This is a guest post by Neal Frankle. Neal found himself in a financially fragile situation at the age of 17. Both his parents passed away while he was still in high school, leaving behind a small insurance settlement. Neal sought out a financial advisor to help him invest his nest egg so that it would help put him through college. Instead, the advisor charted a self-serving course and was on the verge of burning through the money when Neal realized what was happened and fired him just in time to avoid losing everything.
The experience had a deep impact on Neal and formed in him a lifelong desire to help people learn to make smart financial decisions. Today, with more than twenty-five years of experience in the financial services industry, Neal is an author and avid blogger. To learn more, visit www.wealthpilgrim.com
Do marriage counselors provide money management advice? Maybe they should.
According to MarriageAdvice.com 43% of all couples argue about moolah. Usually, it involves one spouse being a more conservative investor than the other.
Sue and Chris provide a wonderful example. This is a hard-working couple in their mid 30’s who could not stop fighting about money. Sue was a big risk taker – she loved to take flyers on speculative stocks. Chris, on the other hand was terrified of any investment that wasn’t FDIC insured. The dispute threatened their marriage. What steps could they take to bridge this gulf ? What can you do if you find yourself in a similar situation?
1. Give the risk-taker mad money to play with.
The amount should be reasonable and mutually agreed upon. It should be amount that both are comfortable losing completely. Both spouses should agree that no more than this amount will be made available. That means if the Risky Rich losses the dough, that’s it. Game over. If the aggressive strategy works, both parties benefit. If it does not, its possible that the more aggressive spouse will have learned a lesson and be willing to take a more realistic approach to investing.
2. If You Are The Conservative Cathy, Educate yourself
If you are the conservative partner whose idea of a good investment is the mattress or backyard, its time to face facts. Your partner is right when he says you need to grow your money. As painful as the current investment climate is, the reality is that if you have long-term goals, you need to have long-term investments. Here is an article on having a long-term perspective. I know it does not feel good now. But think about it. Your partner is taking too much risk, right? You’re asking your partner to face reality. Shouldn’t your partner be able to ask them same from you?
3. If all else fails, split the assets – not the marriage.
If you can’t see eye to eye after considering the first two steps, split assets up and manage the money as each sees fit. One way to do this is by allowing each spouse to manage their own retirement accounts. The most important ingredient for success here is making sure that each partner agrees that they will not interfere with the other. The “non-proliferation” agreement is the important element for success here. And no kidding, it might be good to get this agreement in writing.
My experience is that if you have a mutually agreed upon financial plan and stick to it, these fights won’t materialize. Create your own plan or meet with your adviser to hammer this out. If you start from a position of being crystal clear on what your mutual goals are, over what time period and what’s most important about money to you, you’ll find it an easier exercise.
So where is the ½ step that’s missing? Its coming from you of course. What is your secret? What tips can you share to help us avoid the financial fights?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Interesting that Sue would be a big risk taker and Chris isn't - Generally, men are more okay with risks.
Giving th erisk taker mad money to play with is a sound strategy, provided you've got it to give in the first place! There has to be a strict policy regarding this, and no "But I told you so"'s afterwards, provided the lesson has been learnt.
Money is usually a main culprit of fights in marriage and I'm not surprised that there are also fights in terms of investing it as well. I agree that giving it to the more financial savvy person in the family is probably a better idea, unless they are investing way to risky. It can also be extremely risky to be too conservative with your money in that you can end up losing money by not at least making some percentage on it. Twos key to keeping the fights minimized is to compromise and keep open communication with your partner.
I agree that the best choice is to allow the better money manager in the family manage the money. Sometimes, it's between dividing the (or some) of the assets and divorce.
I think its a great question and the answer depends on the situation. I think this is the time when a therapist is important. You need a third-party to really gain perspective sometimes.
My only issue with #3 is if your partner stinks at managing money, s/he's going to take you down anyway once retirement or financial trouble comes. If you truly care about him/her, then would you really allow him/her to suffer financially?
I just posted this week on Marriage, Money and Manners. This is about keeping peace in the house. I enjoy seeing posts on marriage and money. I teach a young married couples class at my church and I am really interested in this issue. I've never heard of 'non proliferation' but it makes sense...there is my 1/2....keepup the good writing.