Family ties and cooperation

The family funancial support

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There is a topic that has been on my mind for quite a while but I was doubtful about suggesting it for discussion. This topic is family coop­eration. Even though it is undoubtedly expedient and financially beneficial for the family, there are usually a number of obstacles when it comes to putting it into practice. It is not a secret that relationships within families are often far from ideal. However, I still decided to touch upon this sensitive subject be­cause of its mutually beneficial outcome for all the family members.

It is common knowledge that the basis of family budget stability for the Amer­icans of at least the second or third generation is inherited funds. They enable Americans to be more aggressive in handling their own or loaned funds. But we are newcomers in America. We don’t have the luxury of such a ‘life-buoy’. In our case, emergency fund can be helpful but only up to a certain point. Each family is faced with a number of smaller financial issues like purchasing a house or a car, starting a business, or setting up an education or pension fund. When resolving these issues, families try to avoid using their emergency fund. They don’t want to put their financial stability at risk in case of emergency. The standard solution in such situations is getting a loan. However, you have to be careful of this seemingly simple solution as it might make your project quite costly or even impracticable. For example, lack of funds when buying investment property or monthly pay­ments exceeding the possible limits of the client’s income. Such situations may seem unresolvable but it is usually not really so. There is always a possibility to make use of the funds belonging to other family members (?)

The question mark is not accidental. I have no doubt that extended family will always offer a helping hand in extraor­dinary situations or emergencies. But when it comes to simple day-to-day business situations, positive answer is not guaranteed. Other family members might have their own plans and needs requiring additional funds. Besides, hardly anyone will feel comfortable if a family member who is trying to help you out, will, as a result, end up facing finan­cial problems himself.

So the question remains: is it at all possible to avoid such situations? My an­swer is YES. And the secret is in coordi­nating the budgets of the family mem­bers. If we compare the budget plans of children and parents, we will see that they are similar in essence but quite dif­ferent in details. The difference that is of interest to us is the timing and terms of investment projects. Relatives most like­ly purchase cars or houses at different times, make investments in business or set up pension funds at different times too. Such different timing of financial projects provides financial potential for using the joint family budget. Unfortu­nately, most of us don’t recognize the benefits of joint family budget and, as a result, rarely use it.

Coordinating the funds and financial steps of different family members makes it possible to save time and lower the costs of the projects that require initial investments. Financial coordination be­tween family members is not only limited to sharing funds but can also work very well when it comes to credit history or income issues. That’s why I always ask questions about family members as well. Data analysis shows the strong and the weak points of each family member fi­nancial situation. The solution is formed based on the comprehensive analysis of the financial status of everyone involved. That’s what I call cooperation.

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