The Four CFO Rules

The following is an excerpt from Your Life & Your Money In the book the author says every family needs a chief financial officer (CFO), and he gives these four rules for that person.

Do what you can, with what you have, where you are.—THEODORE ROOSEVELT

Once you have a mission statement, you can start acting as your family’s CFO. The job has many dimensions, of course, but there are four basic rules:

Rule #1: Know Your Expenses

Familiarity with expenses is the CFO’s most important job. Think about it. If you don’t know how much money is going out, how will you know how much money to spend—or not to spend? People, businesses and governments get into fi nancial trouble when they don’t know exactly how much goes out each month. Unlike the government, however, you can’t print money when you’re in trouble or running a little short.

Can you imagine what would happen if a corporate CFO didn’t know how much his company was spending every month? He’d be fired. Well, if you’re the family CFO and you don’t know your monthly expenses, you’ll be fi red too. (It’s called divorce.)

Here’s how to start getting a handle on expenses.

Review the last three months of your check register and see where the money is going. Also, look at the last three months of credit card statements to see what you’re charging. Don’t plan the next three months of expenses until you get a clear idea of how much you and your spouse have been spending recently. This will give you a ballpark figure of what you can afford. If you pay quarterly, biannual or annual bills like homeowner’s insurance or association fees, for example, then divide those bills by the appropriate number to get as close as you can to figuring out your monthly expenditures.

Computer software can help get you expense house in order. Packages such as QuickBooks™ and Quicken™ can help you tally your monthly bills or expenditures and keep everything well organized. I like doing my family’s expenses on QuickBooks