Some relationships can be extremely strained due to different ways of dealing with money. One partner may be a natural saver, and the other an unbashed spender. (Don’t feel guilty if you’re the latter rather than the former)
A few years ago, I worked on a financial plan for a couple in their late 30’s who made very decent joint family income, but the husband was quite adamant that his wife was overspending and putting their retirement in jeopardy. The wife was unconcerned, and this made for a very tense and awkward meeting , and by the end of the meeting, no resolution had been made. Soon thereafter, the couple went to seek marital counselling. They realized that they needed to get on the same page, as they were clearly not able to talk about long term planning before settling their shorter term differences regarding their financial habits.
We have good reasons for developing partnerships – to have a stable partner we can love, raise a family together, depend on and be ourselves with. But when your future is inextricably linked with someone else’s, it is crucial to be able to trust that person, and money is no small part of that equation.
What are some of the key money mistakes couples make? How can you alleviate money stresses from your relationships?
1. Honesty is always the best policy. A friend of mine once confessed that she had a secret Visa bill that she kept hidden from her husband. She was embarrassed that she couldn’t repay it quickly enough. The #1 thing you can do to ease your money woes is to be completely honest with your spouse. Don’t hide your purchases, or your debts. Chances are that if you feel the need to hide them, then something may be amiss. The end result will always be worse if your spouse finds out that you have hidden it from him/her.
2. Have a Budget. This point speaks to the importance of both partners being on the same page with regards to everyday spending. Have you sat down to go through how much money is being spent on necessities, how much is put towards savings and how much is “discretionary” (i.e.fun money)? Are you on the same page when it comes to the latter point? This can be hard when one of you is a saver and the other is a spender, but it is SO KEY to developing long-term trust with your partner. Try giving yourself a monthly allowance for extraneous spending so that you don’t end up nitpicking over every little purchase.
Something else I’m a fan of is having a joint bank account or credit card for household expenses (utilities, groceries, maintenance, cars, etc.), and individual accounts for your discretionary “fun” purchases. As long as you both contribute equivalently to the joint account, and adhere to the amounts committed to long term savings and debt, then whatever each of you chooses to spend from your own individual accounts is your business.
3. Don’t Put One Person in Charge. In every partnership, chances are that one person is “better” (or more well versed) with money than the other. One of the biggest mistakes that couples make is letting one person be in charge of everything financial. The unfortunate outcome of this is that it releases one person from any responsibility for money matters. This can lead to a certain amount of resentment on the part of the partner dealing with money (what, you don’t care?), but more importantly allows potential mistakes to go “unchecked”. If two sets of eyes see everything that’s going on, chances are that you will be on more solid financial footing.
If you were to outlive your spouse, would you want to feel in control of your finances? I had a client whose spouse unexpectedly passed away and left her in financial ruins. She had not known the true state of their finances and had been told by her late husband that they were in “good shape”.
Lastly, perhaps your spouse thinks that they are really financially savvy (but they really aren’t!). A few years back, I met a couple where the wife (who was the main income earner) had left her husband in charge of dealing with all their investments. He had boasted about how well he had done over the years. The reality was that he had lost a significant amount of money on trading penny stocks, and had only been talking about the “wins” that he had had. Overall, their savings had diminished which put their retirement plans in jeopardy.
Make sure to educate yourself and take part in discussions with your spouse and meetings with the Coleman Wealth team!
4. Communicate and Negotiate. Most importantly, make sure that you are always on the same page as your partner. If you’ve always taken a backseat to your partner and want to regain a bit of financial control, then bring it up! The longer you let things lie, then the more it becomes part of your modus operandi, and the harder it is to change the behaviour.
At Coleman Wealth, we strongly believe that it’s important for both spouses to take part in the planning process. This goes towards empowering you as a couple to make important strides forward towards financial freedom, comfort and success!
There has been a lot of concern about the rapidly falling oil prices and what that means both for energy stocks as well as the Canadian and global economies. We’ve been following this and hearing a lot of conference calls and reading analyst reports on the topic. As you can imagine, there is a lot of noise about this right now – and the short answer is that no one knows.
While that may be disconcerting, it is indeed most often the case anyway – so, from my perspective, this is nothing new. We continue to watch the situation closely to see what we can glean from it.
In any event, it has always been my bias to not own more than a token weighting in the energy sector. We like businesses that have high degrees of predictability. Anything connected with a commodity, almost by definition, has no predictability. For example, 6 months from now, a barrel of oil could be $40 or $140. No one knows! And that’s a lousy business.
Banks, by comparison, will undoubtedly continue to be the greatest fee generating machines the universe has ever created. The Canadian banks reported their results this month and they continue to set records, even in a historically low interest rate environment. Bank of Montreal, for example, made $12 million profit per day last year, including Sundays when they are closed! Yet, try and find a pen at the teller station. Actually, try and find a teller now… but I digress. The point is, banks generate remarkably stable and robust profits – and yet they all sold off as they didn’t make quite as must as “The Street” had hoped in the 3rd quarter of 2014.
It’s funny – my decision to not have any significant weighting in energy stocks is not something we’ve generally talked about. Managing for risk, as we do, is not a huge selling feature when people are normally hunting for returns. From my perspective, it’s like a car company bragging that they have better air bags than the next guy. It doesn’t really matter until you need them. We’re happy to report now that our portfolios are doing considerably better than most, precisely because we managed for risk.
Where we do see considerable opportunity is in all of the beneficiaries of lower oil and gas prices — the consumer. The sudden drop in the price of gas at the pump is an immediate and significant savings for all consumers! It’s like a massive tax cut. It comes at a very good time, as people are spending and travelling a lot over the holidays. This impact will primarily be felt in the US – which is great for most clients, as we have purposefully overweighted US and global companies in most portfolios. As I suspect this trend will continue, we’ll be tilting our sails more in this direction.
We will also continue on the path of reducing stock specific risk in most portfolios. Buying single securities is a bit 1970’s now, as we have so many effective tools (ETF’s and well selected mutual funds, for example) that allow us to manage risk and access new opportunities with great speed and efficiency. I’ve seen so many cases of an investor getting the idea right – and the stock wrong. Just consider how you could be right in identifying smartphones as a great investment, and then buying Blackberry instead of Apple. Better to have bought several of them and getting it mostly right than trying to pick the winner and getting it completely wrong.
In any case, we continue to do our due diligence and “vacuum” behind the scenes!