The financial challenges confronting the head of a household are often comparable to those faced by a corporate CEO. Both must keep an eye on long-term goals while navigating day-to-day challenges and setbacks—ranging from small ones to sometimes colossal ones. Both must keep pace with an ever-changing and sometimes frightening world without losing sight of long-term plans. And both must closely monitor the money going out while trying to increase, or at least stabilize, the money coming in. Successful CEOs develop strategies for doing these things—and some of those strategies can be scaled down for use in households.

To incorporate CEO strategies into your family finances…

Create a family finance mission statement. Whether you’re running a company or a family, it’s easy to get so caught up in the Here’s what I have to do today that you lose sight of the Here’s what I’m trying to do long-term. One way that corporations overcome this is by crafting “mission statements”—brief explanations of what the company is seeking to achieve. Distilling that down to a single, oft-repeated statement helps make it ­second nature, reducing the odds that this core purpose will be forgotten over time. Examples: ­LinkedIn’s mission statement is, “Connect the world’s professionals to make them more productive and successful.” Nordstrom’s is, “Provide outstanding service every day, one customer at a time.” 

Household financial mission statements should similarly encapsulate ­financial plans or goals. Examples: Spend wisely to allow a comfortable ­retirement at 65…protect the financial futures of current and future generations of our family. 

Repeat the mission statements often, especially when times of crisis threaten to throw those goals off track.

Tune out the noise, but respond ­dynamically to fundamental change. Even the best-laid plans inevitably come under threat, some relatively ­minor and some potentially catastrophic. For a CEO, that threat might be a new competitor or changing customer preferences. For a head of household, it might be unexpected medical bills or a stock market crash. And this year, of course, the challenges have been in the extreme, including a global pandemic and severe economic recession. For either the CEO or the head of household, the question is the same—should I try to stick with my existing plan as much as possible or quickly come up with a drastically new one? Both options carry risk—change course too drastically based on every new development, and you’ll never complete any long-term plan…but ignore new developments for too long, and you might be sticking with a plan that’s now obsolete. 

Savvy CEOs confront this dilemma with a pair of weapons—time and teams. They know that events that are developing rarely require an immediate response—for one thing, to respond immediately often means ­responding before all the relevant facts are known. That means they may reflect on possible changes for days or weeks before responding…waiting for the initial, emotional impulse for a knee-jerk reaction to pass while watching to see how events unfold…gathering information…and soliciting input from a team of trusted underlings, analysts and/or consultants. 

A head of household also should delay reacting to unexpected news until the initial emotional response of hearing the news passes. And he/she, too, should confer with a “team” before acting. If the change is financial, this team might include a financial adviser, tax adviser, estate-planning attorney and/or a friend or relative who is very good with money. If the change is health-related, the team might include a primary care physician and medical specialists. General questions to ask include the following… 

  • What are the financial implications of this change for the short and long terms? 
  • Does this news affect my pursuit of my long-term financial goals?
  • Do I need to change anything about my current plan to reach my goals, and if so, what?
  • Are there any tools or resources available specifically for people facing this situation? 

For example, if you or your spouse has just been diagnosed with an expensive-to-treat medical condition that is not well-covered by your insurance, there might be nonprofit organizations that make grants to people who have this condition. 

To create more detailed questions, read about the responses other people have made to this change, describe these and then ask, Would a similar response make sense for me? 

Pursue expense-trimming with the same vigor as earning. Successful CEOs know that belt-tightening isn’t just something to do in difficult times—every dollar saved at any time is a ­dollar that can be put to productive use. Households should consider cost-cutting a continuous process, too. Unfortunately, most don’t bother cutting costs until a financial emergency ­occurs…and many don’t even have a firm grasp on where their money is going. 

Helpful: Mint.com offers useful free tools for tracking spending. Many credit cards provide spending breakdowns as well. Once you have a handle on where your money is going, divide your expenses into necessities and discretionary expenses. Rank the discretionary expenses in order of importance to you. Then eliminate most or all of the entries at the bottom of the list, and redirect the money previously spent there to achieving your most important financial goals.