February 14, 2017

Take Your Mate On A Hot Money Date

Talking about and planning your financial future together is like getting a couple's massage. How? Read on...
Dawn Doebler, CPA, CFP®, CDFA®

According to Fidelity’s 2015 Couples Retirement Study, there’s a disconnect between how well couples say they communicate about money and what the research says. For instance, 72% of couples surveyed feel that they communicate about money exceptionally or very well, yet almost 50% have no idea how much they need to save for retirement to maintain their current lifestyle. The more disturbing fact is that this level of disagreement is highest among Baby Boomers who are the closest to retirement and have less time to do much about it.

The survey also reveals that more than half of the couples have no idea how much they expect to receive in monthly retirement income. And over a third disagree on the total amount of money they have invested in retirement plans or brokerage accounts.

So, have these sexy statistics put you in a romantic mood? Maybe for you data geeks, but they also reveal that couples should spend more time looking at the details of their finances together, rather than making assumptions.

There are many articles that suggest couples schedule time on a regular basis to talk about their finances. We all know that we shouldn’t broach this subject right after he comes home with a new set of golf clubs and we’re annoyed by his spending habits. I wholeheartedly agree with these common sense suggestions.

Talking about money and finances can be touchy, especially if you and your spouse or partner have disagreed about money in the past. That applies to pretty much all of us. To keep the romance alive, here are a few hot tips to encourage money conversations with less drama.

Write financial love notes to each other:

Many couples start a financial discussion by talking about spending or budgeting first. I think this is a trap that will quickly dissolve into an argument. There’s also a misconception that couples with more money have less to fight about. In advising couples, I find that disagreements over spending habits happen with couples at higher levels of wealth too 

Even if spending is an issue, I suggest that you start by talking about your financial goals, not your spending habits. Sharing bigger goals that require better saving and spending habits is a more positive way to motivate each other.

Take action: Write down your top three financial goals on a piece of paper and have your spouse do the same. Rather than saying, “I would like to have enough money in retirement,” make your goals as specific as possible. A better goal might be “to retire by age 65 with $1 million in savings and no debt.” This goal now has both a timeframe and a dollar amount. From here, you and your spouse can run some numbers to know how much you will have to save each month to reach this goal. While this may or may not be a realistic goal, the idea is to know what’s important to each other, prioritize your goals together and create an intentional path to achieve them.

Share your deepest investing secrets:

Since the financial goals you established depend on investing your savings in a way to reach them, don’t be shy to share how you are investing your money.

Like many couples, you probably have your retirement and investment accounts in different places, like your 401Ks at work or accounts that may be held at different custodians, like Schwab or Fidelity. If it’s been awhile since you looked at all of your investments together, or if you never have, then get on the same page by knowing what accounts you have, where they are located, what they are invested in and how much risk you are taking.

Take action: The best way to do this is to print out your 401k and brokerage statements and schedule time to review all your investments together. This will help you to know if you have duplicate investments, which may mean that you are less diversified than you thought, or have an overconcentration in stocks or bonds. If you’re not sure what you are invested in or why, then ask questions, especially if your spouse has been the one primarily responsible for your joint investment decisions.

Taking too much or too little risk is a common disconnect among couples. You would be surprised to know that even couples in the financial industry don’t always agree on the level of risk they should take with their investments. I had a conversation with another advisor recently, and she told me that she and her husband can’t agree on how much risk to take. She’s very comfortable owning more stocks, while he wants a more conservative portfolio. It’s an ongoing discussion with them. 

While there’s no easy fix for this, it’s good to open up a dialogue that leads to a better understanding about how your partner feels about the level of risk in your portfolio. If you can’t seem to agree, it may be time to get professional financial advice.

Board the same love boat:

Too often, couples assume that they know where they are financially. They also assume that they know what their spouse or partner knows about their finances. In my 25 years as a financial advisor, let me say that there’s a lot of assuming going on.

Since very few couples that I work with start out with a good grasp of their total financial situation, I like to have them take a short quiz separately, then compare notes about what they do and don’t know. This gives us a place to start when creating a financial plan that works for both of them. I can tailor a plan to focus on the most critical areas first like developing an investment strategy or reviewing their insurance policies to make sure that their coverage meets their needs.

Take action: We developed a short (12 question) Financial Fitness Checkup quiz and I encourage couples to take this separately, then compare their scores. This is not a competition, but an exercise to know what you don’t know and what your spouse doesn’t know about your finances. Then, you can download our Financially Fit For Life Guide that will help you to fill in the blanks.  

Keeping the romance alive:

Talking about your finances and planning together for your financial future is a lot like getting a couple’s massage—it reduces stress and creates a shared intimacy. While I don’t recommend discussing your finances during your couple’s massage, I do suggest that you make time for both on a regular basis. And since it’s Valentine’s Day, my advice is to celebrate your love with some chocolate-covered strawberries!

 

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Dawn Doebler, CPA, CFP®, CDFA®

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents.