Before I started up my blog, I spent my free time as a dedicated volunteer for Little League baseball. And although I rose through the ranks over the years to eventually become a league president, looking back, my fondest Little League memories still come from the time I spent managing my son’s tee-ball team.
My first “practice” was a pitiful failure. I was woefully disorganized and, as a result, the 5-year-olds got bored almost immediately. Before long, that practice session looked like something straight from Lord of the Flies; I had lost complete control, surrounded by a band of marauding boys who defiantly spent the rest of the hour kicking up the infield dirt and pulling the wings off moths in the outfield.
Needless to say, I made sure the rest of my practices were always well-organized.
The Importance of Organizing Your Personal Finances
Organization is a means to an end. The truth is, organized people save more time and money than those who don’t. When you’re organized, you become more efficient and that makes life much easier.
With respect to your personal finances, organization is what enables people to manage seemingly complex and/or enormous jobs such as tracking their income and outgo down to the last penny with relatively little effort.
The good news is, getting organized isn’t hard. In fact, all it takes is a little commitment and discipline — and I found that one of the best ways to get organized is to run your household like a business.
My Household Business Organizational Structure
In the grand scheme of things, a household is a business with real assets and liabilities. There are revenues, represented by our household income. and there are non-discretionary obligations such as the mortgage and utility bills. There are also discretionary costs in the form of entertainment, vacations, and other non-critical expenses that require careful analysis and smart decisions.
And just as any smart business works to efficiently manage and maximize its revenues, I too want to ensure that our household spending decisions always give us the most bang for my paycheck.
From the day we were married, the family finances have been jointly managed by the Honeybee and me. Each of us has separate responsibilities that are clearly defined, as shown in the handy dandy household organization chart below.
The duties of the household CEO and household CFO.
As you can see, it’s not very complicated; I act as the CEO, while she is the CFO. I know. But just play along.
I’ll now go into a little more detail for both our jobs.
My Duties as the Household CEO
As the CEO, I’m responsible for long-term and strategic financial planning decisions, including stuff like how much life, auto and home owner’s insurance to carry, retirement and investment contributions, emergency fund allocations, and future big-ticket discretionary spending. That requires me to evaluate all household expenses, both past and future, and then determine whether those expenses are discretionary or non-discretionary.
In short, my job consists of seven primary tasks:
- Identifying future household expenditures
- Categorizing those expenditures as either non-discretionary or discretionary (“needs” or “wants”)
- Developing a household strategic spending plan
- Establishing the household budget
- Ensuring my family understands the strategic spending plan and budget
- Ensuring the strategic spending plan and budget are faithfully adhered to
- Refining the strategic spending plan as necessary
My Wife’s Duties as the Household CFO
As the CFO, the Honeybee acts as the family’s financial manager. Essentially, in addition to handling day-to-day financial operations, she keeps her fingers on the family financial pulse, always aware of past and impending non-discretionary expenses, as well as any near-term discretionary spending considerations.
In a nutshell, here are her seven primary responsibilities:
- Establishing and maintaining our financial records and spreadsheets
- Ensuring all the bills are paid on time
- Actively tracking household expenses and income
- Identifying present and future household expenditures to support strategic planning
- Ensuring the strategic spending plan and budget are faithfully adhered to
- Ensuring the checking account is balanced each month
- Identifying negative financial trends and potential trouble areas
Summing It All Up
Running our household like a business has played a crucial role in ensuring that our family income has been used as efficiently as possible over the years. In fact, it’s been more successful than I ever imagined.
That being said, will the way we run our household work for everybody? That’s doubtful.
Has it worked perfectly for us? Of course not.
But it has instilled a strong sense of organization and financial discipline into our lives. And for most anyone who aspires to take control of their personal finances and achieve financial freedom, that is absolutely essential.
Photo Credit: ell brown
Loading ...
via Email 
Whatever works! I my household, I operate the dual roles of CEO/CFO. Any large expenditures we discuss together. It works for us (for over 40+ years).
Yep, I know a lot of folks who do that. I like the split duties because it not only spreads out the work load, but it also keeps both partners involved and invested in the family finances.
We have similar roles in our house; hubby’s the CEO & I’m the CFO. We’re a team!
I really enjoy the tandem approach. I think it is especially beneficial when there is only one household breadwinner in the home — as it is with us. I think it is important for the stay-at-home spouse to have a handle on the finances, so they are not caught flat-footed in case of an unexpected death, or even a divorce. (No need to read anything into that, folks. I’m happily married. LOL)
there is a saying that goes like this,
“if businesses were run more like a family and families were run more like business everyone would be better off.”
i have often countered this by saying;
” if more families were run more like a business then everyone would realize just how much that businesses are already run like a family.”
I like that, Griper!
You are way too organized Len. But, it’s better to be organized and hit the target, than to be disorganized and flounder around.
I’m the CFO in our family and I have a much simpler method for running the finances. I squirrel away a bunch of money on payday, then I act like we are broke when everyone comes asking me for money. We will be married for 21 years next month and it still works.
LOL! Hey, Bret, if it ain’t broke…
It seems like your wife has more work. You have all the big picture things and she has all the day to day things. Sounds like your maintaining all the CEO characteristics.
Oh, she definitely does have more work than I do, Matt! But she is also a stay-at-home mom, so she has more time than I do too.
I think in the grand scheme of things, she actually gets more perks than I do. (And I’m sure I’ll be sleeping on the couch after the Honeybee reads this. LOL)
I think we are also split down those CFO/CEO lines in a sense. And, we come to an agreement on the large expenses.
Yes, the Honeybee and I always come to an agreement on the larger expenses too. We rarely disagree, thankfully.
That’s a great way to give people roles and make sure that things get done. I like the important sounding names as well.
And if you like the names, you should see our business cards!
Can you explain in more detail what “developing a household strategic spending plan” means? Is this a statement full of #’s: expenditures/balances/leftover? Or is this a general approach type statement?
Hi Debbie. The household strategic plan is the long-term vision for your spending made up of big-ticket purchases you plan to make over the next, say, 5 to 10 years or so.
One of the first articles I ever wrote for this blog discusses long-term strategic planning. You can read about it here:
http://lenpenzo.com/blog/id467-creating-a-household-strategic-plan.html
[...] Why I Run My Household Like a Business (And Why You Should Too): Len Penzo takes a look at how businesses run things. Then, he explains how you can run your household finances in a similar manner — for better financial results. [...]
[...] be allowed to overdraft your account. True, you could bounce a check. But if you’re running your household like a business and balancing your checkbook regularly, that shouldn’t ever be a problem. Consider using money [...]
[...] Len Penzo dot com – “Why I Run My Household Like a Business (And Why You Should To)” [...]
[...] will be a necessary and major ingredient in a recipe for success. Len Penzo wrote this week about how he manages his own household finances. In particular, he shared how he divides responsibilities between himself and his wife. If [...]
[...] Len Penzo explains why he runs his house like a business. [...]
[...] When They Are Handled By Professionals Stupid Cents | Why you need house insurance Len Penzo | Why I Run My Household Like a Business (And Why You Should Too)Free From Broke was featured in the following carnivals:Festival Of Frugality #296: September, Meh [...]
[...] Penzo recently wrote a great article describing the division of the financial labor in his household. Most of us who have been together with a partner for any length of time have done the same [...]
[...] haven’t established a credible plan for digging yourself out of [...]
[...] isn’t as much of a budget per se than it is a financial road map that helps the household CEO run his household like a business and anticipate big-ticket purchases that will require future [...]