Family Financial Management: a Real World Perspective Glenn Allen Muske Iowa State University
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Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1996 Family financial management: a real world perspective Glenn Allen Muske Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Family, Life Course, and Society Commons, and the Home Economics Commons Recommended Citation Muske, Glenn Allen, "Family financial management: a real world perspective " (1996). Retrospective Theses and Dissertations. 11387. https://lib.dr.iastate.edu/rtd/11387 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. 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This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zceb Road Ann Arbor, MI 48103 ii Graduate College Iowa Slate University This is to certify- that the doctoral dissertation of Glenn Allen Muske has met the dissertation requirements of Iowa State University Signature was redacted for privacy. •Major Professor Signature was redacted for privacy. For ih&Major Depanment Signature was redacted for privacy. f^r^li^-oraduate College iii TABLE OF CONTENTS ABSTRACT viii CHAPTER I. INTRODUCTION 1 Purpose of this Study 1 Importance of this Study I Organization of the Dissertation 3 CHAPTER 2. LITERATURE REVIEW 5 The Family in the Economy of the 1990s 5 Recommended Practices 8 Definitions 8 Historical roots and the normative practice 11 Success in financial management 13 Benefits of using the recommended practices 15 Use of the normative practices 17 Family Financial Management Practices 22 Question of Interest 26 iv CHAPTER 3. METHODS 30 Qualitative Research in the Literature 30 Outline for the Study 33 Method 33 Case selection 35 Plan of study 37 Data analysis 38 Grounded theor>' 41 Reliability of Inquir\' 44 T rustworthiness 45 Authenticity 49 Researcher background 50 CHAPTER 4. RESULTS 53 Families Sur\'eyed 53 Sample 53 Angie and Bob 56 Cindy and Greg 65 Gar>* and Donna 76 Lorrie and Andy 88 Nora and Don 99 Sam and Gail 11 ^ Sandy and Carl 125 CHAPTER 5. FINANCIAL MANAGEMENT THEMES 140 Themes 1 1 Process 142 Stability 145 Capacity to change 146 Safety 150 Control 151 Comfort 153 Values 154 Feelings 159 Reported time orientation 164 Experience 165 Situational knowledge 166 Information 166 Long-term Preparations 168 Summar\' 171 CHAPTER 6. A PROPOSED FINANCIAL MANAGEMENT FRAMEWORK 172 CHAPTER?. WHAT DOES IT ALL MEAN? 188 Purpose of this Study 188 Summary of Study 188 Major Findings 189 Implementation of the Findings 192 Knowledge of motivators 194 Tools 195 Formal educational settings 197 Timing 199 Informal education efforts 201 Outside institutions 202 Summar>- 203 Future Research 204 Long-term Assessmem 206 APPENDIX. STUDY AREAS OUTLINED 208 REFERENCES 215 ACKNOWLEDGMENTS viii ABSTRACT The purpose of this study is to examine techniques used by families in the day-to-day management of their finances. The purpose is accomplished by analysis of data gathered through a series of in-depth interviews with the family money manager in seven different families. Each family was inter\'iewed for a minimum of four hours, to examine what the family actually does and their reported explanation of why they do it. The families are all white, in first marriages, with children living at home. The family financial managers have a bachelor's degree or less, and both spouses are employed at least part-time. Family income ranges from S40.000 to S60.000 annually. Several themes emerge from the data. These themes, in turn, axe developed into a proposed financial management process. The proposed model, a grounded theory, suggests that families have a process for managing their money and that it focuses on the ideas of safet>', control comfort, and routine, with an overall goal of the family's financial viability. The specific activities. largely mental seen in the model are a result of a decision process that is shaped by several motivating factors including cash flow, the near future, feelings and values, experience, and situational knowledge. Respondents all said their goals are to '*live life to the max." and to be able to "pay our bills." Although long-term planning, saving, and net worth appear to be of little or no concern, all respondents are home owners, have retirement programs (some minimal), and are protected from at least some catastrophic occurrence by health, property, and liability insurance. Lx The study suggests five areas that have implications for the development and teaching of financial management practices: (1) motivators and how they influence the entire process: (2) tools and the need for a variety: (3) teaching and how formal educational efforts must expand on the motivational forces at work and include a variety of methods: (4) liming, including the short-term focus of the manager's planning horizon and how life experiences impact financial decisions: and (5) the use of the mass media outlets to educate regarding family financial management. 1 CHAPTER 1, INTRODUCTION Purpose of this Study The purpose of this study is to examine techniques used by families in the day-to-day management of their finances. The purpose is accomplished by analysis of data gathered through a series of in-depth interviews with the family money manager in seven different families. The findings are used to inform the development of teaching materials and techniques on financial management to be used in formal and informal educational settings with a broad range of audiences. Importance of this Study Family financial management has been of interest to the family/consumer/home economist for some time. Numerous studies have been done examining the beha\^o^s of families when handling their personal finances (e.g., Beutler & Mason. 1987; Ferber. 1973; Ferber & Lee. 1974; Foster & Metzen, 1981; Godwin & Carroll. 1986; Heffran. 1982; Hira, 1987; Mullis&Schnittgrund. 1982; Rosen & Granbois. 1983:Titus. Fanslow, & Hira. 1989; Wells. 1959). The premise behind many of the studies is that use of recommended behaNiors. or the "normative" model (Rettig & Mortenson, 1986), leads to positive results such as increased net worth or higher satisfaction (Godwin. 1990a, 1990b; Lawerence. Carter & Verma, 1987). .A.lthough studies have found that fenulies using the recommended practices have higher net worth or increased satisfaction with their financial situation than those not 2 following the recommended practices (e.g.. Beutier & Mason. 1987; Godwin & Carroll. 1986: Mullis & Schnittgrund, 1982; Titus. Fanslow. & Hinu 1989). the same studies also have found few families using the recommended practices. The practices studied by Beutier and Mason (1987), Godwin and Carroll (1986). and Titus. Fanslow. and Hira (1989). as examples, are those that have been recommended in personal financial management textbooks (e.g.. Carman & Forgue, 1994: Winger & Frasca. 1993). These practices include the preparation of a written budget, record keeping and control, and constant monitoring. The recommended practices are prescribed not only in college textbooks for family resource management and in consumer economics textbooks (e.g., Lee & Zelnick. 1990), they also are used by writers of popular family financial management materials (Bainford. Blyskal. Card. & Jacobson, 1992: Dolan & Dolan. 1988, 1993; Givens. 1990; Klein. 1987;