Personal Finance for Moms- Understanding Income

We all know that income needs to exceed expenses if we're to keep our family's financial head above water. While a lot is written in the blogosphere about living frugally and cutting expenses, the first part of the financial "equation" is actually INCOME.

Here are some questions to consider:

- What are the sources of your family's income?
- Do you know your spouse's salary?
- If you work full-time, do you know your salary?
- If you do part-time or freelance work, can you make a good estimate of your income on a bi-weekly or monthly basis?
- Do you have income that is unrelated to work salaries, such as rental or investment income?

It's important to look not only at the gross amount of your income, but the net as well. Gross income is the total amount you earn before any deductions are taken. If you work for a 3rd party, you'll likely have expense such as taxes and insurance deducted from the pay before you receive it. Once all the deductions are taken, what's left is your net income.

If you are self-employed, you need to account for those deductions on your own, as you'll still be liable to report your income and pay income, Social Security and Medicare taxes.

Once you know the total amount and all sources of your family income, you need to know where all that money goes! Does all your income go to one checking account? Is it split automatically between checking and savings? Do you and your spouse both have access to all of those accounts? Would you prefer to keep some income combined and other separate?

Joint vs separate accounts (or a combination) is a crucial topic for discussion. Some couples combine all their funds into joint accounts, while others keep all income separate and each pay for a portion of the family's bills. Still others choose a combination of the two methods and have some joint accounts and other individual accounts.

All of these systems can work fine for a couple or family, the most important thing is just to discuss the options with your spouse and decide what works best for your situation. If you do choose to maintain separate accounts, ensure that both parties know the location and details for all accounts. This could become important in the event of an emergency.

Action Plan:
- Sit down with your spouse and get a good understanding of all the sources and amounts of income to your household.
- Review what bank/investment accounts receive regular/automatic deposits from your income streams
- Decide with your spouse whether to combine or split financial accounts.

Now that you have a handle on your family income, stay tuned for more on understanding expenses.

Don't miss any posts in this series! Subscribe today!