MONEY MATTERS

HOW TO GET YOUR FAMILY'S FINANCES IN ORDER—NOW!—FOR 2010

Listen up, parents: It's time to get your finances in order. With the
new year fast approaching, there's no time like the present to take
action. Not only will being proactive about your money situation
make for a calmer, happier, and, ultimately, more successful year,
but it will get your kids on the right track while they're still young,
setting them up to have a healthy relationship with the the almighty
dollar for the rest of their lives.

Here, Spencer D. Sherman, CEO of Abacus Wealth Partners and author of The Cure for Money Madness, tells you how to make money matter to your little ones.

Our kids inherit more than our eye color and height—they also inherit how we think about money and how we behave with money. If, for example, you use money to feel good (buying a new sweater after a bad day, buying your kid a toy when you feel distant from her) you are literally teaching your kids that buying more things will somehow, eventually, fix the problem. They, too, will begin to feel a sense of deprivation—after all, if you did have enough, why would you need to constantly acquire more? They’ll also begin to believe a particularly problematic falsehood: the best way to ease discomfort is to make a purchase. It won’t be long before their own behavior mirrors the messages they got from mom and dad.

Rather than head down this road for yet another 12 months, take advantage of the New Year to get clear with yourself and with your kids about what your spending and saving will look like for 2010. Why is it important to include your children in this process rather than just let them figure out on their own that your spending is changing? There are two reasons. First, if you are up front with you’re kids about how you choose to spend the family money, they won’t create negative, imaginary reasons for the change. Just as children of divorce often invent that they are to blame for their parents’ split, children in homes with suddenly- tighter purse strings may come up with destructive, unhappy and untrue causes for the shift. Second, if your children feel they are a part of the decision process rather than serfs to your financial decrees, they are less likely to rebel or develop a negative attitude. This is particularly true of older kids.

So how do you decide what needs to be done in the New Year, and how do you talk about it with your kids?

Here are my 6 Top Tips for Creating Financial Family Fitness in 2010:

1	First and foremost: Before getting together with the kids, if you have a partner, share with him or her the money message you got from your parents so that each of you knows what inherited money beliefs you each bring to the table. You may be working with the basic belief that the love of money is the root of all evil, while your partner is positive that money makes the world go ‘round. If you don’t have a partner, have this talk with a friend. Recognize that our adult money activities are driven by childhood beliefs. This understanding can help you turn any judgments you may have about your own or your partner’s money habits into compassion.
2	Complete a Spending Intention worksheet with your partner—this gives you a clear picture of your actual cash flow and allows you to create a spending range for each category of expenses. And, if one of you tends to hand over the reigns when it comes to family finances (happily or begrudgingly), this will help to restore some balance.
3	Remember the value—and yes, the fun—of saving. Our grandparents generally couldn’t overspend much because they didn’t have Visas and Mastercards. If they wanted something, they typically paid cash up front, or (drumroll please) saved for it. Restore this practice with your children. Give them the experience of anticipation, excitement, and accomplishment that comes from saving, and experience it yourself by helping out. If there is something your kids really want this year—a bike, a trip to Disneyland—instead of using the credit card to buy it, develop a matching savings plan. If they save five dollars, you add 10.
4	Speaking of credit cards, let them go. It is wise to keep one or two on hand for emergencies and credit cards can play a role in restoring damaged credit. But generally, they should function as a spare tire, not a steering wheel. Overusing credit cards not only plants you firmly in the debt cycle, it’s teaching your kids—and yourself—that saving is essentially impossible or useless, and that you can have whatever you want whenever you want it. The thorny truth is that you can’t—not without paying the price in interest, stress, and the growing sense that you don’t have enough. If we want our kids to be patient and wise spenders, credit cards are teaching them the opposite values.
5	Sit down for a family money meeting, but take care to strike an information balance. Too much financial information stresses kids out. They don’t need to know all the details of your mortgage, the raise that didn’t come through, or the 401K that’s losing traction. If your intention is to decrease family spending, tell the kids how you are going to cut back and invite them to come up with ways that they can reduce the family’s spending as well. It’s beautiful to witness how children can step into greater maturity and responsibility when their ideas are taken seriously.
6	Finally—and trust me on this—there is nothing that will improve a family’s sense of security and wellness more than giving to others. It is the quickest way to dissolve a sense of not having enough or needing more. Generosity necessarily undermines our feeling of scarcity and sufficiency blossoms. So sit down, put your heads together, and select a beneficiary and an appropriate amount.

Spencer Sherman lives in Northern California with his wife, two kids, three chickens, and a dog. He is the CEO of Abacus Wealth Partners and the author of The Cure for Money Madness (Random House, 2009). To see Spencer’s schedule of upcoming workshops and speaking engagements, check out www.curemoneymadness.com.