Yours, Mine, and Ours: Achieving Financial Goals as Individuals and a Couple
August 28, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Making sound financial decisions is challenging enough when it’s just you – one person deciding on what’s best for his or her short-term and long-term goals. But add in a spouse, and the choices multiply! You now have two more sets of goals – your spouse’s and your combined goals as a couple. Plus, we all bring our own habits, attitudes, and history with spending, saving, bookkeeping, and planning for the future.
How do you accomplish what’s most important to you together and as individuals?
First, establish shared financial goals – this should be a combination of each of your individual priorities that you have discussed. This process generally works best if each person writes down his and her own goals before sharing them together. You will need to prioritize your financial resources toward meeting the ones that are most important to each of you.
Second, create the action steps and spending plan that support your goals. Depending on your history with spending and saving, you may want to consider setting up automatic savings contributions, shifting spending in certain areas to cash only, getting rid of credit cards, or other techniques that work for you.
Third, manage the day to day. Each person should have some responsibilities for managing your financial lives. Even if one person handles the majority of the financial tasks, the other person should still take the time to understand their overall financial situation, where all accounts are held, how investments are allocated, bills paid each month/year, etc.
Fourth, review your progress monthly and yearly. Set a monthly date to review progress on spending, saving, other action steps, and day-to-day financial management. Once a year, review your net worth statement and take stock of how overall progress is coming towards achieving your goals.
Money is a powerful tool to fund the lives we envision, and it can also be a source of friction and great pain in relationships. Sometimes involving a neutral professional – either a counselor or financial planner depending on the nature of the issue – can support you in moving the relationship and your financial goals forward.
To go more in depth on this topic, plan to attend my free workshop on Couples and Money at the Keller Public Library on Tuesday, September 20 at 6:30 pm. The library requests registration to library@cityofkeller.com or (817)743-4800.
Quoted in couples and money article
October 15, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Associated Press Personal Finance Writer Eileen AJ Connelly interviewed me earlier this week about couples and money. Her questions were about whether joint accounts or separate accounts were better for couples to manage their money. The recent John and Kate debacle is what sparked public interest in the subject matter. But no matter what causes the attention, it’s always great to get couples talking with each other about money.
My answer: bottom line, there’s not one system that’s best for everyone. The important thing is to communicate well with each other and devise a system that makes sense to each of you and your relationship. It’s also really important that both people in the relationship are involved in managing the couple’s finances at least on some level. See her article on Oregon Live.
Couples, Investing, and Risk
July 21, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
It’s pretty common for spouses to be at different points on the risk tolerance spectrum. If you’re one of these couples, you know that these differences can have varying effects on the relationship and your investing behavior.
Sometimes, the more conservative spouse just completely delegates investing decisions to the other spouse and just shuts their eyes when the statement comes. This is not the ideal solution because it’s important for both spouses to be educated on your investments in case something happens to the decision-making spouse. Lack of information can lead to stress and poor decisions with long-term consequences in this situation.
Other times, there’s a constant state of friction and stress whenever investments are discussed. The more conservative investor may veto anything that sounds the slightest bit risky. Or the more aggressive investor may rush to make investing decisions without fully explaining or researching the risk to the more conservative spouse. This approach is also clearly not what you want in your relationship!
The bottom line is … You can have differences in this area and still work quite productively together on investing. In fact, you can use your differences to prompt each other to thoroughly research and discuss each investment option resulting in better investment decisions. So how do you get to this point?
First, define your goals
Making good investment decisions is difficult if you don’t know what you’re investing for. Making sure you’re on the same page–or at least reading from the same book–when it comes to financial goal-setting is the first step toward dealing jointly with investments.
Make sure the game plan is clear
Making sure both spouses know how and (equally important) why their savings are invested in a certain way can help minimize marital blowback if investment choices don’t work out as anticipated. Second-guessing rarely improves any relationship; making sure both partners understand from the beginning why an investment was chosen, as well as its risks and potential rewards, may help moderate the impulse to say “I told you so” later.
If you’re the more aggressive investor …
Take time to understand your spouse’s concerns. You may need to provide additional information to increase his or her comfort level, but you won’t know what to supply if you automatically dismiss any objections. If you’re enthusiastic about an investment, concealing potential pitfalls could make future joint decisions more difficult if your credibility suffers because of a loss. A more cautious spouse may help you remember to assess the risks involved.
Remember that you can make changes in your portfolio gradually; you don’t have to become more aggressive all at once. And if you’re an impulsive investor, try not to act until you can consult your partner.
If you’re the more conservative investor …
If you’re unfamiliar with a specific investment, research it. Though past performance is no guarantee of future returns, understanding how an investment typically has behaved in the past or how it compares to other investment possibilities could give you a better perspective on why your spouse is interested in it.
Consider whether there are investments that are less aggressive than what your spouse is proposing but that still push you out of your comfort zone and might represent a compromise position. For example, if you don’t want to invest a large amount in a single stock, a mutual fund that invests in that sector might be a way to compromise. (Before investing in a mutual fund, carefully consider its investment objective, risks, charges, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.)
What if you still can’t agree?
You could consider investing a certain percentage of your combined resources aggressively, an equal percentage conservatively, and a third percentage in a middle-ground choice. This would give each partner equal input and control of the decision-making process, even if one has a larger balance in his or her individual account.
Another approach is to use separate asset allocations to balance competing interests. If both spouses have workplace retirement plans, the risk-taker could invest the largest portion of his or her plan in an aggressive choice and put a smaller portion in an option with which a spouse is comfortable. The conservative partner would invest the bulk of his or her money in a relatively conservative choice and put a smaller piece in a more aggressive selection on which you both agree.
Or you could divide responsibility for specific goals. The more conservative half could be responsible for the money that’s being saved for a house down payment in five years. The other partner could take charge of longer-term goals that may benefit from taking greater risk in pursuit of potentially higher returns. You also could consider setting a predetermined limit on how much the risk-taker can put into riskier investments.
Finally, a neutral third party with some expertise and a dispassionate view of the situation may be able to help work through differences.
If you and your partner have worked through investing differences, I’d love to hear what’s worked for you. Please feel free to post a comment!