Managing Family Finances

Scholarly research of family financial management supports scriptural teachings. Research shows that finances have a tremendous effect on family relationships and need to be considered a major part of the marital relationship. In their research about the effect of finances on family relationships, scholars have considered various factors that drive financial behavior, such as emotions, personality, and individual attitudes about money. They have also considered relationship behaviors that affect family financial management, such as communication, emotional intimacy, respect and consideration, and trust and love.

Research examining the causes of family financial problems shows that financial problems are caused by a lack of financial understanding, personal behavior problems, and relationship problems. Although some financial problems are simply caused by poor financial understanding that results in bad financial decisions, research suggests that most financial problems are caused by non-financial behavior problems. Examples include impulse buying, excessive materialism, preoccupation with status or social image, and using money to control others. Relationship problems also result in family financial problems; they include poor communication, mistrust, the controlling or manipulation of others, and selfishness.

From their research, scholars have provided insights and recommendations to help families manage their finances more effectively. These recommendations are based mostly on changing behaviors and attitudes. They include learning to distinguish between needs and wants, communicating openly and honestly about family finances, using a budget or financial plan, and understanding the connection between money and family relationships.

Finances and Family Relationships

Research shows that finances have a tremendous impact on family relationships and are often the cause of marital conflict.⁴ Researchers in various studies made the following observations:

• Finances ranked first or second in four surveys examining the causes of marital conflict.⁹
• Finances ranked second among a list of fourteen areas of disagreement in a survey of couples married only six months.³
• Financial struggles are one of the main causes of divorce in first marriages and difficulty in second marriages.¹
• One study indicated 89 percent of all divorces can be traced to financial arguments.²

Such research suggests that finances should be considered an important factor in the happiness and stability of the marriage relationship since it is often the cause of disagreement and divorce.

Although finances have a major effect on the quality of marital relationships, few people consider it. "Money is often a more taboo topic of conversation than sex, and courting couples may discuss their prior sex lives while never raising the question of their economic histories . . . [Personal finances] are the last frontier of self-disclosure".⁵ Money is a difficult topic for married couples to discuss because it involves powerful emotions.

Finances and Emotions

One of the reasons finances affect family relationships so significantly is the close link between money and feelings. "The way money is used can symbolize such feelings as anger, fear, guilt, or power struggles. It often symbolizes feelings of love or rejection. Giving money or things it can buy may be seen as an expression of affection or conversely as a substitute for personal attention and caring. On the other hand, withholding money or financial support may be used as punishment or perceived as rejection, lack of empathy, or a manipulative use of power".⁶

Bernard E. Poduska instructs families to consider the feelings behind their financial behavior, stating "We seldom spend money just to obtain things. Rather, we spend money to experience the feelings associated with the things."⁷ For example, a husband may spend money on flowers for his wife to feel happy about caring for her and to make her feel loved and appreciated. Or an individual may spend money on a new outfit to feel more confident and attractive.

The understanding of the relationship between money and emotions will help a family understand its financial problems or behaviors and implement effective financial plans. For example, a father may realize he acquired credit card debt because he spoiled his daughter with toys to make up for missing her piano recital and relieve his own feelings of guilt. Or a couple may realize that the wife goes on shopping sprees to get revenge because she feels the husband is too controlling of the finances. Such understanding can be a step to solving financial problems.

Individual Attitudes about Money

Money has a symbolic meaning to most people that has developed from their childhood. "One partner may have been socialized that money was a scarce resource and the other partner socialized that money was a relatively infinite resource. One or both partners may highly value material goods, comfort, status, and convenience. Conversely, one or both partners may prioritize saving or giving generously to causes they cherish".⁶

For example, a husband who saw his own parents struggle financially may be reluctant to spend money on luxuries like vacations or jet-skis. Or a wife who grew up in an affluent home may expect to own expensive items and brand names. Differences in values and the symbolic meaning of money may be the cause of financial conflict between husband and wife.

Personality traits also have a significant affect on a person's attitude toward money and financial management. Bernard E. Poduska notes that Alfred Adler identified four common lifestyles or personality types that give insight to an individual's financial behavior:

• Superiority
• Control
• Pleasing
• Comfort seeking

The person whose lifestyle is based on superiority feels a need to be better than others. He or she may seek superiority through status symbols such as expensive cars or brand names even if he or she cannot afford them. A control-based person seeks control in three areas: control of self, control of others, and control of situations. Individuals who focus on control tightly manage money. They spend money only on their needs and do not give in to impulses to purchase wants or luxuries. They may have difficulty sharing the responsibilities of financial management with a partner and may make financial plans that are too rigid or strict for other family members.⁷

Individuals who live what Adler calls a "pleasing" lifestyle are focused on pleasing others to avoid rejection and be accepted. These individuals may use money to buy gifts for others in return for their acceptance and love. People who seek to please others may have difficulty saying no to family members or salespeople. For example, an individual may buy an unneeded appliance from a door-to-door salesperson because he or she didn't want to say no.

Finally, a comfort-seeking individual is focused on ease and comfort. An individual with this personality trait may be self-indulgent and unable to distinguish between needs and wants. Comfort-seeking people may refuse to delay their wants and incur debt to satisfy them immediately. For example, an individual may buy a new, fashionable winter coat on store credit even though he or she has a perfectly good coat from last year.

Financial Problems Are Behavioral Problems

Financial problems typically originate with behavior problems. Although some financial problems are caused by external events, such as death, divorce, or unemployment, many are caused by negative financial behavior. Many people believe their financial problems would be solved if they only had more income; however, most people continue to have financial problems even after their income increases because they do not change their financial habits.

Scholars have identified the following behaviors that can cause financial problems:

• Materialism and an obsession with social image: Individuals may spend money on items they cannot afford in an effort to improve social status or accumulate material things. For example, a newly married couple may buy a luxury car in an effort to "keep up with the Joneses."
• Impulsive and addictive behavior: Individuals may purchase items impulsively, including expensive items they do not need or cannot afford. Or individuals may have expensive addictions like gambling, alcohol, or illegal drugs. Addictive behaviors can put a serious strain on financial resources, and individuals with impulsive or addictive behavior may incur chronic debt to satisfy their cravings.
• Failure to determine what is sufficient: Married couples may increase their expenses as their income increases instead of living on what is sufficient for their needs and saving the remaining income. Bernard E. Poduska calls this an open-ended budget versus a close-ended budget. With a close-ended budget, a couple determines how much money is sufficient for their basic needs and then saves any surplus income instead of spending it.⁷
• Lack of financial management skills: Married couples may lack the self-discipline or organization to use a budget, control their spending, pay bills on time, and make wise savings and investment decisions.
• Lack of financial understanding: Married couples may not realize the true cost of a purchase because they don't consider the significant hidden or indirect costs associated with a purchase. For example, an individual buying a car may not include insurance, gas, and maintenance as part of the car's cost. Married couples may also fail to determine the cost per use for a particular item. For example, an individual may purchase an expensive kitchen appliance that will only be used once or twice.

Behavioral Solutions to Financial Problems

Responsibility and Consideration

To eliminate financial problems, married couples need to eliminate the behavior problems behind poor financial management. First, they need to act responsibly and be considerate of each other's needs and feelings. Bernard E. Poduska warns, " one of the quickest ways to destroy a marriage, or any other relationship, is to allow a love of things to become a higher priority than a love of each other".⁷ Spouses should be considerate of each other as they manage money and make decisions that are best for both partners.

Allocation and Control

One issue married couples must consider is the allocation and control of their money. In addition to spending money on their basic needs, most families have enough money to purchase some wants. Married couples must decide how their extra income will be allocated to these different wants. For example a husband and wife may disagree on how to spend their tax return. The wife may want to spend the money on remodeling the kitchen, while the husband wants to save the money for the children's college education. Resolving such disagreements will require understanding and cooperation.

Couples must also decide who will control the money and how much. This requires a significant level of trust and love in the relationship. The person who controls the money must make decisions that are best for all family members. Additionally, the other spouse must have enough trust that the person controlling the money will seek the interests of all family members and consider their needs and feelings.

Role Specialization

Research shows it is helpful for couples to have clearly defined roles regarding the family financial management. In a study of financial behavior among married and divorced couples, researchers found more happily married couples shared financial responsibilities equally ^.8 Such responsibilities include balancing the checkbook, paying bills, and investing saved income. In Schaninger and Buss's study, equal role specialization indicated "less husband dominance and greater influence of the wife in handling various areas of family finance".⁶ Scholarly research suggests that married couples should divide financial responsibilities according to skills and interest rather than a male-dominated or joint decision-making policy. For example, the husband may be responsible for paying the bills and making investments while the wife is responsible for day-to-day spending on groceries, clothing, and activities and updating the budget.

Needs and Wants

Families also need to re-evaluate their definition of needs and wants. Married couples should have a clear understanding of how much income is sufficient to meet their needs and plan to save or spend their surplus income according to their values. Married couples focused on obtaining their wants instead of their basic needs will usually be unsatisfied with their income. On the other hand, families content to have their basic needs met tend to be happier and more satisfied with their financial status.

"A couple may believe that they will have great happiness when they finally get a new car, build an addition on to their house, or go on a special vacation. But attaining a goal with a high price tag does not usually sustain a sense of increased financial well-being. Rather, we soon revise our expectations for a new level of consumption".⁶

A couple caught in the trap of obtaining their wants may find that yesterday's luxuries become today's necessities and that they are never satisfied with their standard of living. Bernard E. Poduska warns, "the need for 'more income to purchase goods and services' can become an endless, futile quest unless you come to grips with who you are and what you really want out of life".⁷ A couple content to have enough money to provide for their basic needs may be happier than a couple dissatisfied with their income level, even if it is higher than the other couple's.

"Studies have reported that perceived income adequacy is a more powerful indicator of family economic well-being than income . . . families that believe their income is adequate manage their resources better than families that believe their income is inadequate . . . the family with adequate perceived income may actually have less money than the family that believes its income is inadequate".⁶

When a couple really evaluates their basic needs and manages their money according to those needs, they are more likely to be happy and satisfied with their level of income; and they will manage their money better.

Design and Implement a Financial Plan

Scholarly research shows a financial plan is critical to financial success and marital happiness. One study found the most important factor in financial satisfaction is a financial plan or budget.¹⁰ Despite the importance of a family budget, only 50 percent of American families use a budget and only 12 percent use a written budget.¹¹

Bernard E. Poduska comments, "Over a lifetime, the average family will manage between $1.5 and $2 million. Imagine running a business that will gross a couple of million dollars and deciding that it is not necessary to write anything down - 'We'll just wing it.' Far too often this is exactly what families do".⁷

Poduska suggests a married couple should use the following practical steps when developing a budget:

1. Evaluate how much money they think is coming in and from what sources, as well as how much they think is going out and for what purposes.
2. Compile an accurate account of what is actually happening financially.
3. Develop a survival budget to show just how little money would be required to take care of their basic needs, rather than satisfying their wants.
4. Develop a projected budget, making a relatively accurate guess about how much money they expect to bring in and how much they expect to spend in each budget category.
5. Compare the projected budget to their actual income and expenditures.⁷

Married couples developing a new budget will learn through trial and error how to estimate their income and expenses and follow their budget. Family financial plans should consider the feelings, values, attitudes, and behaviors of all individuals involved. An understanding of the behaviors and attitudes that affect financial management will help couples implement a more effective financial plan that meets their needs.

"Most families have difficulty managing finances because they focus on numbers rather than on people. Budgets are seen as a means of accumulating things rather than as a means of experiencing feelings, enhancing relationships, and encouraging spiritual growth".⁷

Following a financial plan based on sound principles and considering the needs and wants of all family members will increase the financial stability of families and also increase the happiness and stability of marital relationships.

Ideas for Practice at Home

Seek Understanding

• Be aware that each individual has different values, standards, and goals that influence his or her view of money and its uses.
• Understand the family financial rules that existed in your spouse's family of origin and how they affect his or her financial perspective.Communicate openly and lovingly with your spouse about your family financial patterns. Assess your family financial rules and decide which ones you want to keep and which ones you want to change.
• Increase your financial understanding and skills by using community resources like libraries, schools, and seminars.
• Consider the motivation behind your financial habits. Do you spend money to "keep up with the Joneses" or improve your social image? Do you spend money to buy the love and affection of others? Do you control the family money too much because you do not trust your spouse?
• Plan a family activity to teach all family members about the family finances. For example, cash your paycheck and show your children how the money is allocated to various expenses and savings programs.

Change your Financial Behavior

• Manage your money with a written budget.
• Make a list defining each spouse's financial roles and responsibilities.
• Make purchases that are appropriate to your income level.
• Make a list separating your basic needs from your wants. Keep expenses constant even when your income increases.
• Give family members some allowance to spend how they choose, without being accountable to anyone.

Cut Expenses

• Avoid impulse buying. Make a shopping list and stick to it. Don't carry credit cards or checkbooks. Set time delays or waiting periods before making large purchases.
• Establish a limit to the amount of money either spouse can spend before consulting his or her partner. This limit will vary according to the life-stage of the couple; it may be $100-200 for an established couple and only $20 for newlyweds.
• Share the purchase and use of expensive items. For example, buy a snow blower with your neighbors, or purchase a cabin or boat with your family.
• Calculate hidden and indirect costs associated with a purchase.
• Set up a thirty-day menu to plan and save on grocery purchases.
• Eliminate debt and interest payments. Use an accelerated payment or fold-down plan for debt reduction. Avoid using credit for things you do not need.

Prepare for the Future

• Establish an emergency savings fund of at least three months' income. If the family has only one breadwinner, consider having savings of six months' income.
• Review medical, life, and property insurance policies to make sure they fit your circumstances.

Recommended Readings

Poduska, B. E. (1993). For Love & Money: How to Share the Same Checkbook and Still Love Each Other. Salt Lake City, UT: Deseret Book Company.

Helpful Websites

www.financialplan.about.comwww.kiplinger.comwww.smartmoney.comwww.fidelity.com

Written by Susan Sheldon, Graduate Research Assistant, and edited by Bernard E. Poduska and Stephen F. Duncan, professors in the School of Family Life, Brigham Young University.

References

1. Albrecht, S. L., Bahr, H. M., & Goodman, K. (1983). Divorce and remarriage: Problems, adaptations, and adjustments. Westport, CT: Greenwood Press.
2. Ashton, M. J. (1975, July). One for the money. Ensign, 72-75.
3. Bader, E. (1981). Do marriage preparation programs really help? Paper presented at the annual conference of the National Council of Family Relations, Milwaukee, Wisconsin.
4. Blood, R. O. & Wolfe, D. M. (1973). Husbands and Wives. In R.E. Bell (Ed.), Studies in marriage and family therapy. New York: Thomas Y. Crowell.
5. Blumstein, P., & Schwartz, P. (1983). American couples: Money, work, sex. New York: William Morrow.
6. Hogan, J., & Bauer, J. (1988). Problems in family financial management. In C. S. Chilman, F. M. Cox, and E. W. Nunnally (Eds.), Employment and economic problems (pp 37-53). Beverly Hills, CA: Sage Publications.
7. Poduska, B. E. (1993). For love & money: How to share the same checkbook and still love each other. Salt Lake City: Deseret Book Company.
8. Schaninger, C. M, & Buss, W. C. (1986). A longitudinal comparison of consumption and finance handling between happily married and divorced couples. Journal of Marriage and the Family, 48, :129-136.
9. Troelstrup, A. W. (1974). The consumer in American society: Personal and family finance. New York: McGraw-Hill.
10. Williams, F. (1985). Family and personal resource management as affecting quality of life. Thinking globally - Acting locally. Washington, D.C.: American Home Economics Association.
11. Yankelovich, Skelly, & White, Inc. (1975). The General Mills American family report, 1974-75. Minneapolis: General Mills Consumer Center.

The teachings of the gospel of Jesus Christ provide guidance on effective financial management. The Family: A Proclamation to the World states parents have a sacred duty to provide for [their children's] physical needs. Gospel principles teach temporal blessings are a stewardship from the Lord. Characteristics of effective financial behavior include self-discipline, planning, frugality, gratitude, and charity. Secular research also reveals the importance of effective financial management in marriages and families. Because finances have a tremendous effect on family relationships, families need to design and implement financial plans that provide security, peace, and contentment in the home.

All Things are Spiritual

The gospel of Jesus Christ teaches all things are spiritual, including financial management. President Joseph F. Smith³ stated, "You must continue to bear in mind that the temporal and spiritual are blended. They are not separate. One cannot be carried on without the other, so long as we are here in mortality" (p. 208). Finances affect a family's spiritual growth and happiness and should be managed according to gospel principles.

Seek Ye First the Kingdom of God

The gospel of Jesus Christ commands families to first seek the Kingdom of God and teaches true happiness is found in eternal principles and not material possessions. Jesus Christ taught, "seek ye first the Kingdom of God, and his righteousness; and all these things shall be added unto you" (Matthew 6:33). The gospel also teaches,

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven. For where your treasure is, there will your heart be also (Matthew 6:19-21).

The gospel teaches the things of most worth are free, "now we have received, not the spirit of the world, but the spirit which is of God; that we might know the things that are freely given to us of God" (1 Corinthians 2:12).

Jesus Christ also warned against seeking worldly possessions; he said "no man can serve two masters: Ye cannot serve God and mammon" (Matthew 6:24) and "for what is a man profited, if he shall gain the whole world, and lose his own soul?" (Matthew 16:26). The leaders of The Church of Jesus Christ of Latter-day Saints have also warned against the pride associated with material wealth; President Spencer W. Kimball stated,

The Lord has blessed us as a people with a prosperity unequaled in times past. The resources that have been placed in our power are good, and necessary to our work here on the earth. But I am afraid that many of us have been surfeited with flocks and herds and acres and barns and wealth and have begun to worship them as false gods, and they have power over us. Do we have more of these good things than our faith can stand? Many people spend most of their time working in the service of a self-image that includes sufficient money, stocks, bonds, investment portfolios, property, credit cards, furnishings, automobiles, and the like to guarantee carnal security throughout, it is hoped, a long and happy life. Forgotten is the fact that our assignment is to use these many resources in our families and quorums to build up the kingdom of God.²

Jesus Christ taught wealth and temporal goods are to bless the poor and needy, as he instructed, "go thy way, sell whatsoever thou hast, and give to the poor" (Mark 10:21). The gospel of Jesus Christ teaches money is to be used to provide for family needs and build the Kingdom of God.

Financial Stewardship

The gospel teaches that material wealth is a stewardship to be used to build the Kingdom of God and families should first pay their obligations to the Lord; "Will a man rob God? Yet ye have robbed me. But ye say, Wherein have we robbed thee? In tithes and offerings" (Malachi 3:8). President N. Eldon Tanner taught the first principle of effective financial management is to pay an honest tithe.⁴

Second to tithing, material wealth should be used to provide for the basic needs of the family, "if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel" (1 Timothy 5:8). Because money is a stewardship, it should be managed responsibly according to gospel teachings and principles.

Family Financial Management

Consider Your Ways

The gospel of Jesus Christ teaches families to consider the use of their financial resources,"Now therefore thus saith the Lord of hosts; Consider your ways. Ye have sown much, and bring in little; ye eat, but ye have not enough; ye drink, but ye are not filled with drink; ye clothe you, but there is none warm; and he that earneth wages earneth wages to put it into a bag with holes. Thus saith the Lord of hosts; Consider your ways" (Haggai 1:5-7).

Partnership Between Husband and Wife

Financial planning affects all family members and requires a partnership between husband and wife. Elder Marvin J. Ashton counseled married couples to share financial responsibilities equally and stated both individuals should have a role in making financial decisions. He stated,

Management of family finances should be mutual between husband and wife in an attitude of openness and trust. Control of the money by one spouse as a source of power and authority causes inequality in the marriage and is inappropriate. Conversely, if a marriage partner voluntarily removes himself or herself entirely from family financial management, that is an abdication of necessary responsibility.¹

Elder Ashton further warned, "peace, contentment, love, and security in the home are not possible when financial anxieties and bickerings prevail."¹

Learn to Distinguish Between Needs and Wants

The gospel of Jesus Christ teaches families to be content when they have means that provide their basic needs. "For we brought nothing into this world, and it is certain we can carry nothing out. And having food and raiment let us be therewith content" (1 Timothy 6:7-8). President Brigham Young further taught, "our real wants are very limited. When you have what you wish to eat and sufficient clothing to make you comfortable, you have all that you need".⁵

Families should be grateful their basic needs are met, "giving thanks always for all things unto God" (Ephesians 5:20) and should not desire material possessions beyond their needs, "thou shalt not covet thy neighbor's house, thou shalt not covet thy neighbor's wife, nor his manservant, nor his maidservant; nor his ox, nor his ass, nor any thing that is thy neighbor's" (Exodus 20:17).

Live on Less Than You Earn and Avoid Debt

The leaders of The Church of Jesus Christ of Latter-day Saints teach families to live on less than they earn and avoid consumer debt. President Heber J. Grant counseled,

If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet.

The scriptures teach "the borrower is servant to the lender" (Proverbs 22:7) and give the following counsel, "pay the debt thou hast contracted. Release thyself from bondage" (D&C 19:35). President Tanner⁴ discusses the pitfalls of consumer debt,

For most of us there are two kinds of financial debt-consumer debt and investment or business debt. Consumer debt refers to buying on credit those things we use or consume in daily living. Examples would include installment buying of clothes, appliances, furniture, etc. Consumer debt is secured by mortgaging our future earnings. This can be very dangerous. If we are laid off work, disabled, or encounter serious emergencies, we have difficulties meeting our obligations. Installment buying is the most expensive way to purchase. To the cost of the goods we buy must be added heavy interest and handling charges.

Develop and Live within a Budget

The leaders of The Church of Jesus Christ of Latter-day Saints teach families to manage their finances according to a budget. President Tanner⁴ states,

Far too many people do not have a workable budget and have not disciplined themselves to abide by its provisions. Many people think a budget robs them of their freedom. On the contrary, successful people have learned that a budget makes real economic freedom possible. Budgeting and financial management need not be overly complicated or time-consuming.

Plan for the Future and Prepare for the Unexpected

The leaders of The Church of Jesus Christ of Latter-day Saints counsel families to save money and plan for emergencies. President Tanner directs families to save and invest their financial resources,

We should by frugal management regularly save to create funds for investment. It has been my observation that few people have been successful with investments who have not first developed the habit of saving regularly. This requires discipline and discriminating judgment. There are many ways to invest. My only advice is to choose wisely your investment counselors. Be sure they merit your confidence by maintaining a successful investment record.⁴

In addition to the financial security of savings and investments, President Tanner counsels families to prepare for emergencies by obtaining necessary insurance.⁴

Nothing seems so certain as the unexpected in our lives. With rising medical costs, health insurance is the only way most families can meet serious accident, illness, or maternity costs, particularly those for premature births. Life insurance provides income continuation when the provider prematurely dies. Every family should make provision for proper health and life insurance.

Teach Children about Finances

Finally, the teachings of The Church of Jesus Christ of Latter-day Saints instruct parents to teach their children so they will be financially prepared. President Tanner stated

One of the greatest favors parents can do for their children is to teach them to work. Much has been said over the years about children and monthly allowances, and opinions and recommendations vary greatly. I'm from the "old school." I believe children should earn their money through service and appropriate chores. Some financial rewards to children may also be tied to educational effort and the accomplishment of other worthwhile goals. I think it is unfortunate for a child to grow up in a home where the seed is planted in the child's mind that there is a family money tree that automatically produces cash once a week or once a month.⁴

The gospel of Jesus Christ teaches that material wealth is a resource to provide for families and build the Kingdom of God on earth and should be managed according to gospel principles. The gospel further teaches the pursuit of wealth should not be a higher priority than living the gospel and seeking its blessings.

References

1. Ashton, M. J. (1975, July). One for the money. Ensign, 72-75.
2. Kimball, S. W. (1976, June). The false gods we worship. Ensign, 4-6.
3. Smith, J. F. (1877). Gospel Doctrine. Salt Lake City: Deseret Book.
4. Tanner, N. E. (1979, November). Constancy amid change. Ensign, 80-82.
5. Young, B. (1871). Journal of discourses, vol. 13. Liverpool, England: Horace L. Eldredge.