Standard Cost Concepts Applied to Family Finance

Standard costs serve as benchmarks that represent expected future costs required to achieve an objective or goal. In business, these costs are mainly used for decision management and decision control. The same control applications can be employed for family finances. The related concepts that are exercised in business prove beneficial to several areas of family finance described below.Families operate very similarly to businesses, working together to reach common family-related objectives through setting goals. Similar to businesses maintaining mission statements, families develop unofficial, unwritten family standards and themes. Within the overall family objective are many smaller objectives that change with time, economic demands and other internal or external factors. Standard costs provide businesses with a mean for decision management and control in order to assist them in reaching their objectives, and thus, the principles can be applied to family finance in the same manner to achieve common objectives.Family SavingsThe application of standard cost systems provides businesses with the incentive effect to achieve costs less than or equal to the standard costs required to achieve the business objectives. When these costs are used as a basis for performance evaluation, incentives are created for management to control their costs. With this incentive comes the possibility of discouraging cooperation when individuals are not rewarded in the same manner as the whole unit.Let us examine a family of four attempting to save money to reach a family objective: going on vacation to California next summer. This objective is set when the parents have a discussion on how to spend more time bonding as a family, equivalent to a board of directors setting a top-down objective. In order to reach the objective, the family realizes that they must save $5,000 in the next year and that they must achieve this through decreasing their family spending since there are no anticipated increases in family income. In order to achieve the objective, the family must work together to achieve increased savings. In a business, if an individual is rewarded based only on what they produce then they may not be motivated to work with the other individuals in the department to ensure they are also attaining the same levels of productivity. However, if the same individual was rewarded at multiple levels, both individual and departmentally driven, then there would be more incentive for cooperation. The same must occur for the family in the example. In a case where the vacation itself is the only reward, if the children are not as excited with the family vacation destination then they may not be as motivated to work towards the family’s savings. If other individual level rewards are set (i.e. stickers, one on one time with the parents, or an hour extended curfew for teenagers) then the unit would be working together more cooperatively to reach the overall objective of the family vacation.Family BudgetFamily budgets have a direct impact on the savings available for the family. In discussing the same family of four with the objective to save $5,000 to acquire enough funds for a family vacation, cost concepts can be applied to the family’s budgeting function. The family should use the basic concepts of a standard cost system to set an overall budget for the year. The budget should then be drilled down further to set costs that must be met in each budgeted category. For example, if the family calculates that it can only spend $300 on groceries bi-weekly then they should apply standard costs to each grocery item to ensure that overspending does not occur. If the family sets a standard cost for cereal at $2 then the concepts should be applied so that cereal is not purchased if it is above $2. If purchasing were to occur above the $2 cost then the vacation may be sacrificed.Another incentive effect can be applied to this situation; building inventories when price discounts occur. The recently popular occurrence of extreme couponing illustrates this incentive effect. Extreme couponing is a pop culture hobby with the goal of stocking up on items when they are below the standard cost. This strategy involves meticulous planning and monitoring of standard costs for household items, clothes, groceries and even vacation packages. Utilizing this strategy to stock up on goods or build inventories when prices vary below their set standard cost range can assist the family in reaching its end objective. Prices and costs can change because of inflation, demand, resources and many other economic factors. Therefore, it is important to mention, especially in the case of long term objectives, that standard costs should be constantly examined and updated.Standard costs concepts are a beneficial approach for families that function similarly to a business where they are one unit working towards a common objective. Many related concepts can be applied to family finances. If these concepts are understood properly by the family the overall family’s finances including short and long term objectives will be improved.

If We Have Grown Into a Nation of Relatives From a Nation of Families, Could the Needed Rx Be KR?

A few weeks ago, two of my cousins stopped in to visit, rather impromptu. They passed through Ohio as they were returning home to Pennsylvania. It was both a treat and very delightful to see them both, even for a few brief moments.Both apologized for not phoning in advance, but neither was certain of their time itinerary and if a visit would even be possible before they returned home. They also didn’t want to give too much advance notice because, traditionally for our family we love sharing meals together. If we know someone is planning a visit, then by the nature of just showing good manners, a meal is made readily available for their visit or sojourn during their travels.The older generations, which I seem to firmly hold a membership within, are affectionately called “food pushers”. I am not certain if the title is entirely accurate. We have descended from a long line of exceptional cooks who prepare wonderful meals that is only accentuated by good conversation and good fellowship. We, our immediate and extended family, have all grown to love each of the three rather equally. We grew up learning that the partaking of meals simply cannot occur with everyone. While food is fuel for the body, the fellowship, an intimate activity shared only between those close to one’s heart and connected to another’s spirit, nurtures the soul.My cousins neither wanted me to unnecessarily expend time or energy in preparing food on their behalf just in the event the opportunity to visit couldn’t occur. Yet more importantly, from their perspective, their real focus, the point that was of paramount importance, was to insure they didn’t either forgo or bypass the momentarily opening for a personal exchange of family hellos, which clearly doesn’t happen nearly enough or as frequent as any of us desire.As we shared our mutual affection, I reiterated or clarified that their company is always welcome, invitations are not necessary, and arriving unannounced is totally acceptable, a privilege reserved for family and family-like friends. We exchanged our typical banter, yet I wasn’t willing to relinquish this argument, {I seldom am willing, given I am slightly older} and they were remaining at the point of good manner apologies unnecessarily too long. To move us all beyond laboring on this idea and on to something really more important-kinship fellowship, I made one succinct statement. I said, “there is a difference between family and relatives.” “You,” I added, “are family.” We all chuckled and nodded in agreement.As you are reading this too, I imagine the sides of your mouth are also curving upwards as well. Why? The feeling many have for family members differs from those categorized as relatives. Family members come to visit. Their stay is always too short; their departure occurs too quickly. Their presence is wonderful and their absence creates a noticeable void. In contrast, visits from relatives seem to last too long. Sometimes the distance between their arrival and your desire for the visit to conclude activates a child’s voice in the brain “asking is it over yet?”Sadly, over my lifetime, I have had, and perhaps still do have some relatives intertwined among family. I am confident that this occurs more by default of a series of random unfortunate events than by some atmospheric grand design. I wondered how some earned this distinctive labeling and separate categorization. What began in humor caused me to take a little closer look at some of the differences between relatives and family. As you look at the descriptors, which are not exhaustive, tell me your thoughts as well.The separation by title suggests that each have very different attributes that are present in one and absent in the other. Does that mean that one brings additive qualities to personal interactions; while conversely the other removes through a subtractive process desired or needed elements between two or more human beings? Does this mean that the presence of one of these groups is effortlessly fluid and the company of the other is tension laden? Does one transform physical space with their cloud covering of a sense of entitlement and the other usher in gratitude like a warm breeze?Consider the organization of humans from a faith or creation perspective; the human race evolved through the units or groupings titled families. Consider again from a human and not necessarily a secular vantage point as one looks both out and inward, the reality is that in the absence of families, some individuals just would not be chosen. This causes a chuckle for those in the position to do the choosing or who have categorically always been chosen. However, if aligned to the other segment, it is painful for those who are excluded or included only through default.So how does one make this delineation? On more occasions than I can recount, I have heard conversations where someone touts an expression about being connected to another as a blood relative. Similarly, we have all heard comedic lines describing relationships to someone as a second cousin, twice removed. Is it blood that defines status as either relative or family membership?Interestingly enough, examining the blood in white blood cells or cells from the interior of the cheek will reveal if the hereditary material in one individual is the same as in another. This only proves relative relationship, a biological connection either vertically or horizontally exists. This alone isn’t the definitive proof for family membership. Family is so much more. It is the kinship knitting of spirits and hearts that far surpasses positive DNA testing and presence of genetic markers. The ties that bind individuals and groups together exist and oftentimes are greater than blood connections.Consider the unselfish and willing sacrifices, love, devotion, and commitment in the family unions of Biblical characters of Ruth and Naomi and Jonathan and David; joined together by marriage and as in-laws no less. Wow! They didn’t share any similar biological markers, but did possess commonality in spiritual kinship affinity. Are these random isolated examples found only in Biblical literature? Consider polling or interviewing the hundreds of thousands or millions of individuals who experienced love, nurturing, acceptance and protection of family whose origins began with adoption.Many would argue that they were welcomed and wanted. Many would also add their membership in these families were full, whole, unconditional and absent of restrictions even in the nonexistence of common biological markers. Consider Jaime Foxx, Faith Hill, Dave Thomas, Steve Jobs, Melissa Gilbert or even Bo Diddley; all adopted-most by strangers, some by blood related individuals-all unequivocally would argue these foundational kinship connections are truly family.So what made us chuckle at the onset of this article that describes the inclusive group as family and the exclusionary faction as relatives? What makes it possible for us to cringe at the uncle, brother, sister, mom or dad whose persona in general or specific antics, always at group social events and holiday gatherings, which cause personal embarrassment and create retellings of these momentary exploits over and over for the next year and sometimes for years to come? What makes us justified in shunning these individuals’ visits, avoiding phone calls, emotionally and physically distancing ourselves personally and sometimes professionally justified?The justifiable evidence is really quite simple I believe; others may disagree and counter with, it is very complex. It can be summarized in a few areas, behavior, choices, disappointments and hurts-both intentional and unintentional-from things such as religious preferences, political differences, career choices, sexual and marital partnerships, alcohol usage or intolerance, etc., circumstances-sickness, physical characteristics, drug dependency, mental illness, aging, homelessness, financial insolvency, financial dependency, or financial successes sometimes becomes the boundary guidelines for exclusionary practices, avoidance, and ultimately relegation to relatives within a family caste system.Echoing these labels silently in my head, or worst audibly through my voice, creates a void in my spirit as I empathize with the pain some must feel from the isolation and separation from families resulting from both planned and forced life choices. My own family of origin had the elements of disaster, the sprinkling of imperfection but was rooted deeply in one belief and practice: family first. My family was a collection of individuals connected to one another by blood, by friendship, persons abandoned, lost, displaced, discarded and/or forgotten. Strangers were provided shelter and given a seat at my mother’s table. Transgressions were admonished; wholeness was foremost the goal, and forgiveness was served from a year round a la carte menu.When I reflected upon my own journey through and with both my family of origin and extended members, I realized that my mother’s dictated rule of family first had specific elements, a formula of sorts. There was not a formal or informal practice of relative delineation or castigation to the room of tolerance. She only displayed acceptance. No one honestly wants to just be tolerated; many desire wholehearted acceptance. So what dynamics allow or prepare individuals to treat others as and retain membership within a family? Is the recipe simple? I think it is. Here is my mother’s recipe, enhanced by my aunt, and embellished over time by me.1. Infinite supply of unconditional love.2. Unbridled acceptance3. Seventy times seventy application of forgiveness4. Nonconforming unselfishly and willingly sharing responsibility for one anotherIs it possible to infinitely love unconditionally, accept others without constraints, forgive in the absence of change and/or repentance AND yet willing share responsibility as someone’s brother or sister keeper? Is it possible for this to be a realization other than in sitcoms and fictional families of Ozzie and Harriet of the 1960’s or Claire and Cliff Huxtable of the Cosby’s in the 1980’s? I believe this an easily doable task. I grew up in an environment where it was not only expected but practiced.My mom, then the reigning matriarch of our family, was quite similar to Mrs. Younger, the mother in the play Raisin in the Sun. She, like Mrs. Younger issued family edicts and accepted nothing less than compliance. Family was quintessentially important to both as was acknowledging God’s dwelling presence in the home. This is evidenced in the classic line from Mrs. Younger to Beneatha and demanding recitation of “in my mother’s house there is still God!” Perhaps flowing from this God foundation, also in my mother’s house, each individual was valued and viewed separately from both negative behavior and choices.While she perhaps never gave a particular name to these teachable moments and life lessons, I learned from her and my aunt that people are neither disposable nor valueless, but instead irreplaceable and priceless above all things. Looking back over our lives, I watched her repeatedly envelop people in an unconditional love without condemnation and simultaneously demonize the only the behavior but never the individual; each was always separated.So what about the tens of 1000’s and maybe the hundreds of millions relatives exiled from families? Could my mothers’ love of family and quirky but extraordinary talent to reduce seemingly complex constructs to simplistic matter-of-fact how-to truths, be a bridge to reconstruct {durable sustainable} relationships and reconnect {whole healthy} families?I think it is desperately needed. If you disagree, look at our communities that may not contain neighborhoods, the very existence of homelessness in the streets, the increasing volume of random acts of violence, free floating rage, disenfranchised, abandonment in nursing facilities, across our nation and globally, around the world. The media’s local and national reporting seems to over abundantly report on the strife among us. It seems that we have turmoil in every direction we look; so many things out of order.I am reminded of the biological classifications of both the animal and plant kingdoms in nature. Family is inserted following species and genus and prior to order. In the absence or removal of family, can order exist? Are kingdoms ever possible without families? Just using deductive reasoning, every nation around the globe originated with a collection of families evolving into neighbors, ordering and arranging into communities, then growing into kingdoms that we call countries. I didn’t notice a place in either a classification of relatives. Every species has a unique and specific base to which it is connected. For animals, the clan, group or family is the source of nurturing, instruction and protection. Relatives living in isolation have neither. Have we grown from a nation of families into a nation of relatives?In an era where people are not disposable, every hand is needed to make a change as critical changes are needed everywhere. Individual estrangement and isolation as relatives potentially can be more harmful to everyone whose life is touched by him or her. In this very imperfect world, correcting and closing the chasm of exclusion and exile, erected over time, has a high utilitarian beneficiary value throughout the “kingdom”. The good news is that banishment to the isolated island of relatives does not have to conclude as terminal but can be only a temporal residency. This simply means that families can be conjointly reconciled and the relative status as outcast or outlier can be dismissed without prejudice. At the very least, consider it an Rx worth exploring. Let’s call it KR–kinship redemption.