Household finance deals with how families manage money, especially expenses and savings.
Learning efficient management of household finances is good for our financial health. But why is household finance important? Is there a mathematical formula for saving? Below we answer frequent questions about our household’s finances.
How to manage our household finances? Income and expenses
Household finances are often a major concern for families. Still, some don’t make a plan for them and miss things that may be harming their financial health.
We should start with the concept and elements of household finances in order to know how to manage them. Household finance refers to a family unit’s management of money to meet its members’ needs.
It consists of:
Today, there’s no secret formula for managing household finances, since we must look at each family’s circumstances. Still, there are tools and recommendations we can use to improve our finances and, with them, our physical and mental health. Read about it in this article (in Spanish) on the Openbank blog.
How couples can plan their household finances
Chasing new trends, sales, passing fancies... it all may seem harmless, but it’s actually bad for our financial health. It’s a sign that our household finances are in need of planning: it’s about not only unforeseen or unnecessary spending, but also mismanaged expenses. Check out this common example:
María and Héctor are a young couple who've decided to move in together. Because both have been working for a couple of years in the industries they studied, they can pay the Internet bill, petrol and other small expenses to manage their incipient finances. But now, they want to make the move to live together.
After a few months of living together, they sit down and discuss their household finances. Contrary to what they imagined, they’re seeing their monthly income take a dive because of their expenses. So, they make a budget on an Excel spreadsheet based on their income and expenses to compare the difference.
Even though that’s a good way of getting information, they need to make sure they analyse it the right way. At first, they think the answer is cutting back on their ant expenses: last-minute chewing gum at the shop; a daily snack from the office vending machines; going out for breakfast every day; etc. However, they’ve completely ignored their variable expenses – the ones they can’t get rid of altogether but can reduce substantially if they slightly change their routine. Some common errors are leaving the lights on at home or forgetting the expiry date of food that they’ll have to throw away when it goes bad.
Basic household finance tips: learn to manage
Today, we have many programmes, apps, books and other tools (like these suggestions from Santander Consumer España in this article in Spanish on its Tu Futuro Próximo [“Your Upcoming Future”] blog) to have better financial health.
Following recommendations for our circumstances and needs doesn’t have to be annoying. As proof, here are three fun challenges you can add to your daily routine to improve your household finances.
Can you think of another challenge to help your household finances? Learn about more tools to improve your family’s financial health in this article (in Spanish) by Finanzas para Mortales (Finance for Mortals).