7400.602 Family in Lifespan Perspective
Family Life As Management

Note: In FCS, We teach an entire course on the topic of family life management - 7400:362 (3) Family Life Management  The most fundamental concept in our discipline, Family and Consumer Sciences, is the idea of management of our resources. Resources are what is available to be used, or anything with a real or perceived value put to service for attaining goals. E.g. time, money, energy. Also knowledge, personality, etc. Resourcefulness is the ability (a learned ability, a skill) to recognize and use resources effectively. When resourceful people encounter a problem, they are not defeated by it, but find a way to solve it. Resources are central to the management process; they are the means to attain goals and meet demands for individuals, and for families, they provide a lifestyle to meet needs.  Resource theory (first promulgated by Uriel Foa in 1971)analyzes, predicts, and explains the nature, perception, exchange and use of resources. It contributes to the quality of life for several people by helping them be more resourceful about limited/scarce resources. The management of time, energy, the environment, money, the people in our lives. In considering management, it should be kept in mind that everyone worries about the "things" in their lives, but few seem satisfied with how much they have and most are indiscriminate in the way the expend their resources.

Resourcefulness is taught in many different ways:

    -stumbled onto, or discovered 
     -learned from family members and friends

    -provided by community, government, school, social organizations (e.g. Boy Scouts)
    -accessed through work

Resources may be classified in several ways:
  • Tangible versus Intangible resources which can been touched, seen or appraised – e.g. money, things, jewelry
  • Intangible resources cannot be touched – such. confidence, literacy, wisdom, power.
  • Human Resources are the skills, talents, attributes that people have. These increase through use. The sum total of human resources is Human Capital. (A study by Peters and Waterman found that humans tap 4-10% of their full potential)
  • Material Resources include natural phenomena (natural resources like soil, water) and human-made objects (buildings, computers).
  • Resource Stock is the sum of readily available resources an individual possesses.

Resources and Economics
Most decisions in life are affected by economic realities. Economics refers to the production, development and management (also distribution and consumption) of material wealth. Scarcity is the idea of a shortage or insufficient amount or supply of a resource. Obtaining any scarce resource involves some cost, and this leads to people engaging in economizing behavior and goal setting. Since everyone defines for himself/herself what constitutes scarcity, the richest as well as the poorest person will experience scarcity. Availability is a related concept, and a resource is available or not depending on how scarce or abundant it is. One scarce resource we all understand is time. Schor (“The Overworked American”) says we have about 16.5 hours of leisure time per week, which we often try to carefully spend and allocate. Scarcity forces people to make allocation choices and decisions.
  • Choice and Opportunity costs
The more scarce (expensive) a resource is, the more likely we have to encounter an Opportunity Cost in order to obtain that resource.  Opportunity Costs are the highest valued alternative that must be sacrificed to satisfy a want or attain a resource. Many household activities include decisions about opportunity costs – seen as tradeoffs. (e.g. time being increasingly scarce, many families trade off healthy eating habits in favor of fast food meals and takeouts).
  • Laws of Supply and Demand
According to the law of Demand, as the price of a resource rises, the quantity demanded falls. As the price falls, the quantity demanded of a resource increases. The Law of Supply is the inverse: As the supply for a resource increases, the price will start to drop, and as the supply goes down, the price goes up. In economic theory, the right price is reached only when supply and demand are equal.
  • Economic well-being
This is the degree to which individuals and families have economic adequacy and security – degree of protection against economic risks like job loss, illness. How much is enough "stuff" - money, things, possessions? This is more of a cultural and psychological question. Economic well-being is influenced by several things combined, like income, financial assets, human capital, time, management skills, feelings of control, values, etc.
  • Allocation and Recognition of resources
Management is the process of using resources to attain goals through planning and strategy - taking the steps necessary to meet short term, intermediate and long term goals. (Often, resources are allocated more to immediate demands, to the neglect of long term goals). This requires an understanding of ourselves and of the environment in which our resources reside.  Resource recognition involves realizing what skills, talents and materials one possesses.
  •   Types of Economic Resources:
  • Wealth – measure of what has been accumulated: property, cash, valuables.
  • Income – that which is earned or given to recipient.
  • Employee Benefits – goods and services that form part of the individual’s or family’s resource base, that is given over  basic pay (health benefits, retirement funds, free turkeys). 96% of Americans receive Employee Bennies from medium-to-large firms.
  • Knowledge and Education – vital resources
Knowledge, gained through study or experience, may be our primary resource (Drucker, 1999). Schumacher, however, believes that education is the most vital resource, and the basis of social development. Investing in human capital may lead to wide pay-offs. However, think about all the educated people we produce – are they really knowledgeable?
Is literacy or a college degree a guarantor of wisdom?
  • Consumption and resources
To consume means to use, expend or destroy. The US has often been characterized as a consumer society, as are many nations these days. This refers to the productive capacities and the market forces that have made life comfortable for the average person in this society, but at the cost of the environment, and safety of the future of this planet. There is little sensitivity to nature and little realization of the need for conservation, recycling, etc. (much less future proactive action) for the sake of convenience and immediate gratification.
  • Resource strategy
A strategy implies a well-thought out plan of action, conducting and following through on operations. A successful resource strategy includes what is owned and compares it to what is desired, setting up a plan to achieve it optimally, with least expenditure.
  • Money produces both pleasure and anxiety. Whatever the experiences in our families of origin, money also has certain meanings in the culture that affect us.  Generally, money means success and status in our society. Money also means freedom and power in American society. Money can be used in contrary ways–to manipulate or help others.  In nations throughout the world, the higher the income bracket the greater the proportion of people who say they are happy and satisfied. How people define their financial situation is as important as actual income level.  1. About one person in five lives in a household that has difficulty one or  more times during the year paying for a basic need. Money problems  affect people’s personal well-being and the quality of their interpersonal  relationships.  2. When families go deeply into debt and cannot meet their living expenses  or reach an agreement with creditors outside of court, they may file for  bankruptcy. Bankruptcy can have adverse effects on family life. 

More than half of all teenagers ages sixteen to nineteen are in the labor force and many of them are not working out of economic necessity. There are both benefits and potential problems when teenagers work. The greater involvement in work tends to be combined with less involvement in school and family and, therefore, with more conflict between parents and teens.  Financial planning is an important task for every family. A financial plan is a complete map on one’s personal finances, including a strategy for achieving certain goals. In addition to goals, assets must be listed, along with attitudes about risk.  An important part of the long-range financial plan is the monthly family  budget. In simplest terms, a budget requires a listing of all income and  expenses. There are fixed expenses and variable expenses. Neither long- range planning nor budgets will guarantee freedom from financial problems. Budgets are meant to be our servants, not our masters. No matter how compatible a couple may be, spouses will have some diverse interests and needs. Money issues are likely to be one of the more frequent reasons for arguments. Communication about money matters is important for sound financial management. Financial conflict can be minimized by regularly talking about financial matters.

Types of Income include:

  •    Discretionary income - money that an individual can use according to his/her own judgment, as in which debts to pay.
  •    Disposable income - is the money that is left after all deductions are made.
  •    Gross income - the combined income an individual or family has from all sources
  •    Psychic income - how rich or poor we feel - not an objective measure of anything
  •    Real income - uninflated income - the buying power of the money we possess.

Figuring One's Net Worth is accomplished by subtracting what is owed (liabilities) from what is owned (assets, including savings, insurance policies with cash value, all your stuff). Some, but not all of the items to be listed as Assets and Liabilities might be:

Assets
Cash on hand 
Checking and Savings Accounts
Stocks, Bonds, other Investments
Real Estate
Retirement funds (IRA's)
Company Benefits
Annuities
Personal Property
Automobiles
Insurance cash value
Inheritances
Debts others owe you
By assigning a cash value to each 
asset, and summing, we arrive at
Total Assets
Liabilities
Loans
Unpaid Bills
Personal Debts
Mortgages 
 
 
 
 
 
 
 

By assigning a cash value to each
debt, and summing, we arrive at
Total Liabilities.

Good planning requires that we know both figures accurately - and that we budget for unforeseen circumstances to the best of our ability - creating an "emergency fund" - so that we can minimize debt, and live within our means. Credit should be seen as a tool and never mismanaged. Thus, paying off balances each month, owning only a few credit cards, shying away from charging on impulse.

Establishing and maintaining "good credit" is easy to do and easy to ruin, as well.  Steps toward establishing good credit are as you might imagine:

  • -maintaining a checking account
  • -paying bills promptly
  • -carrying, using, and paying off each month a gasoline or department store credit card.

But what really paves the way for a larger loan (i.e., a mortgage) are things like:

  •     -residential stability - whether or not you've moved around a lot
  •     -job stability - how long you've maintained the same job
  •     -education
  •     -income
  •     -previous home ownership
  •     -your ratio of debt to income

Decisions to use credit should always be made with your Financial Plan in mind.  If it's not in the plan - don't make the purchase. Investments should be made with a trusted advisor and should be seen as long term in nature. Stocks, bonds, mutual funds, real estate, retirement funds - these are investments that may take many years to "mature" or turn liquid.  The investment agent's ability to count on the use of your money is precisely the reason they grow in value. Investments should also be made from disposable income - money left after living expenses and debts are removed. See http://www.learner.org/exhibits/dailymath/savings.html

Insurance comes in many forms, and only live insurance has any potentially liquidity to it.  Health benefits, accident insurance for your car, home owners or mortgage insurance - these are meant to protect the owner from catastrophe.  These are expensive, but the alternative to having such insurance is to risk financial ruin.  For many of these types of insurance, a "group" plan from work is available for those with such jobs.  Life insurance needs some scrutiny here. Typically, term life insurance is purchased to achieve a relatively short term goal - thus term insurance for a parent, to protect his/her children and surviving spouse in the event of their death, is more important when a family is in early to mid-life.  It would be a poor financial decision to purchase or maintain life insurance after retirement since a person's financial picture is, by-and-large, set or fixed.

In addition to term insurance, there is whole life insurance. Whole life performs like term insurance with the added benefit of "maturing" and becoming liquid at some point toward the retirement age. The problem with whole life insurance is that is largely an inefficient use of investment monies.  In fact, the difference in cost of whole life minus the same coverage in term insurance is substantial - and this is money that could be invested more efficiently in a long term mutual fund with a good history of performance (making profits for investors).

A note about saving (and this advice should be discussed prior to marriage and periodically during marriage with a trusted financial advisor).  If you know how to use a electronic spreadsheet - try this little trick.

When a family brings home their first child  if they were to put under the mattress $10 a week every week
for 52 weeks a year there'd be $520 at the end of a year:
   After 18 years there would be $9360
-if they were to put that same $10 a week in a 3% savings account
   After 18 years at 3% interest your $520.00 investment will grow to $12,191.11.
-if they were to put that same $10 a week in U.S. savings bonds
   After 18 year(s) at 7.86% interest your $520.00 investment will grow to $19,251.76.

So with an actual investment of $9360, the family made $10,000 profit.
This is the highly conservative approach.  If one were willing to take risks and invest in the stock market:
-if they were to put that same $10 a week in the stock market
After 18 year(s) at 11.99% interest your $520.00 investment will grow to $29,022.82.
See the Compound Interest Calculator at http://www.themint.org/tryit/compoundingcalculator.php
Ten Dollars a week.
The Reality of Household Expenses
Se 66 ways to save money at http://www.pueblo.gsa.gov/cic_text/money/66ways/index.html
Food, Housing, Transportation, Clothing, Health care - families cost money and this is without any fun included.

Notice what this list doesn't include:

     -no payment of student loans                  -no payment of any bank loans
     -no car payments                                        -no credit card payments of any kind
     -no emergency funds for sickness, pregnancy  -no coverage for other loss of income
     -no TAXES which hovers around 11% Federal, 4% state and 3% local in Ohio 18% total.
     -no movies, video rentals, stereo equipment, commercial recordings, alcohol
     -no entertainment of any kind                          -no vacations, presents
     -no Christmas, no birthdays                             -no birth control devices
     -no personal grooming                                    -no diapers, baby oils, pediatrician money

Ideally, the budget graphic above doesn't change that much with the addition of children to the family. What does change is additional expenses, pediatrician visits, special considerations and equipment, day care. If it is true that raising a child up from birth to age 18 costs an additional $300,000 per child, then we must think of childrearing as an investment in the future.

Like any investment - children must be cared for and protected from ignorance - perhaps the main predator of young lives. Thus, an important aspect of early training and socialization has to do with developing a sense of money and responsibility.

Children learn most of their habits of thought and action through their parents first, followed by peers and the media. Teaching concepts of the Work Ethic and Financial Responsibility - as well as Stewardship of our possessions and the earth's natural resources - require parental effort to live the life they espouse. I remember my father - who meant more to me than any other person for most of my life) giving me a lecture about the evils of drug use - while holding a beer in one hand and a cigarette in the other. I also remember Dad making me go to work with him on days there was no school (try all summer long) - the point being to show me what he had to do in order to pay the electricity bill that made the television work.

Learning the lessons of financial responsibility begins with simple recognition of all the coins and dollar denominations.
A useful website for this purpose is Ron Wise's World Paper Money Homepage and coin collections of various types is an excellent way to introduce the idea of denominations and value.

The challenge of effective time management is as important to family intimacy as that of effective financial management. Time management is also important to the well-being of family members. In an intimate relationship, it is important to agree on how to allocate time.  A. For some people, the combination of work and sleep takes up the bulk of the day. Time diaries reveal that Americans have more, rather than less, free time now than formerly. Nevertheless, people feel more pressured by time than they did in the past. Americans cram more activities into the average day and many spend the rest of their free time watching television. While the demands on our time frequently seem to be overwhelming, we usually have some discretion.  B. Many articles and books are available to help people manage their time better.  Working our goals, priorities, and a daily to-do list is one of the most important parts of effective time management. As in the case of money management, time management should not become oppressive.

The addition of one or more children to the family makes issues of power and conflict an even greater challenge.  Power can be misused when one family member uses another in a power struggle with a third member:
  • This is a form of triangulation. Healthy relationships require balanced power in the home.
  • One way to share power in the family is to have a regular family meeting. 
  •  As in the case of marital conflict, conflict within the family can be both positive and negative.
  • On the negative side, whether the conflict is between parents, between parents and children, or both, it is likely to create problems for the children.
  • Both the intensity and kind of conflict in families vary depending on the family situation.
It is clear that a healthy family has to manage conflict well in order to stay healthy. Vuchinich found four ways in which a verbal attack by one family member on another ended: withdrawal, submission, standoff, or  compromise. Each of these methods has implications for family intimacy.