Family Finances: Objectives and Importance

Family Finances: A family’s economy is subject to how its finances are manage. Therefore, it is essential to know how to correctly work the various aspects that make up the finances of a home.

Definition of Family Finances

Family finances are the management of money that a family carries out to keep its economy healthy. It considers the income you receive and the actions of budgeting, spending, and saving to manage your money efficiently.

It contemplates, in turn, the possible eventualities that could occur in the future and negatively affect the family’s financial resources.

They also consider the family’s assets, such as real estate, savings funds, insurance, loans, and investments. Therefore, how these resources are manage, regardless of their materialization or liquidity, are part of the economy of a family.

The family administration studies the different factors that affect each resource or action. For example, in investments, the family unit must analyze the financial risks involved in carrying out a specific investment. After doing this, they can see if they can afford to lose much money, consider the levels of return and calculate the risk percentage to determine whether the investment is worth it.

Family Finance Goals

In general terms, the objective of family finances is to manage the assets of a home efficiently to obtain the best possible results in a long time.

However, the specific objectives would be the following:

• Quantify income: It is about counting the income repeatedly receive to plan savings and spending actions.
• Assess sources of income: Indicates how safe the origins of money are to know if it is necessary to opt for other sources of income and not depend on those that are not safe.
• Know and control the expenses: In this part, the expenses (expenses) are determined, as well as the causes. Furthermore, it is Carrie out to know family consumption and to analyze the possibility of reducing costs that are not elementary, for example, with ant expenses.
• Analyze the degree of indebtedness: It refers to the measurement of the expenses incurred due to the debts. It is done to develop a strategic plan and get out of debt.
• Use available resources intelligently: Resources such as credit cards or bank loans must be use. Intelligently to get the most out of them and thus prevent them from playing against us.
• Saving is one of the essential objectives of family finances since it allows us to face unexpected situations or materialize plans.
• Make an emergency fund: It is a bit related to saving. However, an emergency fund is intend only for unexpected events that force us to disburse considerable money. This, in addition to not interfering with savings, avoids indebtedness. We will no longer see the need to request a loan to make a payment.

Importance of Family Finances

The importance of family finances lies in maintaining a healthy economy. Controlling expenses, being debt-free, having an emergency fund, saving to buy material goods, and having secure sources of income contribute to the better general well-being of all the individuals in the family.