Family finances! Our financial mess! How we started…
To talk about family finances I decided to start with our story.
Aline has a degree in business administration. She has always been a super organized person, saved money every month and wrote everything down. Her parents taught her that every month we should save something, and that ideally we should have the money for 3 month’s expenses saved. I, on the other hand, started out financially organized, and with very little resources was able to pay for college and snacks, but I wasn’t taught anything about money. When things got tight with college and I could no longer afford it, I simply went to the dark side and lost control. I started to spend more than I made without thinking about it until I got to the point in which I couldn’t enrol in my next semester because I owed a full year of college.
Aline and I married in 2006 and she said: this is what I make, I could control our family finances, but I think you should do it. Well… she was certifiably crazy. For the first 3 months when it was time to pay bills we would sit and cry together. Her parents helped us during this time and we are forever grateful for this aid, besides giving us our first apartment and other things they have blessed us with during our journey.
We soon saw that we had to get organized, especially regarding how we thought of finances. We found a way for both of us to see all our expenses, what we spent and dates in a big Excel spreadsheet. It was not at all user friendly and it changed during the first 5-6 years at least once a year, but we knew where all our money was going.
Know where your money goes
The best way to save money and keep your family finances in order is to know where your money goes, keep a record. Almost no one knows what percentage they spend in each area (groceries, living, fun, education, clothing, etc). If you pay rent or mortgage, chances are groceries are your second largest expense, and it can be controlled. More than that, if you want to organize your financial life, you should start in the kitchen.
Our first impact was in 2007, when we lived next to a huge supermarket in Curitiba. If we needed one egg, we went there and came back with a dozen eggs and a bag full of other stuff, of course. We decided to save our receipts for a few months and make a spreadsheet. Our total expense was R$400 (roughly C$200). Every weekend we would buy an ice-cream, each one cost R$10. This means that 10% of our grocery bill was spent on ice-cream! Whaaaat?
Our family finances organization came down to ice-cream and we decided to stop buying it for a while. It seems so innocent, just an ice-cream every weekend! But in less than a year we would have consumed a month’s worth of groceries in ice-cream. Thinking of the bigger picture helps when you’re buying something or thinking of creating a permanent expense. Suddenly signing cable didn’t mean R$120/month, it meant R$1440/year, and we thought of all we could do with R$1440. This resulted in us cancelling our cable in 2009 and never looking back. We haven’t missed it once.
For a while we used a great software called Quicken to control our family finances, and we were able to get on track, save money, pay our debts and live with a margin. Now, with our move to Canada, our spending categories and family finances organization is changing and we decided to use a simpler spreadsheet instead of quicken (we promise to share soon).
The magical solution for an organized financial life
If you want a magical solution for your family finances… sorry. It doesn’t exist. What exists is willpower to find more discipline and be more organized with your money. If you use a software, a phone app, a notebook, an excel spreadsheet… what matters is that you need to know where your money goes. Do you want a quick test to know if you’re financially organized? Answer this: What is your net annual income? What percentage do you spend on groceries? What percentage do you spend on restaurants? How much do you save every month, and how much more could you save if you shaved off the excess spending?
Wherever you’re at, don’t give up! You can always do better!
Come back for tips, tricks and ideas for living well on a budget!