Category: family

Portrait of Husband and Wife Arguing with Each

Do You and Your Spouse Bicker About Money?

I recently read an advice column about a couple who frequently bickered about money. The husband and wife disagreed about whether to pay off their mortgage. One wanted to pay it off faster and have the peace of mind that comes with reducing debt. The other wanted to take advantage of the tax write-off the mortgage interest brings while spending money on current needs and wants.

Money issues, unfortunately, are near the top of the list for why marriages fail. This is because money, and how it’s spent, affects our lives on a daily basis. Money and the things it can buy have a big influence on the way we view ourselves and, often, on how others see us. Which is more important to you, a new car or more money in the bank? A home with more bedrooms or a bigger retirement account?   

Marriage is often about compromise. Communication is often the key.  But in many cases, there is conflict and spouses can’t come to an understanding or agreement. One spouse may be so focused on frugality that the family is deprived of simple pleasures. On the other hand, spending beyond the family’s means often leads to unnecessary debt and, ultimately, financial ruin.

If this is an issue with you or someone you know, this may be the time to consult with a financial planner. Financial planners have the tools and training to help couples develop financial guidelines that will help them come to an agreement that both can live with. Creating a financial plan together may show a way for a compromise between parsimony and extravagance.

If you find yourself arguing over money, give us a call. We may be able to help you resolved your differences.

How Well Do Couples Communicate About Money?

A recent research report by Fidelity Investments studied how well couples communicated. The majority said they communicated very well. However, the study found that couples don’t communicate very well at all on finances, and many disagree on investing. The study included a wide range of ages. The couples were either married or in committed relationships. They ranged in age from 25 to retired.

Here is what the study showed:

  • 43 didn’t know how much their partner earns.
  • 10 were off by over $25,000.
  • 36 don’t know how much they had in investable assets.
  • Nearly half had no idea how much they should to save for retirement.
  • 60 didn’t have any idea how much Social Security would provide for their retirement.

This proves to us that financial planning is very important; especially for achieving peace of mind and helping couples get on the same page about their finances.  If you have any questions about creating a financial plan or saving for retirement, contact us today!

Income vs Spending in Married Couples

Most couples think they communicate well, but research indicates otherwise when it comes to finances. Of course, talking about finances can be a minefield. If one partner is frugal and the other spends freely, tensions can be high. Disagreements about money are one of the leading causes of divorce.

More than four out of ten couples did not know how much their partner makes. Many were off by over $25,000! This can have serious effects. If you don’t know how much income you make as a couple, how do you know how much you can reasonably spend?

Unless couples lead totally separate financial lives, not knowing how much they are earning together can lead to a lack of savings or even debt. This issue could be behind the alarmingly high amount of debt that people carry, often at exorbitant rates.

More than one-third of couples disagree on the amount of investable money they have. This usually happens when there is a division of labor between couples, where one partner is in charge of the investments.

However, our experience indicates that couples also disagree on the kinds of investments that are appropriate. In general, men tend to prefer riskier investments that women. This can lead to a good deal of stress and disagreement.

How Much Will You Need?

Most couples think they communicate well, but when it comes to their finances research indicates otherwise. Our previous essays on the subject have shown just how poor it typically is.

On the issue of retirement, nearly half of the couples surveyed had no idea how much they needed to save in order to maintain their current lifestyle once they retire.

Nearly half disagreed on the amount they need. Even more startling, those who were nearest to retirement – when changing course is the most difficult – disagreed the most!

Over half of the respondents had “no idea” what they would receive in monthly retirement income. Asked about Social Security, 60 percent either did not know or were not sure, what they would receive. That includes the about-to-retire Baby Boomers.

Roughly one-third of couples disagreed on their retirement lifestyle. Half could not even agree on when they would retire.

Our next section on this series will have a look at what financial issues couples worry about financially.

Financial Worries Couples May Have

Most couples think they communicate well, but research indicates that communication about finances is often not good. In our previous essays we have discussed common financial disagreements.

In this essay we will discuss some of the financial worries couples have.

Nearly three-quarters of couples worry about unexpected health care costs. For more than half, it’s their top concern. With people living longer than ever before, advances in medical technology and the skyrocketing cost of health care, this concern comes as not real surprise.

After health care, the next biggest concern for couples was outliving their retirement savings.

The negative effects of inflation and concerns that Social Security may run out were the next biggest concerns.

Despite these worries, only 20 percent of couples actually have a plan in place to address these issues! And over one-third haven’t even thought about planning!

Our next essay will take a look at those couples who have taken the time to create a financial plan.

Why You Should Have a Financial Plan

Most couples think they communicate well, but research indicates otherwise when it comes to finances. Communication on financial issues between couples is especially poor, as we have discovered. Despite concerns about medical costs, running out of money, inflation and Social Security, most couples have not created a plan to deal with these worries.

The 20 percent of couples who have created a plan get the benefit of peace of mind, less stress, and a more cohesive relationship. Uncertainty and doubt around important financial issues creates stress within relationships.
Couples who have a retirement plan in place:

  • Are twice as likely to live a very comfortable retirement.
  • Are 50 more likely to be “completely confident” in assuming responsibility for retirement.
  • Are much more confident that their partner will be OK in retirement.
  • Are twice as likely to know how much they will need in retirement.
  • Are less concerned about unexpected health care costs.
  • Are much less likely to be concerned about outliving their savings.

Having a plan to reach your goals is much like going to the grocery store with a shopping list. You know what you need and are less likely to forget important items, nor are you as likely to buy things you don’t need.

Creating a plan forces couples to be open with each other about their goals, their finances, and the issues that may keep them from achieving those goals. Working with a Certified Financial Planner™ (CFP) to create a plan also brings an important measure of reality to the process. Professional guidance creates realistic assumptions about how much should be saved and the rate at which it should grow. A CFP can also help mediate differences between couples when issues arise.

Newly Wed Financial Mistakes

Most couples think they communicate well, but research indicates otherwise when it comes to finances. Communication on financial issues between couples is especially poor, as we have discovered in previous essays.

Couples were asked what advice they would give to newlyweds and young couples about finances. Newlyweds usually do not put frank talk about finances at the top of their “to-do” list. That may be a big mistake.

The most common suggestions for young couples starting out in life together were:

  • Save as early as possible for retirement.
  • Make all financial decisions together.
  • Make a budget and stick to it.
  • Make sure you have an emergency fund.
  • Don’t hide expenditures.
  • Disclose income, debts and assets early.

One of the easiest ways of accomplishing all of these objectives is for young couples to consult a financial advisor as soon as possible. By doing so they will reveal their finances to each other, develop a budget that matches their income, agree on an investment strategy, and be given a roadmap to long-term financial peace.

Our final essay on this subject will summarize what we have learned.

Creating a Retirement Plan

Most happy couples think they communicate well. However, on the subject of finances, studies and experience has shown that they don’t communicate nearly as well as they think.

Many couples don’t know what their partner earns, how much they have invested, what it takes to retire and where their retirement income will come from.

Couples often disagree on the way their money should be invested and in too many cases one partner is in charge of investing and the other is kept in the dark.

Retirement is another issue in which there is a great deal of confusion. Many do not know what it takes to retire, have nebulous goals about retirement and even disagree about when to retire.

The lack of good communication leads to worries about financial disasters. Issues include health care costs, the effect of inflation on buying power, outliving their savings and the possibility that Social Security may not be there for them prey on their minds.

In the face of so much uncertainty, only one-in-five couples have a plan. One of the benefits of having a plan is that it makes it much more certain that they will achieve their goals. And that bring peace of mind.

Of course the earlier that people start to plan, the higher the probability that they will achieve their goals and have a healthy and frank discussion about financial issues. The best time to start is when you are young and it’s an excellent way for newlyweds to begin life together.

Thanks for your interest and we hope you will share this with your friends.

Korving & Company, the 2015 Suffolk Small Business of the Year is a family owned investment management and financial planning firm. We deliver a very personal level of service to guide, empower and assure our clients that their money is carefully managed to meet their long-term life goals.

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8 Common Reasons for Retirement Failure

1. Overspending.

-You won’t spend less in retirement.  The old saw that retirees only spend 80% of their pre-retirement income is a myth.

2. Elder Fraud.

-Seniors are becoming the favored victims of swindlers.

3. Health care.

-As we age the cost of medical care goes up.  Medicare is covering less and premiums are going up.

4. Starting a business.

-Investing capital in a business that fails can devastate retirement finances.

5. Adult children.

-Helping your children through a “rough patch” can become is one of the most common ways of ending up broke.

6. Second homes.

-The cost of maintaining that vacation home when you’re no longer working can drain your resources when your income drops.

7. Divorce.

-Couples sometimes wait until the children leave home to divorce.  When assets are split 50/50, retirement becomes a problem for both parties.

8. Investment mistakes.

-Making poor investment choices is one of the most common ways of ruining your retirement lifestyle.

If you are nearing retirement, don’t enter into it without a plan.

Protecting Elderly Clients

Much has been written about the vulnerability of the elderly to scams that are perpetrated on them. Because seniors are concerned about health care, con artists prey on the elderly to get them to buy fraudulent products or services. Home improvement scammers prey on the elderly by providing shoddy or unnecessary repairs. Stories about unscrupulous financial advisors are frequently in the news. Funeral homes have been known to get the elderly to spend more than they want or need. Some scammers will read the obituaries and pretend that the deceased ordered products or owed a debt to try to get money from the surviving spouse.

Very often the people preying on the elderly are relatives. Because most of us trust our relatives, it gives them an opportunity to take advantage. Children have been known to move back into the family home and physically abuse their elderly parents. They may employ emotional blackmail. They may threaten to stop visiting or calling.  They may tell their parents that not giving them money means that they don’t love them. Often a demand for money is disguised as help with bills, or presents to grandchildren.

Of course parents make gifts to children and grandchildren all the time. But there is a line beyond which it becomes clear that children are looking to get their “inheritance” early. This can lead to an impoverished parent who loses his independence, or even his home.

It can be very difficult for a concerned financial advisor to protect his client from predatory relatives.  Often the parents want give money to their children and may be unaware of the financial consequences.  As fiduciaries we have to keep in mind that our obligation is to our client; not her children, grandchildren or any other relatives. You may have to tell your client “I know you love your son, but you should not give him the house because you may need to sell it so that you can move into a senior living facility.” Of course this can create a conflict with the relatives who will not appreciate what you are doing.

At some point it may be necessary to get an attorney involved, one who specializes in elder care. This is particularly important if the heirs don’t get along. If the elderly become incapable of managing their own affairs they can assign power-of-attorney to a third party.  If the children are not competent, or if there is a conflict, appointing an attorney as the executor of the estate may be preferable to appointing a relative.

Providing financial guidance to the elderly is much more than managing their portfolio. There is often much more going on that is critical to the well-being of the client, and avoid the chance that they run out of money before they run out of time.

©  Korving & Company, LLC