Work Together to Meet Financial Goals
Nov 04, 2016
by Julie Cole, CFP®, FLMI
Annuity Product Manager
The skill of managing household finances is not a trait that we are born with. It’s an acquired skill that we have to work on continuously. Those with an aptitude for math may find it fun and exciting, while those with creative qualities may find frustration in numbers. To make sure that the financial road ahead is a smooth ride, couples should use their complementary skills together so that each is able to grasp the entirety of their financial future.
Research shows that many women are uninvolved in discussions of investment strategy and long-term financial planning. They have willingly let their husbands take the lead. What will happen when their spouse passes away? According to research from Widows Hope, a non-profit organization dedicated to helping widows, 47% of widows worldwide live in poverty or rely on children for financial support. Less than half of those lived in poverty before they were widowed. Working together with your partner and acquiring financial skills during the marriage is essential to solving poverty among single women.
Whether you are newlyweds or have been together for 40 years, it is important to plan your goals together. Even if one person takes the lead in handling finances, it’s important that both know some key information, learn to work together, and have a better understanding of their partner’s needs.
Here are some of the key issues that you and your partner should be able to discuss with each other:
- Where are all of the accounts held and how are they titled? What are the beneficiary designations? How do I access information online? What are the passwords? Who do I contact at each financial institution? Where are the latest statements stored from retirement plans, insurance contracts, college savings plans, investment accounts, and checking accounts?
- What are your financial goals? What are your top priorities? What are your shared goals and what are your individual goals? What are you going to do to reach those goals?
- What are the things that you don’t know but know you need to know? Compile a list of questions and decide who will do the research to find answers.
- What are your disagreements regarding finances? Can you bring those issues to the table to discuss? If you can’t agree on specific goals, agree to disagree. As an example: couples may have different ideas about how much life insurance they should have, but don’t let that stop you from purchasing life insurance. Ask your financial consultant to weigh in on the amount you need and help you resolve your conflict. Avoid asking your parents for advice on finances (unless they are a financial services professional). Involving parents that have inherent biases can cause additional conflicts.
- Manage your asset allocation together and coordinate your investment choices. Consider a hypothetical couple, Jane and Dean, empty nesters who are both 50 years of age and working full time. Jane avoids risk and has her 401(k) monies allocated to only one account, the stable asset account, which has had very steady slow growth. Dean has a very high risk tolerance and has all of his funds invested in the stock fund called “total stock market." Dean’s 401(k), which is four times as large as Jane’s, has had a great deal of volatility, but he hasn’t worried about it since he won’t retire for another 10 to 15 years. Jane worries about not having enough money for retirement, but Dean doesn’t worry about his retirement account at all. It may be time for them to sit down with an advisor and discuss the risks and rewards associated with their retirement planning and work to ease Jane’s concerns.
- Monitor your progress together with an annual check-up. Compile a detailed personal net worth statement at the end of each year. Comparing year-end balances to prior year balances can uncover weaknesses in your plan. This can help you and your partner to be able to step-back, rethink, and agree on what changes you need to make together.
Those couples who have difficulty discussing finances should work with a financial planner who will act as a mediator to help the clients discuss their issues and resolve conflicts. E-mail firstname.lastname@example.org or call 877-935-2467 for additional information.
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