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By Denise Mhlanga
Talking about money is never comfortable. But if your family has gone through a retrenchment or reduction in income, it can be a wake-up call, and you will need to confront your fears and discomfort about family finances.
Any loss or reduction in income is emotionally draining, particularly for breadwinners, who often suffer in silence. Talking to the family, however, and sharing your fears and challenges can help you to manage the family’s finances better.
Sadly, not every family talks about money. So, if trouble strikes and these talks become necessary, here are some ways to approach this often-difficult discussion.
Formalise the meeting
Instead of casually telling the family to buckle up, the breadwinner needs to set up a formal meeting with every family member present – including members of the extended family who may be affected.
Pick a time and place for the meeting. Some families may feel more comfortable having the meeting at home, while for others, going out to a different location may work best because it’s a more neutral venue.
As a breadwinner, draw up a simple agenda and share it with everyone beforehand. That way, everyone comes prepared and can contribute meaningfully to the discussion. Just make sure that you discuss things in an age-appropriate way for any younger members of the family.
During the meeting, be as open and honest as possible about the financial situation you find yourself in. Ensure everyone in the family fully understands the extent of the situation, and how they can contribute to making the family’s finances run as efficiently as possible. Remain calm and listen carefully.
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Dealing with a financial crisis as a family
In a tight financial situation, every family member can help – and the family meeting is the place to iron out those details. Start by creating clarity on what the family needs are and how these will be funded going forward, says Christian Hugo, Solution Strategist at FNB Money Management.
At the meeting, share how much comes in, and how much is going out, and then look for ways to balance the two. “We cannot change the rise in the cost of living, for example, but we can change the way we spend money,” says Hugo.
It’s important to acknowledge that having your income reduced is tough and a highly emotional time in anyone’s life. If that’s your situation, don’t make hasty decisions. Rather stop and breathe – and get some expert advice either before or during your family meeting. “It helps to speak to someone like a financial adviser to explore your options and get clarity about the financial situation you find yourself in, and how to move forward,” Hugo says.
Maintaining your current lifestyle is going to be difficult if your income is reduced. Carefully explain to the family that to manage with limited financial resources will require funding everyone’s needs instead of their wants. That means all the little luxuries have to go until such time as you’re on a more solid financial footing, so make sure everyone understands what you will and won’t be able to afford.
Older children still living at home can also contribute financially to help meet the family’s financial goals. If more than one person in the household – or even the extended family – is earning, then providing for everyone’s needs shouldn’t fall to just one person.
Keep in mind that when you adjust your lifestyle, you shouldn’t make impulsive decisions around important expenses like insurance and medical aid. Hugo advises talking to your financial adviser before cancelling any of these kinds of cover – an unforeseen health emergency can cause a huge financial burden if you don’t have medical aid, for instance.
Asking the family for help and support will go a long way in meeting the new adjustments in financial and lifestyle goals. Once you are all agreed, it’s a good idea to introduce regular check-in meetings to ensure everyone is on track with the new decisions you have taken together.
Talk about finances before disaster strikes!
But talking about money isn’t just for the bad times. In good times, it’s also a powerful tool for families to learn to manage their finances.
“Families should not wait until disaster strikes to talk about their finances,” says Brenthurst Wealth Management financial advisor and planner, Tanita Conradie.
She says it’s important to start money conversations with children at an early age. As they get older, discuss with them the reasons for saving and investing, as well as the implications of having too much debt.
These conversations could help them to be more vigilant about their finances when they start their own careers and families, she says. People who grow up in households where finances are discussed tend to manage their money better.
Getting the family involved in financial decisions and planning is an efficient way of dealing with any financial crisis when it happens, and also helps with financial planning for the future. Make sure you set time aside for that family meeting today!