Podcast Episode #7: Spotlight on Estate Planning with Christina Lynn
Episode Summary Every good advisor wants to ensure a client’s legacy is protected, but many struggle with reviewing estate plans… Read More
Insights and best practices for successful financial planning engagement
• Rita Cheng • September 1, 2021
My husband and I have differing opinions on insurance. Yes, we’re both multi-cultural and multi-racial. My dad showed me where the life insurance policies were located in a safe when I was 10 years old after my aunt died. My dad paid for my aunt’s final expenses and used this opportunity to teach me about insurance. Joe’s dad died while he was earning his undergraduate degree.
Joe has a large extended family in Indonesia, so there’s no shortage of relatives to care for loved ones in the event of an illness or premature death. In his mind, why buy insurance when you have family?
My reaction to Joe’s perspective on financial planning was making him feel guilty. I then applied for life insurance on my own, scheduled the paramedical exam when I was six months pregnant, and agreed to pay the life insurance premiums for us both.
Key Takeaways
Sure, one could say I’m risk-averse. I prefer to say risk-aware. I didn’t think that buying life insurance would jinx me. I didn’t think avoiding the topic would prevent me from dying, either. I wanted my family to have the money they’d need in the event of my illness, disability, or death.
As a CERTIFIED FINANCIAL PLANNER™, I observe how financial planning can affect a marriage. In fact, I don’t think there’s a single segment of our lives that’s not affected by financial planning.
Imagine the hurdles a couple will face if one or both partners lack even the most basic financial literacy. Missteps and the arguments that result from them frequently lead to ongoing tension and mistrust in a relationship, sometimes reaching a point of no return.
Americans’ declining financial literacy (and solvency) is a growing concern—even the Federal Reserve took note. In a 2018 study, it found that 40 percent of adults wouldn’t be able to come up with $400 for an unexpected expense or would have to sell something or borrow money to cover it.1
Add the tension of unpaid bills, looming student debt, or over-spent credit cards to the stress of a romantic relationship, and it’s no wonder money is one of the most often cited instigators of marital discord.
Financial literacy is the ability to understand money and the role it plays in a person’s life. For couples, it means knowing how beliefs about money impact decisions about money, which in turn affect both partners in a relationship.
For couples, financial literacy should include personal financial planning, creating a budget, setting goals, and managing debt—not just because it’s the “right” thing to do, but because one partner’s decisions will affect the other partner, whether those decisions are intentional or not.
As a CFP® professional who helps clients plan for their financial futures, I encourage both parties to clearly state their views on money, which pretty quickly highlights where they differ. The two individuals who make up a couple bring with them two different perspectives on saving, spending, and investing—not to mention what’s an acceptable level of debt or risk.
When the two members of a couple come from different backgrounds, having contrary opinions on how things “should be” is common. Agreeing on how to handle finances and having frequent conversations about progress is essential. Otherwise, financial infidelity can creep into the relationship.
Financial infidelity can be difficult to detect, but here are a few red flags to look for:
Straight up, money is an awkward topic, and people often avoid having conversations about it. For financial professionals, here are some steps that can help clients having difficulty managing money in their marriage.
Being open and honest is the foundation of creating financial harmony in a relationship. Couples should fully disclose their financial situation, including sharing details about debt, credit scores, bank balances, and spending habits. When taking this essential first step, it’s crucial for couples to listen to each other without judgment so they can gain a clear understanding of their entire financial situation.
Our approach to money is often strongly influenced by our parents and a lifetime of experiences that molded our perceptions on personal finance. If you grew up wealthy, your outlook is probably quite different than that of someone who grew up economically disadvantaged.
Each partner in a relationship should make a point to understand their motivations too. What may seem thoughtless, selfish, or strange to one partner may simply be the way things were always done in their spouse’s life.
Sharing financial goals can help to build a happy relationship. As planners, we know that goal-setting extends beyond money. Advise couples to talk to their partner about what they want to achieve in the future and how they envision their everyday life together. Then have them put those goals in writing and include the steps they’ll take to reach them.
Financial literacy isn’t something that happens once. It’s an ongoing conversation between partners as they navigate life’s complexities. A monthly or weekly “marriage meeting” is an excellent way to make sure couples stay on the same page when it comes to finances.
Whether you’re speaking to existing planning clients, prospects, investment management clients, or anybody else, it’s in a couple’s best interest to meet with a financial professional, as their budget allows, to keep their finances on track. When meeting with couples, it’s important to get to know the role money plays in their marriage.
Here are a few questions you may ask:
In some relationships, one person takes care of the primary financial responsibilities. But financial professionals should meet with both partners in a relationship because financial decisions will have an equal impact on each partner, regardless of who makes the initial choices.
Money is tense. Money is awkward. Money is personal. It’s simultaneously one of the most uncomfortable topics in a relationship and the one most likely to play a prominent role in a couple’s success.
Just like a mental health professional guides individuals and couples over their emotional hurdles, financial professionals can help ensure couples have the right vocabulary, financial literacy, and confidence to make the best choices with their money.
Source:
1. “Report on the Economic Well-Being of U.S. Households in 2018 – May 2019.” The Federal Reserve, 2019. May 28. https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm.
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The views and opinions expressed by this blog post guest are solely those of the guest and do not necessarily reflect the opinions of eMoney Advisor, LLC. eMoney Advisor is not responsible for the content, views or opinions presented by our guest, nor may eMoney Advisor be held liable for any actions taken by you based on the content, views or opinions of the guest.
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