Tag: Soft Skills

Talking To Your Partner About Money

Studies have shown that money problems are the number one cause of divorce in the United States – more than infidelity, disagreements over raising the kids and all other causes. Disagreements and fights over household finances can escalate quickly, leading to problems with trust, hurt feelings, and other serious ramifications.

That is why it is such a good idea for couples to undergo financial counseling as part of their pre-marriage preparations. Partners who are on the same page financially are more likely to weather the inevitable financial storms, from job losses to unexpected expenses.

If you and your partner are having trouble with the finances, it is important to sit down and have an honest, open and frank discussion about expectations, boundaries and rules. Setting the ground rules will help eliminate any misunderstandings and reduce the chances of future fights over money.

Saver vs. Spender

It is not unusual for one partner to be a dedicated saver – and the other a profligate spender. Spender and saver can get along fine – as long as they both understand the rules of the relationship.

Couples can start by setting a spending threshold – the amount of money each partner can spend without the input of the other.

It is simply unrealistic for partners to consult one another about every business lunch or impulse purchase. The key is to agree on a figure, whether that amount is $25 or $250, and to agree that all purchases over that threshold require the input of both partners.

Be a Good Listener

It is important for couples to be understanding and considerate of each others needs when discussing money.

Decisions about money often go beyond the financial realm – buying a new purse or electronic gadget can make us feel better and give us real satisfaction. Understanding the role emotions spend in financial decisions is critical.

Partners should avoid blaming one another for financial problems, and instead work through future spending decisions as a couple. It will take the commitment of both parties to eliminate current debt and avoid racking up new bills.

Tune Out Distractions

Talking to your partner about money is a serious matter, and it deserves your undivided attention. Set a time and date for the discussion ahead of time, and make sure you and your partner both have plenty of time for the discussion.

Be sure to tune out any outside distractions before you get started. Turn off the TV, switch off your cell phone and computer and keep outside noise to a minimum. This will help you stay focused on the discussion at hand.

Develop a Spending Plan

It is not enough to discuss your current financial situation and views on money. To be successful, you and your partner need to agree on a plan going forward. Developing a budget is a great way to control spending, get out of debt, and save for the future.

Take the time to develop a written plan that includes all sources of income, monthly bills, and anticipated spending. Start with a rough draft, then fine tune it each month to get a handle on your spending as a couple.

Talking to your partner about money is not easy, but it is important. You and your partner do not have to agree on every spending priority, but you do need to respect each other and make smart decisions as a couple. Sitting down and having an honest discussion about finances is a great first step.

Don't Just Set Goals, Make Habits

The start of the new year brings new beginnings and for a lot of people that can take the form of a new year’s resolution.

Losing weight, getting healthy, saving money… these are a few common new year’s resolutions that all have something in common. They’re all very broad goals.

What’s wrong with a goal? Well, nothing. But something I’ve noticed is that a lot of goals are never fully fleshed out and fall to the wayside after a short period of time.

Some anecdotal evidence of this is currently happening at my gym. Every January the place is a madhouse. The parking lot is always full and good luck trying to find a machine to work on. Come February though, it’s all back to normal.

So what happened to all of these people? They had a goal they wanted to achieve, but they didn’t develop a habit in order to make it happen.

The Problems With Goals

When we want to change an aspect of our lives, setting a goal is often the logical first step. But there are some problems with this approach.

Goals require work. Humans by nature are generally lazy creatures. Why hunt and gather when I can just farm and cultivate my food? If we perceive something is taking too much of our energy, with not a lot of benefit, we stop doing it!

Goals rely on factors that we do not always have control over. Sometimes reaching a goal isn’t possible, no matter how much effort we put into it. An injury might derail a fitness goal. An unexpected expense might sabotage a financial goal.

Goals have an end. This is the reason many people go back to their old ways after attaining a certain goal. We’ve done what we set out to do and now it’s time to relax or treat yourself.

The Benefits of Habits

Are goals completely useless? Of course not. I’ve found that goals are good for planning your progress and habits are good for actually making progress.

The benefit of creating habits is that it helps us reach our goals in incremental steps and literally rewires our brains.

Habits are easy to complete. Once we develop a habit, our brains actually change to make the behavior easier to complete.

Habits are for life. Our lives are structured around habits. Once you develop one, they are hard to break and they happen automatically.

Habits can be as small as necessary. You can make incremental adjustments to your behavior to build a habit. Once you start, the changes start to compound on one another and at some point, it just becomes part of your routine. It’s like a snowball going down a hill, gathering momentum as it goes.

Say you want to read more. A goal might be for you to read a book a month. Instead, say you are going to read 5 minutes a day for 30 days. By the end of the 30 days, it’s become a habit.

Goals can provide direction and even push you forward in the short-term, but eventually, a well-designed system of habits will always come out on top.

Having a system is what matters. Committing to the process is what makes the difference.

If you have something that you want to do, don’t just focus on a specific goal, rather take the time to form habits that help you achieve it.

Are You In The Right Room?

I recently had the opportunity to attend a conference in Chicago for the National Association of Personal Financial Advisors (NAPFA).

Attending financial planning conferences is exciting because it gives me an opportunity to get out and learn from other professionals.

But that can also be intimidating.

I’m always concerned that I won’t be able to keep up in conversations with my peers or that I won’t have anything to contribute.

Imposter syndrome really seems to hit me at NAPFA conferences in particular because I’m surrounded by a community of bright, motivated, and successful people that are just as passionate about fee-only financial planning as I am.

Then I remembered this quote: “If you’re the smartest person in the room, you’re in the wrong room.”

People who know everything have nothing to learn. There is no opportunity for growth if there is no room for growth. 

When you find yourself in a space where you are among intelligent, high performers, then you are presented with an incredible opportunity – the opportunity to grow.

I found myself in the right rooms at the conference.

In three short days, I learned helpful techniques to improve my skills as a financial planner and met so many brilliant people, people who are far smarter than me. I was reminded that it’s good to be introduced to concepts that I can use to develop new strategies that help make my client’s lives better.

Rooms, where we feel smart, are safe rooms. They are comfortable rooms, but they are not rooms where we grow.

Take a chance on something that makes you challenge yourself and change will come your way. And always questions if you are in the right room.

Am I Rich?

Growing up I always assumed that being rich meant living in a big house and driving a sports car.

But I’ve learned over the years that having that “stuff” doesn’t make a person rich.

They might have a high income, but they may also spend beyond their means and couldn’t go three months without their high-paying job and still maintain their lifestyle.

They’re in a state where all that stuff burdens them to keep working for the sole purpose of keeping those things.

They’re certainly not rich, they’re just able to afford more debt.

What does rich mean to me?

I think a common mistake we all make is to use the terms “rich” and “wealth” interchangeably.

I don’t believe that the term rich refers to the amount of money you’ve accumulated. That’s wealth.

To me, being rich is a mindset. It’s not some arbitrary dollar figure or my social status. I don’t need the latest and greatest gizmo or gadget. And I don’t care if people see me driving the same car for 10 years.

I just want to live free of debt, I want to be generous with my wealth, and I want to appreciate what I have.

Don’t get me wrong, it’s okay to spend money on things that make us happy. But all that “stuff” alone does not make a person rich.

How to think about being rich

Once we rid ourselves of the assumption that being “rich” means that we have a ton of cash or things, there are so many way-more-meaningful ways to think about being rich, including:

Friends and Family: I consider having good friends and family, basically any group that has your back 100%, to be a sign of being rich. Money doesn’t come close to offering the same type of value that friends and family can offer.

Generosity: Why accumulate wealth if you aren’t able to share it? And I’m not talking about solely giving to charity or the less fortunate either. It just feels nice to buy your friends or family dinner sometimes just because you can.

Hobbies: I believe that having hobbies is essential to happiness. The more hobbies we have, the more productive that we tend to feel especially after the drain of full-time work is off of our shoulders. 

Community: This kind of goes hand-in-hand with hobbies. We’re social creatures by nature, and communities help to nurture what comes naturally to the majority of us. Surround yourself with like-minded individuals who have a common goal/interest and you’ll instantly feel richer.

How do you think about being rich? What are other ways of considering yourself rich?

Teaching Kids About Money

I don’t have kids of my own, so I asked my colleague Stacy Antrobus to help write this post. Stacy is the Practice Manager at Precedent AM and has two young children that she is teaching the value of money and the role it plays in their lives.

Passing down values related to money is one of the most crucial, yet challenging, tasks for parents today.

A child’s experience with money during their developmental years can shape how they save, spend, and give for the rest of their life.

By setting a positive example, and having meaningful conversations with your children, you can teach the following three key lessons about money management.

Teach them how to save

Helping children think beyond current wants and desires is not easy, which is why demonstrating the value of saving up for something is best accomplished through real-life examples.

To help your child think beyond current wants and desires, they need to first understand that the money they receive is directly tied to the work they do.

For example, you could create a chart that lists chores plus the pay rate for each of those chores. Loading the dishwasher might be $0.75, taking out the garbage could be $1, vacuuming for $2.

When your child asks for a toy, let them know that they have to buy it with their own money now — or that they save their money and buy something they REALLY want later. Help them count how much they have available and then how much more they need to earn to buy the toy.

Of course, there are many other examples and exercises to teach children the value of a dollar saved. The key is to explain the concept along the way, so children both hear and see best practices in action.

You may also expose your children to long-term savings by bringing them to appointments with your financial advisor. These trips can give you the opportunity to explain the things you are saving for — like retirement or college funding — and can demonstrate to your child the importance of planning ahead.

Teach them how to spend

While it’s hard to let you kids fail sometimes, teaching them that actions have consequences is a lesson that goes far beyond money.

Rather than telling them, “no, you can’t buy that,” it’s okay to let them experience the process of spending their money so they can learn when it’s gone, it’s gone.

Another valuable lesson is to look at what options are available and how to comparison shop for prices and quality.

Guiding children in simple choices now will give them the experience and confidence to make their own decisions as they grow.

Teach them how to give

Teaching kids about giving can be rewarding for both parents and children. Learning about giving and helping others gives kids a feeling of empowerment.

There are many ways a child can learn the value of giving. Setting up a charity box in the home can show how even a little bit of money can make a difference when given with a good heart. Encourage them to donate old toys, school supplies, and clothing to other needy children.

It is also a good idea to teach your little ones that donating time is often just as powerful as donating money and things. Take the whole family for an outing serving dinner at a local soup kitchen or make a habit of keeping a basket of fruit or snacks in the car to give to hungry people in need.

Encouraging everyone in your household to participate in volunteer activities is a great way to reinforce charitable values in your children.

By teaching your children that money needs to be earned, saved and shared responsibly, they stand a better chance of being able to successfully navigate their own finances as an adult — and rely less on you!