Can financial infidelity lead to divorce?
How to work together as a couple to realize your financial goals.
Couples rank talking about money matters right down with talking about death, says a recent poll by T. Rowe Price.
In fact, roughly 43 per cent of them try to avoid family money discussions altogether, lest their children or partners realize how worried they really are about their finances. What's worse, 77 per cent of those quizzed admit they're not always honest about money-related issues.
Experts have a name for this lack of candour: financial infidelity. And they maintain it can prove every bit as damaging to a relationship as adultery.
Let's face it, couples have always fought about money. But thanks to the recession, more partners are starting to realize just how much they're really at odds with each other.
Ask any financial advisor. The most ticklish part of designing a successful financial plan is determining how much investment risk a couple can really handle. And this is doubly difficult to do when you're not even sure that the two people in front of you agree on things in the first place.
For most couples, investing is a lot like flying: If they had their choice, most would stay safely on the ground, and take the train. They fly because it helps to get them somewhere faster, and the chances of a crash seem fairly slim.
Too often though, once the plane runs into real turbulence, at least one partner's risk tolerance suddenly evaporates. Anxiety and fear drive a wedge between the couple, opening the door to recriminations or worse.
To avoid this dilemma, try to determine your "money personality" before - not while - you're making financial and investment decisions, suggest psychologists who study financial behaviour.
What are some of your earliest memories about money? Did your parents agree about finances when you were growing up? Most importantly, how closely are you and your partner aligned when it comes to spending and investing what you've got to work with.
Olivia Mellon, a psychologist who tutors financial advisors on how to read and counsel clients, suggests couples should — over and above obvious feelings of worry such as the fear of losing money and simply not understanding financial jargon — also consider their feelings toward sudden change or loss of control.
For instance, if you've stayed in a job longer than you perhaps should have or often worry that you've made the wrong move after making a big decision, then you're not likely to be much of a risk taker.
While this sense of caution will likely cost you in the long run, there's no sense in letting your spouse talk you into an investment that you're simply not going to be able to stick with over time.
More often than not, opposites do attract when it comes to money, Mellon maintains. The trick is to find a balance between two conflicting approaches, just as many couples do when deciding about asking for directions.
When two people with similar money styles actually do get together, one generally tries to outdo the other and becomes even more obsessed with his or her own view point. And that means nothing but trouble.
To resolve this conflict, try this exercise: Working independently, generate a series of lists, identifying short- and long-term financial goals. Then, share this final list with each other, coming to a consensus about prioritizing not only the goals you both agree on, but also those that may mean more to one than the other.
If you really can't agree on an item, put it off for awhile and move on to another one. Financial planning is a repetitious exercise, so don't expect to tie everything up with a nice bow from the outset.
And when a disagreement turns into a power struggle, the discussion is likely to go a bit better if you keep in mind that listening isn't necessarily obeying.
As you negotiate and compromise, each of you should choose at least one goal that the other partner prefers. The risk taker, for instance, might agree to do more for the other's sense of security by agreeing to keep a reserve of at least six months worth of expenses in a conservative money market fund.
The risk avoider, on the other hand, might accede to putting a slightly larger portion of the family's longer-term money into a potentially riskier but likely more rewarding fund, for instance.
Need some help getting started? Check out psychologist Kathleen Gurney's book, Your Money Personality: What It Is and How You Can Profit from It.
A strong believer in detaching money from emotion, she provides several specific exercises and case studies designed to help you approach family finances in a more controlled, rational fashion.
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