A few years ago, I realized we had been budgeting all wrong. The revelation was particularly painful because I was considered a personal finance expert in the industry. I’d been writing for a huge string of credit unions, a nonprofit credit counseling service and a few big-brand investing firms. The household budget was supposed to be my jam. And it was… until the night everything changed.
It started when my husband left his book lying on the kitchen counter. As a business owner, he has always been an avid reader of organizational leadership books. If it’s on the Business Insider, Forbes or Wall Street Journal’s must-read list, then it’s in our house. The man is insatiable. So I wasn’t surprised to find myself handling the thing. Curious, I opened it.
Some life-changing events appear with a bang. It’s a big promotion, a scary diagnosis, a near-brush with disaster, or something equally dramatic. Other transitions are more subtle. Silent. Unassuming. This was one of those moments. As I read, it dawned on me that I, the expert, had been an advocate of a flawed way of household budgeting.
“We should be treating our finances like a business,” I said aloud in the empty room.
And from that moment, our family has never been the same.
The subsequent budgetary changes we made in the following weeks weren’t driven by willpower or “sense of right-and-wrong.” We didn’t pick up extra work or tamp down our hobbies to squirrel away more and more. Instead, we simply saw things differently, and acted the way an objective business owner would act. Somehow, stress dissipated, and we administered each expenditure as a decision. Not an emotional ordeal. The result was magical.
From a family that’s done it, here’s how to run your house like the literal boss you are, heading up a purposeful, well-oiled, profitable organization.
Define your purpose. All businesses exist to make money. It’s their job. And while healthy economies do rely on profits, great brands also have noble core values that drive them to choose one industry, one medium, one product over another. Your family should, too. Call it your why, your mission, or your collective expression. It doesn’t matter. What matters is that it’s clear. And here’s the thing: it can be as simple as a 3-word list of the things that you want to define you, or as elaborate as the 8-step craft-your-own Mission Statement from the ever popular Art of Manliness. As you talk about money together, discuss financial ideas, hopes and dreams. Write them down, however wild. My family’s is simple:
Johnsons are kind. The Johnson house is a safe place. And Johnsons love popcorn.
Personal finance gurus may call this goal-setting. Successful startups would name this the mission statement or even the bones of a loose business plan. I like “purpose.” And to be honest, what you produce together is less important than the benefit of meeting to forge a bit of solidarity.
Because you’ll need it for the next step.
List your revenue and necessary costs. In the world of personal finance, this is called a simple income and expenditures list. But in business, it’s a little more nuanced. You see, viewing your monthly expenses as the “costs” of doing business counters the sting of loss. Instead, expenditures become investments, and you have an asset to show for it. This naturally discourages spendy impulse buys by neutralizing the emotional thrill of doing something “naughty.” Especially if it clearly doesn’t benefit the operation as a whole. And for inherently frugal personalities, it soothes the pain of a larger-than-usual electricity or grocery bill as the high cost of operating a profitable enterprise. It’s a necessity.
Agree on your historical trends in this area, and how your organization could change to hit certain goals.
Hire and train helpers. Each family member has a unique skill set that can contribute to a stronger unit. Your partner may love office administration while you prefer strategic planning. Kids can sort mail, start a side hustle, or sniff out online restaurant deals to save on family outings. Bring out the best in each person by letting them fulfill their distinct purpose within the group. As one of the group’s leaders, this can be nerve wracking (ask any business manager whose employee “has a great idea”). But if you stick with it, you’ll be glad you did.
Turn them into shareholders. Once everyone has a role, give each family member an equal share in the operation. This way when the endeavor goes well, everyone wins. Yes, financially. Forget weekly allowance, and institute shareholder payouts. Trust me on this one. Six-year-olds love an incentive, and three-year-olds love whatever six-year-olds love. In a matter of minutes, you’ve gone from whining to working.
Tool up. Can you imagine a company trying to do business without any technology? Without a robust system of device-and-software? Well, then, neither should your family expect to operate a pencil-and-paper budget forever. Sign up for Cinch, a personal fiduciary in your pocket, so when it’s time to talk money, you’re ready with all the personalized, real-time data you need to run an effective business meeting with your tribe. In other words, hire an unbiased CFO for your family.
Balance fun with productivity. Let’s be real. Many households with kids spend much of the day surviving, and not much more. A business that tries only to “make it through the day” would soon fold. Instead, a profitable business balances hard work with hard play. Not only does this improve the health of employees, it means they produce better work and experience more satisfaction, a fact noted by the human resources experts at Forbes. Cultivate an entrepreneurial spirit in the house by brainstorming what it would take to raise funds for a dream vacation, for example, and then get to it. How much sweeter would your family’s fun experiences be if they contributed to the investment with hard work?
Re-Invest profits. The husband’s business book I picked up that fateful night, by the way, was called Profit First by Mike Michalowicz. The concept is simple: You can’t run (let alone grow) a business if you get distracted from the main objective, which is to profit. In personal finance, “profit” may have icky connotations, since the term somehow diminishes the importance of relationships. But saving your cream and investing it wisely into a growth fund for future “business” (that is, family) is the best thing you can do for those very people you want to nurture.
No, you can’t fire your kids or put your partner on leave-without-pay. But you can organize and motivate the people under your roof to a common cause: a happier financial future. Running your family like a business can give you the best of both worlds—a self-expressive spending plan, and all the profits of an enterprise.