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Money Matters

Money Matters: For richer, for poorer

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Question: My husband and I are constantly arguing about money, particularly on who should control the family’s finances. We are also at odds as to whether we should maintain just one account for our personal spending or maintain separate accounts. Can you give us direction?—Sent via “ask a friend, ask Efren” service on www.personalfinance.ph

Answer: Imagine a country with no constitution; it would be in utter chaos. And since the family is the basic unit of society, it too should have a constitution, more specifically a financial constitution. Furthermore, you and your husband should agree on the provisions of this financial constitution.

At RFP® Philippines, we teach that household finances can be run in the same manner as company finances. In a company, the board of directors sets the policies based on the by-laws and rules on corporate governance set out by the board itself. This board answers to the company’s shareholders.

In a household, husband and wife are the default members of the board.  As their children come of age, they can be included as observers and/or advisers. The financial constitution takes the place of by laws and rules on corporate governance.

The shareholders of the household are just the spouses.

In a company, policies set out by the board are executed by management, who are appointed based on their ability to perform specific functions.  The “C” levels of management in a company are the chief production officer, chief marketing officer, chief human resources officer and chief finance officer (CFO). The chief executive officer (CEO) coordinates and activities of the other “C” level officers, provides direction and is where the buck stops. Management reports to the board.

In a household, only the spouses can be appointed to the “C” levels of management. And in the typical Filipino family, the husband takes on the roles of chief production and marketing officer. The wife assumes the roles of chief human resources and finance officer.

Please note though that with the exception of the CEO, no “C” level management position is higher than the other. In fact, in households where both spouses work, husband and wife share in the duties and responsibilities of all of the “C” levels of management. Nevertheless, the role of CFO should ideally go to the person who has the know-how, discipline and patience required in financial planning, record-keeping, financial analysis and financial risk management. The CEO is the person who can direct the household, makes the ultimate decisions and is where the buck stops.

Ask your spouse who among the two of you is better in these areas.

As to whether husband and wife should keep separate accounts for their personal spending, consider how profits are booked in a corporation vs a household.

Revenues for a corporation come from its sale of goods and services. Deducted from revenues are operating expenses of the firm. Any excess is profits available first for reinvestment in the corporation to afford higher levels of dividends in the future and eventually for distribution as cash dividends to the shareholders.

In a household, revenues come from salary, professional fee, gross income from business and the like. Deducted from revenues are the household’s operating expenses, which include both fixed and variable operating expenses. Anything in excess would be profits available first for reinvestment in the household to afford higher standards of living in the future and eventually for distribution as cash dividends to the household’s shareholders.

In a household, the only two shareholders are entitled to a split of the household’s dividends. But this is only possible after the reinvestment requirements of the household are first met. If there is nothing left after reinvestment, then neither husband nor wife gets to enjoy any dividends.

On the other hand, if the household has already met its lifetime financial goals, all profits can be distributed to the household’s two shareholders. This is typically the case when husband and wife are nearing the end of their life.

Please note two things: 1) dividends to shareholders or household members are never paid out of debt but only from excess profits; and 2) it is only at the option of and not a requirement for either husband or wife to surrender his or her share in the dividends to the other or to their children.

To help you better in financial planning, please download Ya!man™, the country’s first personal finance mobile app. The Android version of Ya!man™ may be downloaded from Google Play. The app’s Symbian (40 or higher) OS may be downloaded from www.personalfinance.ph. The iOS version is coming very soon. Ya!man™ also comes with a feature where you can pose questions to a financial expert. And everything with Ya!man™ is absolutely FREE.

If you want to learn more about effective personal finance for couples, please visit www.personalfinance.ph. You may also want to attend EnRich™ on Aug. 3, our public training on personal finance. Details for EnRich™ may be found in the website.

Have a financial constitution. It will go a long way in fostering peace and harmony within the family.

(Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines, personal finance coach, seasoned investment adviser and bestselling author. Questions about the article may be sent by SMS to 09175050709 or e-mail to efren@personalfinance.ph. To learn more about the RFP program, attend a FREE orientation on Aug. 8, 7 p.m. at the PSE Center. Text Name_E-mail_RFP Info at 09173464126 to register.)

 

 


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  • rickysgreyes

    Bigay pera sa Misis

  • GProf007

    In our household it has been agreed upon the role and our perception of money plus what it means to be married. For my wife and I regardless of who brings more the money we earn is “ours” not mine not hers but ours… regarding roles… she’s considered as CFO since she’s better at tracking the budget… and I’m on CEO… we’ve also agreed on the computation and allotment of budget line-items (daily allowance, groceries, bills, savings, investments, etc.)… we also agreed that anything outside the budget line-item will need for us both to agree on… but ultimately, I have agreed veto power on the budget… which I use from time to time if I believe such monetary release will be detrimental to our family or might lead to problems in the foreseeable future.

  • Descarte5E

    To me it’s simple, one who is more frugal or stingy and who can maintain monthly savings regardless of how much the salary is, while still able and ensure to regularly pay utility and credit card bills should take control of the money. But can also apply what is being done in a company. List down all expenses in a monthly budget, bills payments, food, kids school expenses, etc., Then the couple will see whether the combined salary is enough and if there is any surplus, then it goes to the savings or investment like a real property. Work on the monthly budget that there is a positive variance (budget – actual expense) for each item. Example, if electric bills is too high, try to cut down consumption; work out to remove unnecessary expenses to generate savings. Argument about money is normally caused by unnecessary expenses. When an expense is necessary, I believe there is never an argument and the couple understand the situation. Vices are unnecessary. Shopping for items that will eventually go to the garbage bin is unnecessary. Going to the parlor and maintain beauty and keeping in shape is necessary when affordable, there is no better sight at home than an ever-lovely looking couple.

  • UrHONOR

    TOO structured. Thoeretically, the principle is sound, but in practice playing by ear preserves the bliss and joy of raising a family without being glued to the numbers as in a corporate setting. Without immoderation and inconsideration in spending and with sufficient income to meet essential espenses, love for one another will carry things through.

  • http://pinayshopper.blogspot.com/ PinayShopper2010

    creating a black n white budget is the most basic thing that you can do and often than not taken for granted
    list everything down. list all the due dates of each payment. list all your income. combine your income and work out who should be responsible in monitoring and paying the bills on time. give that amount to that person.
    set an allowance amount for the husband and the wife, which is separate from the bills kept in individual accounts.

    anything that’s left (savings and investments) should be kept in a joint AND account.

  • eight_log

    Success starts at home where there is peace, harmony and understanding. A place where, the moment you enter, one feels the aura of tranquility in the midst of laughter and joy of those occupying the place called home!!!!

    My wife has her own account which I never check. We have a joint account purely from my income. I never ask where this and that went … she pays all the bills and gives me my allowance … I mostly use the card which I am an extension of hers… I try to make her happy all the time … that is the only way I could get my daily allowance hahahaha. Whenever I am home, I do most of the chores and because of that she calls me a houseband … told her it was never my intention to marry a maid but marrying a goddess was a dream!!!!

    It is our silent understanding that when there is a differing view which we cannot reconcile, we avoid doing it. Consensus is our golden rule business or otherwise!!!!

  • OFW_Investor

    Trust is important. For Household expenses, it is best to have one account (food,mortgage(s),utilities,etc. and personal expenses separately with each responsible with agreed limits. Main Responsibility should go to those who does the heavy lifting. i.e if the Man has a thing or two for grocery,paying bills then he should be handling the money, otherwise, mothers knows best.
    In Investments, goals should be set and discussed to avoid misunderstanding and a regular/pre set saving / investing guidelines can be implemented . This to monitor inflows and outflows in the household on a consistent basis without the other regularly questioning the motives of the other. A series of goodwill gestures on each party can do a lot to maintain the peace and harmony,



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