Yahoo Finance Bringing Some Romance Into Financial Planning
Jonathan Rich has an early valentine for you: Instead of dreading the annual financial planning talk you and your spouse typically endure, try cuddling over a nice warm spreadsheet.
He's serious. Rich, an Irvine, California, psychologist and author of "The Couple's Guide to Love and Money," says "just talking about money can be a romantic thing."
"It's counterintuitive, but you're talking about long-term plans, being partners, so even though it's thought as being the opposite of romantic, it does have a romantic quality in that you're looking at a future with the person. You're talking about hopes and dreams," Rich says.
Is Rich a hopeless romantic? Or is he just hopeless?
Neither, say other advisors whose practices bridge relationships and finances. They agree his perspective can transform a sore spot to a sweet spot. For many, the annual review may be more whine than roses: Rich estimates 80 percent of the couples he sees in his clinical practice cite financial problems in their relationships. On the other hand, you may enjoy the annual review if you take a counterintuitive approach that starts with outlining your values and lets your financial priorities align accordingly.
"Money is part of core intimacy," says Mary Claire Allvine, a certified financial planner with the Atlanta office of advisory firm Brownson, Rehmus & Foxworth Inc. and author of "The Family CFO: The Couple's Business Plan for Love and Money." "If you are truly open about financial issues, you are truly open with each other," Allvine says.
Achieving financial review nirvana is as simple, and as hard, as reframing financial priorities in terms of life priorities. Allvine recommends this three-step process:
1. Agree on your shared values. You may share deep commitment to your children's education and well-being, mutual investments in your careers, a religion or a certain social cause. Most likely, these shared values are part of what attracted you to your partner in the first place. These shared values are how you already intuitively prioritize your time and attention, allowing you to accomplish what is important to you, Allvine explains.
2. Identify your goals, or the things you want to do, based on those shared values. For instance, if you highly value the development of your children, you will support them in college, help them develop their individual talents and provide the resources they need to succeed in school. One exercise Allvine has found invaluable for pinpointing value-based plans is to write each goal on a separate index card. Include every goal you can think of, from this year's vacation to next year's new car to the next decade's retirement.
3. Compare your goals with your partner's. If you are using the index card idea, this means "literally putting your cards on the table," Allvine says. What top three goals do you share? Those are your mutual priorities. Rank all of the goals each of you have. "Once you are done ranking those goals, you have your financial priorities," Allvine says. "All you have to do is attach a number -- how much you will spend -- to achieve those top goals."
This tactic is one way to redirect a financial review from a frustrating discussion about ambitions that outstrip income to a strategy session that shows both of you how to concentrate your resources on the things that matter most, Allvine says. "If you start with the dollar figure -- the amount you figure you will earn or need to earn, then you back your values out of it," she explains. That guarantees arguments over what's more important. This three-step process "starts with the values and backs out the dollars," she says.
Putting a little distance between yourself and the dollars can ease tensions, Rich says. Bear in mind that the "opposites attract" dynamic often applies to attitudes about money as well as personality traits. Your partner's point of view and resulting decisions may be less about you and more about him or her.
"Usually people come to relationships with those financial styles already there, and it causes needless distress to infer that it's about the relationship," Rich says.
Couples often dread money talks because most individuals feel defensive about how they spend money, and "the talk" puts them on the spot, says Ryan Howell, assistant professor of psychology at San Francisco State University and co-founder of Beyond the Purchase, which hosts ongoing research about consumer behavior.
Part of this defensiveness stems from disappointments with purchases. Having something isn't as fun as buying it, Howell says. "People have high 'transformation expectations.' You think that this thing you will buy will transform you as an individual and will make you better. But once you buy it, you're still you," he says. "That triggers anger at yourself," which spills into the discussion about financial priorities and planning.
Howell has found that a "gratitude journal" he writes in daily has helped him see and appreciate small acts of financial collaboration that have helped reshape his approach to routine financial tension.
Simply recognizing the dynamics of financial planning discussions can be enough to defuse much of the tension, Howell says. Get over the fact that it's annoying to see how much money and time it will take to pay off an outstanding credit card debt, and how much vacation you are trading away in retirement savings, and get on with the task, he recommends.
On the flip side, working together to wipe out a single debt, especially a big one like a student loan or mortgage, can bring more satisfaction than you anticipate, Howell says. "Debt is stress. So invest in your relationship by eliminating a huge source of stress and conflict. You will reap those benefits later on," he says.
A sweeter payoff is the dessert after the workout, he adds. "That's why investment companies show couples walking on a beach, not hunched over a spreadsheet," Howell says. "It's all about the reward, not the work."
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