07 October 2013
Run Your Household Like a Business: Business Strategies for Your Family

Though you may not think of it as such, your home is much like a business. However, it’s not unusual for business finances to be highly organized, while household income and outgo are a jumble of missed payments and late fees.

Organizing your home to function as a business can equip you to track expenses more carefully, use household income where it’s most needed, and maybe even set aside a little each month to build up cash reserves to prepare for the unexpected.

Organize personal finances. A business has revenue and operational expenses. So does a household. Household revenue comes from income earned through work, investments, government programs like Social Security, and other sources like rental income, or regular financial support from other family members.

The first step in organizing the family finances is to determine just how much revenue the household generates each month after taxes and other deductions. This is the household’s net income – the money you have available to spend each month.

Determine Your Fixed and Variable Expenses. Next, use your check register to create two lists of household financial expenditures.

The first list includes fixed, monthly expenses. These expenses are for the things you need, and might include:

  • Mortgage or rental payment;
  • Insurance costs (auto, home, renter’s, life, health, etc.);
  • Transportation, including the monthly car payment, cost of gasoline, mass transit commuter pass, automobile maintenance, and other expenses associated with getting from here to there;
  • Utilities, including electricity, heating, cable, water and other fixed expenses;
  • Food expenses, though not necessarily fixed to the penny, are generally the same from month to month, give or take a special goodie from the supermarket;
  • If you have other fixed expenses, like childcare costs or the cost of monthly medications, add these to the list of fixed expenses – expenses that must be paid each month.

Next, create a list of variable expenses – the cost of things you want. These expenses change from month to month based on how much discretionary income your household generates. Variable expenses might include:

  • Restaurant dining;
  • Vacations and trips;
  • Electronics and other “toys;”
  • Telephone expenses (unless your family is connected under a single telephone plan with a fixed monthly cost);
  • Pizza night for the family;
  • Movies and other entertainment;
  • Personal savings;
  • Babysitting costs, and other costs associated with discretionary activities.

In the end, you’ll have two lists – one for non-discretionary, or fixed, expenses (“needs”), and one for discretionary spending, spending that can be adjusted from month to month to fit the household budget (“wants”).

“Big Picture” Money Management At Home

In the business world, “big picture” money management is a key function of company executives, who develop budgets, implement cost-cutting processes, and track cash flow.

Just as in business, household “managers” are needed to track spending needs and better utilize income. Household managers, often the parents, are in the best position to oversee the broader, more long-range financial activities in the home.

These household money managers can:

  • Develop a workable household budget;
  • Plan for future expenses, like the purchase of a new washing machine;
  • Develop a long-term savings program for distant expenses like college tuition, a bigger home, and other major household expenditures that may occur in the future;
  • Explain the household spending strategy to all family members and secure support for the plan from each member of the household;
  • Update spending strategy as family circumstances change;
  • Develop a plan to protect members of the household and household assets with a variety of insurance coverages;

Specific Activities of Home “Money Managers”

In addition to “big picture” money management activities listed above, there are also the small, but critical, details that help keep the household running smoothly.

These activities include:

  • Maintaining household financial records and ensuring records are accurate and up-to-date;
  • Making bill payments in a timely manner;
  • Tracking household spending throughout the month;
  • Identifying and reporting upcoming and/or unexpected household expenses;
  • Identifying opportunities to cut fixed expenses, i.e. a monthly budget payment plan for home heating fuel, a special sale on needed items, etc.;
  • Balancing the household checkbook each month;

The objectives of running your household like a business are: to improve management of income and expenses, to adapt quickly to unexpected expenses, to save for the future, and to ensure that all household members understand their individual responsibilities for maintaining the household budget.

Now may be the right time to call a family meeting about organizing your household finances, to help ensure that your household is run just as efficiently as your business.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.


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