TWO PRINCIPLES OF FAMILY FINANCE
Inflows and outcomes
The structure that regulates family expenditure is a budget. A budget is a useful tool of resource allocation but it is not the ultimate in terms of determining wealth and success.
Indeed, a budget will do no more than you tell it to do. Like the “garbage in, garbage out” principle of computer operations, people use budgets to justify their actions. While those who do use budgets should be commended for making a more than an amateur attempt at managing money, those who will succeed in creating wealth will step up to the principle of managing inflows and determining outcomes.
If you appreciate that money has to come in before it can be spent, you develop a tremendous amount of respect for those who make the time an effort to generate income. Given that inflows are not a matter of visiting the bank, income is recognized as created capital some of which needs to be retained if the family is to accumulate wealth. It with this in mind that specific outcomes can be designed into the process of budgeting and the usage of those funds to facilitate family success. Principles that emerge from this understanding include; spend less than you earn, multiply what you earn and grow your savings
Though the financial origins and circumstances of your family beginnings are unique, your destiny is determined by how well you manage the seasons of family life. Every family moves through a predictable life cycle. However, unlike the ups and downs of a normal business as a going concern, the seasons of family life are a growing concern. In other words, the concerns grow gradually and predictably over time. At the start of a family there are two youthful people with a great deal of energy and only their careers to deal with. As time moves on children and family concerns grow into rising demands of urgent attention. By middle age you family members employment or enterprise may no longer be guaranteed yet family needs are at their peak. Shortly afterwards society begins to sideline your participation in the economy and your basic needs become a crisis of continued existence. Poor preparation for seasons ahead leads to a great deal of family frustration and regret. But understanding the principle and authority of seasons will enable you to order your family life, make wise financial decisions, invest in long term priorities, build your house early and implement a strategy to earn passive income. Start sowing and saving early and by God’s grace you will harvest sustainable returns in later years that you will hand over to generations to come.