Talking to Loved Ones About Money: How to Offer Useful Guidance
Let’s face it: conversations about personal finances are usually uncomfortable. Especially with family members. Especially when your advice is past due. Although your parents, children, siblings, and significant other may trust your opinion on everything from fashion to food, schooling them on their spending habits can poke at their pride and force pushback.
They must be willing to listen to you
If they’re suppressing embarrassment, guilt, and shame while you’re talking, any financial brilliance you can offer is irrelevant. The key is to find a balance between being understanding and dishing out the tough love that’ll give them the help they need. You should be direct and logical; it’s not by chance that you’re the one in the financially superior position, so show them how you got there. Use examples from your own life that resemble their situation, if applicable. If you can relate to them in a personal way without using a condescending tone (easier said than done), you will give them an invitation to humility while giving credibility to yourself.
You have to know your stuff
If you’re not a financial advisor, it can be risky giving guidance to other people. Your intentions may be pure when you tell your brother how beneficial a 529 college savings plan can be for his children, but you might be causing more harm than good if the drawbacks aren’t clearly explained, as well. Do your best to share as much information as you can, but make sure your words aren’t the sole reasoning for their decision-making. Your full discretion here is vital. The endgame should be the improvement of their researching and analytical skills rather than simple memorization of individual facts and figures.
Follow up and show continued support
Giving your loved ones a copy of your fancy budget template and telling an inspirational, “I clawed my way up from the depths of debt” story are great ways to open their eyes and get them on the right track. It’s important to remember, though, that inspiration is perishable. Your motivated mentees have already made poor financial decisions that have resulted in poor financial situations. Changing the way in which they handle money is a slow process that requires patience. Your approachability is paramount; they need to know that you’ll have their back if they don’t get it quite right the first time around. Checking in with them periodically might seem annoying, but they’ll know it’s for their own good, and they’ll appreciate it more than they might admit.
Combining Finances as a Couple
When couples decide to combine finances, whether through marriage or a living arrangement, the last thing on their minds is money. Many believe that the money issue will be an easy transition. For couples with great communication, this is most likely true. However, that communication must include talking about finances. There are specific topics that need to be discussed. Below are some tips for new couples when merging finances.
Discuss spending and saving habits
Some people tend to be more natural at saving, and others think with their hearts first and wallets second. There is room for all types of personalities in a loving relationship. The key, however, is being honest with your loved one about your spending and saving habits. Each person can learn from the other. By identifying each other’s strengths and weaknesses, both parties can learn to bring out the best in the other, and gently encourage their partner into developing better financial habits.
Talk about any outstanding debt
Joining assets legally through marriage, and not talking about how much you owe on credit card debt or student loans can start your joint life off on the wrong foot. Many surveys have concluded that the number one thing that most couples argue about is about money. By not disclosing your debt, this could make future money issues even worse. This is not about playing the blame game, however. It’s about knowing in advance the financial situation each person is bringing to the table in order to tackle future financial goals and obstacles together.
Talk about how you will join assets
Some couples merge all of their assets into one bank account. Couples that do this oftentimes can save money more quickly and achieve financial goals easier. However, it does not come easily. If a couple decides to go this route, they must put some rules into place. For example, bills must be paid first and anything purchased by either partner individually over X amount of dollars must be discussed with the other partner first. This can prevent impulse shopping and spending money on things that aren’t a priority. This amount can be determined in advance and can change later on, depending on the couple’s financial situation. A couple must also decide the amount they want to dedicate to savings, investing, or paying off loans more quickly.
Other couples may decide that having separate bank accounts is the best decision for them, and there’s nothing wrong with that. If you decide to have separate accounts, then a discussion about who is going to pay what is necessary. Having a third account, set aside for saving that both couples contribute to, is another topic couples need to consider in order to achieve their financial goals together.
Even if people don’t want to admit it, money is a very emotional topic. When we bring in another person into our lives and include them in our finances, it gets a little more complicated. Open communication, in addition to discussing specific topics and goals, is important in order to make this transition go more smoothly. You must also recognize the need to consult outside sources when necessary, so that both your relationship and pocketbook can live in perfect harmony.
Three Ways Couples Can Have Fun Talking About Money
“What’s your net worth?”
It’s the last question a person would dare ask on a first date, yet money issues are a top cause of failed relationships. While this magic number speaks volumes, net worth isn’t the only topic that couples need to talk about. Spending habits, income goals, and investment strategy are parts of a financial picture that influences compatibility and predicts relationship longevity.
Wouldn’t it be great to explore your partner’s financial habits and goals while strengthening your relationship? Upgrade your next date night with these fun ways to build fiscal responsibility together.
You could save money cutting coupons, or you could spend date night cutting out pictures of your wildest dreams. Vision boards are a creative way to start the conversation around goals and discuss ways to work towards your dreams together. Not only does this activity energize a couple around shared goals, it also gives them room to talk about ways to make these goals happen. Should you give up the cable subscription or work extra hours? Use your vision board as a reason to ask these sensitive money questions and partner around collective goals.
Couples Game Night
Don’t spend Friday night eating take-out and watching Law & Order reruns. Instead, invite a few couples over for a financial game night. Several board games increase financial literacy in a fun and engaging way including Cash Flow 101, The Game of Life, and Monopoly. Although we played many of these games as children, discussing your strategy with an adult mindset creates a learning opportunity for everyone in the room. Keep the dinner costs down by asking each couple to bring a dish to share.
Head to Head Challenge
What is it about competition that makes people work harder? Challenge your significant other to a contest that helps you make better financial decisions or reach your financial goals. For example, couples can race to save the most money over a six month period. The winner gets to take ten percent of the savings and decide how the couple will celebrate. Another good option is a no-spending challenge. The first person to spend money (excluding regular bills) has to submit to whatever penalty their honey has planned for them!
While money is still a taboo topic for many, couples should be comfortable discussing money and building their financial standing together. Use these proactive and fun ways to make money an open topic and strengthen your relationship.