Are you the primary decision maker when it comes to your household finances? Does your month begin with budgeting and end with analyzing the savings? If this sounds too familiar, the title ‘Chief Financial Officer’ (CFO) is just the right one for you! What makes this title apt is your role as a household CFO, which in many ways is similar to a company’s CFO who is expected to oversee its finances and make informed decisions.
Whether you have a full time job, work part time or are a stay-at-home mum, there’s no stopping you from becoming the CFO of your household and thus an expert in your household finances.
Spend the right way
Managing your household expenses every month can be overwhelming. On one hand are the regular expenses such as groceries, utility bill payments, recreational spends for which you need your pockets full. And then there are the bigger financial commitments such as rent payments, loan installments, school fees, insurance premiums, etc.
The efficiency of your household finances depends on how well you plan these small and big spends. This is where a budget comes into play, which helps you manage your income and expenses, and also maximize savings.
[Related: Balancing career & family: The working mom’s dilemma]
Below are a few budgeting tips to help you manage your household finances better:
- Choose a budgeting style that suits your requirements. Have you heard about the 50/20/30 rule? This is a popular budgeting tool wherein you allocate about 50% of your salary towards needs, 20% towards savings and 30% towards wants.
- Trashing the receipts? You can track your expenses better if you save all your bills and receipts or make a note of these in your budgeting records.
- Need an easier way of making payments? Setting reminders for monthly bill payments is important to avoid missing any due dates. Utility bills such as DEWA, Du/Etisalat bills can also be paid automatically by setting the direct debit facility on your bank account or credit card. For credit card payments, you can opt for the auto-debit option to ensure timely payments to avoid paying hefty interest.
- Old school budgeting? While many still find pen & paper budgets appealing, you can also use other tech-savvy ways of money management through the many budgeting apps available.
- Save for a rainy day? Make sure to set aside some money in an emergency fund every month to help you get back on your feet faster during financially challenging times.
[Related: Financial planning in your marriage]
Save the right way
Once you start watching your spends, you will be in a position to make cutbacks wherever needed and also be able to save more. The next step would require you to decide on what to do with your savings. In the UAE, you can choose from a host of saving options such as bank saving or deposit accounts, offshore accounts, National Bonds schemes and other savings tools.
For those who wish to invest money to get better returns, you can opt for investment options like retirement savings schemes, pension funds, education plans and stocks.
Below are a few tips which can be helpful when investing money:
- All eggs in one basket? Experts advice on keeping your portfolio diversified to mitigate the risk.
- Are the returns as expected? Once you’ve invested, it’s also important to monitor how your investments are doing, especially in case of long term investments and retirement savings plans.
- Know exactly what you’re getting into and the risks of investment. If an investment does not perform as expected, weigh the pros and cons of staying invested or exiting.
- Don’t over-burden yourself and decide the amount of investment based on your financial health. Keep in mind long term investments will keep your money locked in for a longer time.