Family Finance
Module 6: Till Debt Us do Part

Welcome to the last module. And you are still here together. Well done!

I admire those who stay the course and I admire even more those who stay the course when more than one person is involved. Not only did you have to deal with your own financial attitude, you had to explain it to someone else, listen to and understand their financial attitude and blend all of that into one structure that would serve you both. That’s no mean feat. The rewards for your efforts will be great.

We have a couple more exercises to do and then you will have a clear picture of your current financial situation. From that point, the point of knowing exactly where you are, there are many places you can go.

All the hard work is done, be sure to use it for the best possible results in the future.

Part One

Where are We?

So let’s recap where you are now. You know your Net Worth, your expenses, your income and your net monthly profit or loss situation? What does it all mean to you in terms of actual financial progress?

There are two main stages to becoming financially balanced. Some people are happy to get to the first stage, others move on to the second stage and a very few people add a third of their own design.

The first big stage is the one you have been diligently working to since week one and it is made up of four parts. It is to get to a point where

  1. you spend less than you earn, i.e. you have a monthly net profit.
  2. you are putting 10% of what you earn aside each month to contribute towards your future,
  3. you have put a certain amount of cash aside in an untouchable emergency fund
  4. you have a plan to repay any debt you may have.

If you do nothing else after this course, these elements will bring you a certain amount of stability and security.

The first two we have already looked at in great depth. By now you will not only know what your monthly net profit/loss figure is but you have the tools to improve it while still living a life you enjoy.

In this last module, we will look at the second two items, the setting up of an emergency fund and a plan to address any debt you may have. When you have done these two exercises, you will have some financial security in your emergency fund and you will continue to add to it with your 10% per month. And if you have a debt situation you can make your first target the elimination of that debt.

Part Two

Your Emergency Fund

An Emergency Fund is just that, it’s a fund that you keep for emergencies. Very often we go along on a monthly basis paying our bills and keeping ahead (just) until something happens. One of you might have to take sick leave from or loose their job (or choose to change a job) which means the family has a short period of reduced income or inconsistent income. This can put unnecessary additional pressure on an already pressured situation.

In particular where more than one person is involved, it is especially important to provide for those times of our lives when problems hit. They may be challenges or crises that effect you both together. But lets face it, challenges or crises may come that drive you apart. My clients include widowed people, divorcees, and those who are dealing with serious illness in their lives that leaves them having to shoulder the family finances bereft of the support that is no longer available.

The first key to financial peace of mind and being able to sleep at night without financial worries is to have a little cash put aside. How much should that be? Action item 1 will help you calculate it for you. It sounds too simple but I cannot even begin to communicate the difference it will make to your whole sense of security and freedom from money worries. With even just a little bit of money in the bank you will begin to know what it feels like to be rich. Be careful, it’s contagious, you’ll want to feel more of it. You might even get to enjoy putting money aside.

Also you must talk about insurance and pension provisions. Each family will have their own requirements. But right now I want to talk about debt for a moment.

Part Three

Dealing With Debt

It’s a huge subject and one that I am not going to go into in much depth in this part of Family Finance. However, debt is so prevalent in our culture that I know a significant number of people doing this course will have a debt problem. Mind you, the debt is rarely the real problem. It’s the repayment of the debt that’s the problem!

Some of you will have come this far and will not have been able to find the targeted 10% monthly net profit figure because of what it costs you to service your debt. If this is you, I strongly encourage you to book a private debt-coaching programme to blast that out of your financial life once and for all.

In just four to six weeks, you will finally understand debt and how it is working against you. More importantly you will have a plan for total debt elimination that you can follow and (the key to all financial planning as far as I’m concerned) have fun with your life while you are doing it.

Some of you will have come this far, calculated your income and expenditure, revised it according to the 4 way exercise, done what you can to increase your income, found your 10% and have debt. Equally for you. If you have any debt at all, you could eliminate your debt in double quick time and use the extra cash to put you on the fast track to the next stage of financial freedom.

It is virtually impossible to build wealth and service debt at the same time. So begin here now. Make a commitment to yourself that you will not add to your debt from today forward and at least do exercise number 2 to begin to deal with your current debt

And that’s it.

This was an important piece of work for you to do together. I want you to acknowledge that and to acknowledge each other for being willing and committed to taking this road together. A large percentage of families break up over money difficulties and your courage to deal with this subject proactively has given you a better chance of harmony and longevity in your partnership. You may have work to do, but you have both shown that you are prepared to do that work together towards common goals.

What you have done so far has given you the tools of basic healthy money management. Simple but effective, I hope that they change the direction of your financial life. I know it has for many others.

Here are the last action items for Family Finance.

Action!

Actions of the Week

1. Emergency Fund (together)

Calculate how much you want to put aside and a date by which you will achieve this. To do this, you must ask yourself if income were to cease tomorrow and your family had to survive until either or both of you found a new source of income, how long would you like to give yourself to do that.

A rule of thumb is 2-24 months depending on your own comfort level. Now multiply the number of months by your Must Have total from module 4. Put two big fat red lines under this figure.

This is your first goal to achieve using your 10%. Divide the total by the amount that is your 10% monthly net profit and you will find out how many months it is going to take you to fill your emergency fund. Mark this date in your calendar.

2. Drop the Debt (together)

List each debt you have showing the total you owe, the amount you pay per month and the number of payments left to pay. Pick one of them that you would really like to have paid off. Call it debt number 1. Do not pick your mortgage if you have one, leave that one to last. What date is the last payment of the debt you have chosen?

Go back to your net monthly figure. I want you to find from your current income £75 – £100 per month that you will pay extra towards that debt every month until it is paid off.

Look at what happens if you add the extra money to your monthly payment for that debt.

How many of those increased payments will you have to make to that debt? Note the difference in the date?

When you have paid that debt off, you can put the £75 – £100 PLUS the monthly minimum you were paying to debt number 1 towards the next debt you want to pay off and so on until you are debt free.

Do this before you begin to build your emergency fund or if your debt is slight, try to do both.

3. Celebrate good times (together)

Throw a party. Go to a party. Take each other out to a party. Stay in and have a private party. Whatever you do make sure it has the word “party” in it. It is important to mark and remember the times you did things together for your mutual benefit. Heavens knows we all remember the bad times easily enough. Do something that will help you remember this time you stood together and committed to put a financial plan in place to support your mutual dreams.

4. Financial Education (together and separately)

Schedule financial time for yourselves. Take out your diaries and agree on one hour per week during which you will continue to plan your finances, review your progress and add to your financial education. For a subject that drives our lives like no other, an hour a week is such a small commitment for such huge rewards. Talk openly about money in your home. Include everyone in the family. You’ve started now, keep going.

Well, that’s it. You are all done. Or are you only beginning? There is a “wealth” of resources out there if you want to continue your education in this subject in a way that is fun and gets results. This course has dipped your toe in the water, there’s much more wonderful information waiting for you to help you on your way at your own pace. Enjoy your financial journey.