A report by the nonprofit National Bureau of Economic Research (NBER), states that the current economic downturn began in December of 2007, making this the longest recession on record. As families across the country continue to cope with concerns over job security, decreasing home values and rising consumer prices, many are wondering how to maintain a sense of normalcy in this new economic reality.
Were you and your family caught off-guard by this recession or were you prepared with a realistic spending plan and an emergency fund to help you keep up with your major expenses, i.e., mortgage, insurance, groceries utilities and other necessities? In his book, Yes, You Can... Achieve Financial Independence, James Stowers recommends taking steps to "deal with financial emergencies, before they happen" in order to ensure you and your family will get through challenging times.
Learning to live within your means and maintaining an emergency fund can reduce much of the worry over your financial well-being and give you the sense of being in control of your future. But, before you can manage your money, you must be aware of where it goes. Sit down as a family and look at how money flows in and out of your hands. This will help you establish a system to monitor and manage your money wisely:
- Track your dollars.
- Discuss spending issues as a family. When children are old enough to understand the concept of money, it is a good time to also teach them about using it wisely.
- Create a spending plan that is aligned with your priorities.
- Close the gap between income and spending.
- Create an emergency fund that will give you peace of mind in the future.
By putting this information on paper, you will have a better idea of where you can make adjustments to gain control of your money and maintain more financial security when the unexpected happens. And by doing this exercise as a family, you're teaching your kids what they need to know to better manage their money in the future.