is a really interesting article and can help articulate what families will need to consider as they manage their finances in the future. Here are my smart money move tips on how to run your family like a business:
- Get one big picture – There is no way to effectively manage all aspects of your family finances today without being able to see everything in one place, updated and aggregated daily. Whether you use a program like www.mint.com, www.yodlee.com or our system at oXYGen Financial (www.oxygenfinancial.net), you must have a way to get all of your accounts connected in one place. This includes credit cards, bank accounts, investments, 401(k)’s, frequent flyer miles, and more. Remember that as head of your family business, you must be able to make decisions based on seeing your whole picture rather than piece by piece.
- Make your net worth and income statement the two key dashboards – If you can take away something from where you work at today, look at how most companies make VP’s, managers, etc. run a company profit and loss. If you think about the link between this and your family’s finances, nothing is different. You have a certain amount of revenue coming in and then get to manage your overall household expenses. By using an online budgeting system, you can more accurately see a monthly picture of your burn rate from scraping in your bank and credit card purchases. Your net worth is really the balance sheet that shows the overall stability and growth of your household.
- Have your risk mitigation strategy in place – Your overall dashboard of Family, Inc. should depict the protection policies you have in place for the ‘what if’ scenarios. This includes having the right amount of auto, home, life, disability, health, and potentially long-term care insurance. Far too often, CEO’s don’t pay enough attention or ignore the risks lurking in the dark that could hurt the company. Certainly you don’t want to spend too much on insurance, but measuring the appropriate amount of risk protection you have is vital for insuring the key assets within the company.
- Use your management skills – Large companies have really well oiled systems to have weekly management team meetings, mid year reviews, end of year reviews, and regular ongoing company strategic meetings. Why is it that we don’t transfer these skills to the way we run our family finances? Consider implementing a once a week meeting to do a week in review or adding a mid year/end of year review to see how things went with the company. Remember that you should expect what you inspect.
We know that we had a great concept when the company opened in 2008, but it is great to see a major news source like the Wall Street Journal realizing that the next generations need to begin thinking about becoming the CEO of Family, Inc. and managing their household just like they do at work. Get one big picture of your Family, Inc. as soon as possible so you can begin to breathe easier® about life!
CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Editor in Chief of Your Smart Money Moves
Co-CEO and Founder of oXYGen Financial, Inc – The Leaders in Gen X & Y Financial Advice and Services
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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