When love is in the air, some folks have a tendency to lose their heads. That can be fun if you’re planning to sweep your loved one off his or her feet this Valentine’s Day. But when it comes to your finances, letting your heart get in the way of your head can lead to some serious problems.
Forget about killing the romance – if couples wearing rose-tinted glasses aren’t careful, these money mistakes can kill their financial future.
1. Avoiding discussions about money.
Engaged couples and newlyweds are often so caught up in the excitement of starting a new life together that they never really dig into the specifics of each other’s financial situations.
At the other end of the spectrum, many long-term married couples know that harmless discussions can turn into arguments on a dime as soon as someone brings up the family finances.
No matter what stage your relationship is in, money can be hard to talk about. That’s because money isn’t JUST money. Our feelings of self-worth, our ability to provide for our families, our dreams for the future, our sense of professional pride and accomplishment and yes, our past mistakes are often all tied in with our money. However, it’s impossible for a couple to execute a financial plan without clear and open communication about a whole lot of money related issues.
Discussing money from an indirect angle can be a good way to start. So rather than risking an argument about whether you’re saving enough for retirement, you might ask your spouse, “Where do you picture us living when we stop working?” An exciting conversation about your future might help you approach your budgeting from a more positive place.
2. Keeping secrets.
One part of this open dialogue that can be particularly challenging is if either spouse hasn’t been totally honest about their finances. Hiding away high balance credit card bills you racked up before you were married isn’t going to get that balance paid down any quicker. The money you secretly lost on an investment that turned out to be too good to be true isn’t going to magically reappear in your account.
The problem with money secrets is that they tend to surface at the worst possible times, like when you’re settling an estate after the death of a loved one. You and your spouse need to have total transparency about your finances. Each of you should be able to access your joint accounts, and you should tell each other about any solo bank or investment accounts. In most cases, make sure you are listed as each other’s first beneficiary on all accounts and file all relevant paperwork and passwords in one location you’ll both remember.
3. Turning a blind eye to bad habits.
Nobody’s perfect, and part of any successful marriage is learning to love – or at least accept – your partner’s imperfections.
But love will not conquer all if your spouse has any financial habits that put your long-term planning at risk.
Sometimes these bad habits come from a good place, like wanting to help out a struggling adult child, even if it’s straining your monthly budget. Other habits, like not budgeting in the first place, too many splurge purchases, or knee-jerk reactions to market volatility, are less easy to love away.
Whatever your spouse’s motivations, if you don’t confront him or her about negative financial habits, you might reach retirement without a reliable nest egg. And even if you do make it to retirement relatively unscathed, I’ve seen way too many undisciplined investors treat those nest eggs like jackpots and blow through money that should have lasted decades in a matter of months.
4. Letting one spouse “handle the money.”
At Keen Wealth, we ask our married clients to attend annual review sessions and any other important meetings together. We want both spouses to understand the family’s financial plan and feel comfortable with how their portfolio is going to weather volatility, make adjustments as necessary, and continue to build wealth.
We also want both spouses to be able to handle the family finances should one of them pass. I don’t mean to generalize, but in my experience this issue is of particular concern to women who let their husband handle the money. It’s also a fact that women tend to outlive men, so even if a couple divided up financial responsibilities, both people need to understand the whole picture.
We understand that stopping in to talk to your fiduciary advisor at Keen Wealth might not sound like the most ideal date night. However, we firmly believe that after talking with us, you and your spouse should leave feeling more confident and more excited about your financial future.
And you can always grab dinner on your way home!
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.