Marriages and Families Intimacy, Diversity, and Strengths

Transcription

1 Marriages and Families Intimacy, Diversity, and Strengths Chapter 8 Managing Economic Resources David H. Olson John DeFrain Linda Skogrand 8e

2 Money and happiness Marriage and money Diversity and financial style The cost of divorce Why do finances cause problems? Family income and expenses Smart money management Credit: Uses and abuses 8-2

3 Research indicates that: Annual family income correlated with peoples happiness responses Income is related to social problems Poor families: Live in substandard housing Experience crime in their neighborhood Send their children to schools that are unsafe 8-3

4 8-4

5 8-5

6 Financial stress contributes to emotional distress Good financial management is associated with happier marriages Wealth and marital happiness are related Debt is negatively related to marital satisfaction For women, assets are related to marital satisfaction Couples who are happy in their marriages trust each other and communicate about finances 8-6

7 8-7

8 Spending practices of various income groups relates to differences between: Collective worldview: Giving high priority to sharing resources with friends and family Followed by low-income families and diverse cultural groups Individualistic worldview: Using resources for the betterment of self 8-8

9 Personal costs Legal and filing fees Divorce education classes Housing Lost productivity due to distress Affects the physical, emotional, and mental well-being of individuals 8-9

10 Money is a taboo topic of discussion No budget or adherence to budget Overspending or reliance on credit Partners have different styles of spending and saving Use of money as tool to gain power and control Conflicts over meaning of money 8-10

11 Lack of adequate food and decent shelter Inadequate health care Limited transportation No telephone Substandard schools or not attending school 8-11

12 Family income Ethnic income differences Gender income differences Annual household expenses Largest percentage income is spent on food, housing, and apparel Family net worth Sum of all financial assets minus all liabilities Two-income families Benefits of second income disappear when the expenses associated with it are paid 8-12

13 Source: U.S. Census Bureau,

14 8-14

15 Source: U.S. Census Bureau,

16 Source: U.S. Census Bureau,

17 Proper budgeting knowledge Consideration of how two-income couples manage the different pots of money Plan to save for future needs and crises 8-17

18 Regular, systematic balancing of income and expenses To construct a proper budget: Establish the amount of income to count on Outline expenses by category Shelter, transportation, food, clothing Estimate how much money is required to pay for each category 8-18

19 Simple, realistic, and clear Builds in some personal control for each family member Distinguishes between wants and needs Gives priority to needs Satisfies wants if possible Treats credit as debt, not income 8-19

20 Advantage - There are fewer accounts to balance Disadvantage - Loss of independence Different approach Pool some of money from each person to cover joint expenses Keep a smaller but separate checking account and credit card for each person 8-20

21 Have made savings accounts rare Paying minimum amount is very costly in long-term Debt: Increases in young age Peaks when people are in their middle years of life Tapers off at old age 8-21

22 Advantages Enjoy something while paying for it Take advantage of sales prices Convenient Useful during emergencies Disadvantages High interest charges Potential for overuse 8-22

23 Advantages Mobility Amenities along with fewer responsibilities Large down payment not needed Easy budgeting Disadvantages No tax deductions or gain from the rising value of the property Rents rise with inflation Restrictions on noise level, pet ownership, and children 8-23

24 Advantages Pride of ownership and better credit rating Monthly payment remains constant for many years Federal income tax deductions Potential for increase in value over time Each payment is an asset that grows in value Gives ability to buy against equity Provision to make home improvements and alterations Disadvantages Substantial down payment is needed Cost of maintenance and repairs can be high 8-24

25 Legal term indicating that a person is financially insolvent and unable to pay her or his debts Causes for excessive debts Credit spending - Leads to overextension Crisis spending - Results from unexpected events in life Careless or impulsive spending Compulsive spending 8-25

26 Develop and stick to a budget Avoid making any new financial commitments Destroy or put away credit cards Develop a debt repayment plan Pay off debt with highest interest rates first Reduce total number of debts Pay a little off each month Avoid debt consolidation loans 8-26

27 Sought by individuals who: Are overextended Have made no progress in dealing with their debt in three to six months Large employers have budget counselors Approach therapist if financial difficulties are due to deeper marital or personal problem Avoid budget clinics 8-27