CFO: One in Every Happy Home

CFO: One in Every Happy Home

You might dream of one day becoming the chief financial officer of a major company, but your current job as the CFO of your household is important enough. As a mom, you're required to juggle a bevy of debt payments, monthly bills, childcare expenses and other recurring obligations. All the while, you're tasked with ensuring that your family doesn't spend more than it takes in.

The Importance of Living Within Your Means

American households are awash in debt. If you own your own home, you're probably all too aware of this fact: By the Federal Reserve's estimation, mortgage debt accounts for nearly $9 trillion in aggregate U.S. debt. Meanwhile, credit card debt takes up nearly $650 billion of the American debt pie. Student loans and auto loans each add nearly $1 trillion as well.

Put another way, the average American family uses about 10 percent of its total disposable income to service its debts. Unless you've paid off your mortgage, auto loans and credit cards, your financial security hinges on your ability to manage your debts and keep your household's expenditures in line with its income. Fortunately, millions of moms-turned-CFOs do this every day.

Manage Your Debts

You probably can't stand making your monthly mortgage and credit card payments, but defaulting on your debts isn't really an option. Failing to keep up with your debts can lower your credit score and cause your creditors to raise the interest rates on your bills. This will certainly hurt your short-term financial security and could adversely affect your long-term planning for retirement.

As any CFO knows, companies that can't be trusted to repay their bills don't last very long. Accordingly, you need to prioritize your ongoing obligations. Before you budget for optional activities like trips to the movies or weekend getaways, focus on staying current on your mortgage, credit card bills and other debts.

Take a Kinder Approach to Household Productivity

In the real world, a CFO who wants to boost the productivity of his or her company's workforce generally announces a hiring freeze or a round of layoffs. He or she might then "encourage" the remaining employees to work harder to fill the void left by departed coworkers. While you can't "lay off" your kids or spouse, you certainly can encourage them to be more productive.

If you have working-age teens or young adults in the home, nudge them towards the part-time workforce. Help them place job applications at local supermarkets, stores, golf courses and other labor-intensive employers. If they're resistant to the idea of working in retail, encourage them to leverage their talents to earn a few extra bucks as academic tutors or sports referees. Once your kids are gainfully employed, reduce or eliminate the financial support that you provide them and force them to use their own earnings to pay for the things they want. If they're raking in enough dough, open a savings account in their name and offer to match contributions up to a certain dollar amount. Think of this as an investment in your own financial security: By teaching them the value of working, saving and long-term planning at a young age, you'll reduce the likelihood that they'll rely on your generosity later in life.

If your kids aren't old enough to work or have too much else on their plates to do so, make sure they do their part to keep your home running smoothly. Remember, time is money. Instead of taking time out of your busy schedule to clean and organize your entire home, assign cleaning or de-cluttering tasks to your kids. If you're currently paying for a cleaning service, this step will strengthen your budget as well.

Don't Forget About the Future

With so much on your plate in the present, your retirement plans might be little more than an afterthought. Unfortunately, the statistics don't lie: Americans who fail to start saving for retirement at a relatively early age must work harder and longer to build an adequate nest egg.

As CFO of your happy home, you can't forget about the future. If you're working at a regular job, be sure to contribute as much as possible to your employer-sponsored 401(k). If you work on a part-time or freelance basis, open an IRA in your own name. Encourage your spouse to do the same as well. At the same time, engage in some creative long-term planning by opening an "emergency fund" that's separate from your household's retirement accounts. This fund should be robust enough to protect against hefty medical bills, home or car repairs, and temporary periods of unemployment.

As your happy home's CFO, you have a lot to keep straight. Fortunately, you don't have to answer to angry shareholders or skeptical colleagues. All you need to do is keep these commonsense tips in mind and set a tone of frugality, responsibility and foresight around the house. In addition to keeping your household's finances in working order, you'll teach your kids some valuable lessons and set them up for a lifetime of good financial decision-making.