What Financial Records Should We Keep?

            Families, communities, and nations are stronger when parents teach the basic of money management to their children. An important skill to learn is how to keep good financial records. This is an area that I struggled with and needed some counsel.

            E. Jeffrey Hill and Bryan L. Sudweeks wrote about financial records in their book titled Fundamentals of Family Finance – Living Joyfully within your Means.

Habitually keeping your family’s important personal and financial records organized will contribute to your family’s financial success. Well-kept records help you track how your money is being spent, which will help you create and stick to a budget. Additionally, organized record keeping helps you easily find the information you need to file your taxes. Should an emergency arise, family members and legal representatives may need to access your financial information, and an organized set of records will help them easily find the necessary information (2016, p. 26).

            The authors suggest several documents as important to good financial records. The first document is a family income and expense statement that keeps track of the “past cash inflows and outflows over a specified period of time.” Cash inflows include all the income that is available for family expenses, such as “net wages and salaries, … tips, interest, dividends, royalties, gifts, tax returns, scholarships, and refunds” (Hill & Sudweeks, 2016, p. 28).

            Cash outflows include all family expenses, which fall into two categories – fixed expenses and variable expenses. Fixed expenses include tithing, rent or mortgage payment, car payment, insurance payment, loan payments, and property taxes. Variable expenses include things like food, eating out, clothing, entertainment, and vacations. “An income and expense statement is a record of your family’s past financial history and a budget is your family’s financial for the future.” The next document is “a snapshot of your family’s present financial situation” (Hill & Sudweeks, 2016, p. 30).

            The second important document is a family net worth statement, otherwise known as a balance sheet. A “family net worth statement is calculated by subtracting the monetary value of your family’s liabilities from the monetary value of your family’s assets. This document is used to determine “your family’s financial health and in making financial decisions” (Hill & Sudweeks, 2016, p. 30).

Assets include monetary assets, investment assets, retirement assets, real estate, vehicles, furniture, clothing, jewelry, and electronics. Liabilities are divided into current liabilities and long-term liabilities. Current liabilities include credit card balances and unpaid utility bills. Long-term liabilities include debts that have repayment periods longer than a year, such as auto loans, student loans, and home mortgages. Net worth is found by adding all the assets and adding all the liabilities and then subtracting total liabilities from total assets.

The third important document is a family budget. Once you know your past spending and your current financial situation, you will be in a position to plan for your financial future. President Spencer W. Kimball taught the following.

Every family should have a budget. Why, we would not think of going one day without a budget in this Church or our businesses. We have to know approximately what we may receive, and we certainly must know what we are going to spend. And one of the successes of the Church would have to be that the Brethren watch these things very carefully, and we do not spend that which we do not have (“Finances,” Eternal Marriage Student Manual).

            Hill & Sudweeks gave five repeating steps for effective budgeting. The steps are as follow: “1) Set goals to address family needs and wants, and determine financial resources needed to meet those goals. 2) Categorize your current income and spending (family income and expense statement). 3) Develop your family budget by allocating income to budget categories that will meet your family’s goals. 4) Implement your budget by tracking income and expenses against your budget. 5) On a regular basis (usually monthly), compare your budget to your actual expenses and amend your budget when necessary to achieve your goals” (2016, pp. 32-33).

            When setting your goals, be sure to make them SMART. This is an acronym for Specific, Measurable, Attainable, Relevant, and Time-bound. “Your family goals should also be written down, because, ‘A goal not written down is merely a wish.’” (Sean Covey) (Hill & Sudweeks, 2016, p. 33). Whatever other categories are in your budget, the authors urge two specific ones – miscellaneous and Mad Money (certain funds set aside for each spouse to spend without needing to account for it). Another important item to remember is to budget for both short-term and long-term goals. Then find a way to keep a budget that works for your family.

            Three important documents for effective money management are income and expense statement, net worth statement, and budget. They can tell you past spending, current financial situation, and future financial situation. Wise parents who learn to keep good financial records and then teach the skills to their children can strengthen their family, their community, and their nation.