Hold a Family Financial Summit
by Phil Dyer
"...A key to success for both entrepreneurs and work-at-home professionals is to take the steps needed to ensure that our personal life provides us with a solid support system. For example, when we know that our household budget is under control, it is easier to focus on the fiscal needs of our business from a professional perspective. Learning to talk about money with our spouse or family and being able to do it in a productive manner, can provide us with the skills we need to do so at work..." - NMSN
Don't Let Money Ruin Your Relationship: Hold a Family Financial Summit
When it comes to money, the adage that "opposites attract" can lead to marital discord. A spender marrying a saver is akin to mixing oil and vinegar for a salad dressing. Their different styles can blend well if they shake things up a bit -- through talking, planning, and compromise. Couples with different ideas about how to handle money who don't communicate might be doomed. 50 percent to 75 percent of divorced couples identify financial difficulties and disagreements as a major factor to their divorce. Despite the dangers of unresolved money issues, many couples find it extraordinarily difficult to discuss money in a calm and rational manner -- a situation that proves true for older couples as well as newlyweds.
So why the difficulty? Money traditionally is a taboo or off-limits subject in many families. It is considered impolite to ask how much money someone makes, how much something costs, or how a household's finances are handled. We all come from different financial backgrounds -- with lessons learned from early childhood through young adulthood. Those lessons, combined with societal taboos surrounding the discussion of money, cause many couples to avoid talking about finances until problems of debt, spending, and budget priorities become overwhelming to one or both parties.
Whether you just got hitched or have been have married for years, these steps will help bring financial issues out of the closet and into the open for honest discussion.
Have a money talk
Talking is particularly helpful for newlyweds or as part of pre-marriage planning, but it is just as relevant to couples who have been together for a long time but still have difficulty communicating about finances. Take turns sharing your personal experiences -- how money was perceived in your family and how your parents handled money and dealt with financial problems. It also can help to share your most painful memory and your most joyous memory about money. If things become heated or emotional during the money history talk, some experts suggest that couples sit back to back and take turns repeating what their partner says. Doing this removes body language and facial expressions from the equation and requires more careful listening, typically resulting in a calmer discussion.
Since people also communicate in very different ways, consider getting using an objective assessment like the Kolbe A Index (www.kolbe.com, $49.95) to gain a greater understanding about what makes your spouse tick and how a communication approach that seems perfectly logical to you just doesn't work for your spouse (and vice versa). Simply having clarity around how your partner receives processes and deals with information can head off many arguments before they even start!
List your goals
If you don't know where you want to go, it's hard to get there. Each partner should make a list of five to 10 financial goals, covering areas such as retirement, housing, children, college education, paying off debt, spending, and personal development. Once you're done, compare your lists and identify areas of common agreement.
Discuss your goals, prioritize them, and give a time frame and dollar amount for each one. There doesn't need to be agreement (or even buy-in) on each goal, but most couples find they have general areas of agreement once they take the time to actually write down their goals. These goals should provide the foundation for ongoing financial planning, because the financial decisions you make in terms of investments, insurance, and tax, estate, and education planning will be made in the context of supporting your goals.
Merge your finances and cash flow
Once you have established your goals, you should tackle merging your finances and cash flow and budgeting to support your goals. Deciding to completely merge your financial lives can be difficult, particularly if one or both of you has been independent for a long time or married before.
Some couples choose to put everything into a communal pot with joint checking, savings, and investment accounts; others opt to keep separate accounts. A third way to handle financial shares is by creating accounts that are "yours," "mine," and "ours." With this method, each spouse contributes the bulk of his or her income to a common account from which most household bills are paid and investments are made. Each spouse also keeps a separate checking or savings account into which he or she puts a pre-agreed amount each month. Each spouse then can use his or her "allowance" to pay for small luxuries, to buy gifts for the other spouse (keeping the price secret), or to spend any other way he or she sees fit.
Invest and save
Many of the goals developed in step two will require saving and investing money. This is another area where differing money backgrounds can cause conflict. If one spouse likes to make risky stock investments and the other prefers the safety and guarantee of less-risky bonds or CDs, finding common ground can be difficult. Avoid being too aggressive with short-term money and too conservative with long-term money.
Dance around debt
In this era of easy credit, runaway debt, and identity theft; consider getting a copy of your prospective partner's credit report before you get married. First, you want to ensure there are no errors on the credit report. Second, you want to gain an understanding of how your partner treats credit and debt. Substantial debt doesn't need to be a marriage deal breaker, but your partner's debts essentially become your debts once you tie the knot, so you should proceed with accurate information.
Saying "Honey, can you show me a copy of your credit report?" isn't the most romantic line, but it is essential for self-protection. If you already are married, get a copy of your credit report from all three credit reporting agencies at least once a year to check for mistakes and "hidden" debt (secret spending binges on behalf of one or both spouses). You can receive a free copy annually from the three major credit reporting agencies -- Experian, Trans Union, and Equifax -- by visiting www.annualcreditreport.com or calling (877) 322-8228.
Talking about money can be difficult and even scary, but not talking about money can lead to financial and marital disaster. Coming to agreement about money issues through planning and compromise can pay huge dividends and enhance long-term financial success. So don't delay -- hold your financial summit today!
Phil Dyer is an award-winning CEO, serial entrepreneur, best-selling author, writer, and speaker. He's mentored hundreds of entrepreneurs and executive teams from start-ups to Fortune 50 companies to top non-profits/universities on peak performance and building elite teams. His most recent book Wonder Women: How Western Women Will Save the World (with Jessica Eaves Matthews) is an Amazon #1 best-seller. Connect with Phil at http://www.linkedin.com/in/phillipdyer/.
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