It is very likely that you and your spouse took some sort of financial improvement vow in the last 2-3 months. If you pivoted toward healthier communication, sustainable spending and strategic investment habits - good for you. But if the home team is still struggling, recognize that your mindsets vis a vis Team Orientation, Time Orientation and Strategic Orientation play a role in long term financial success.
Individual or Team Orientation - Are you on the same team? You’re married so you must be on the same team right? Wrong. He wants to live within their means but gambles on internet stocks, she wants financial security but spends to the mantra of, “You only live once”. Honestly, I’ve seen window washers who share no common language display greater degrees of self-awareness and teamwork than married couples caught in ego battles and divergent agendas.
Couples on the same “money team” understand the strengths each partner brings to the table, look for opportunities to build confidence, aim to collaborate not control and follow these best practices:
- They keep balance sheets and budgets and agree, by and large, on how money should be spent, saved and invested,
- They agree as to who is in charge of the administration of paying bills, taxes and handling investments,
- Money discussions are fact-based. They involve logic and active listening in lieu of fear, intimidation or emotional manipulation.
Time Orientation - Are you focused on creating long term financial stability, “getting rich” or is investing scary due to past experiences? Couples focused on long term financial stability reflect on the past, live in the present and plan for the future. They feel wealthier because they feel they have adequate control over their lives.
Examples of distorted time orientations: 2008 left you afraid to invest, but now you fear your savings will be put through the inflation wood chipper. Or perhaps you are a treasure hunter believing that if you can just flip assets all will be right in the world. Or maybe you are making millions, but are still panicked because it’s just not enough yet.
Best practices for optimal time orientation for financial stability:
- Past – Openly discuss what you have learned from past money and investment successes and mistakes.
- Present - Create a budget that helps meet future goals but allows for regular, mutually agreed upon enjoyment/hedonism.
- Future - Determine together how much is “enough”. Visualize your retirement and the costs involved factoring in for inflation and emergencies.
Strategic or Laissez Faire Orientation – Are your investment decisions ad-hoc or do you have a strategically considered plan that you fully understand?
It’s entirely possible to have no strategy and wind up with a lot of wealth, but it doesn’t happen very often. If I had a dollar for every doctor, heiress, professional athlete, entertainer or lottery winner that declared bankruptcy I would retire tomorrow.
Everyone needs to have a plan – whether it is self directed or constructed with the help of professional planners. And your strategy should be based on today’s realities not on outdated ideas (your parent’s plan) or wishful thinking (that interest rates will pay 5% any time soon). You can leave the thinking entirely up to a 3rd party advisor, but you have to live with the results, not them.
Strategic planning questions for the team:
- Does your strategy involve "betting" on one asset or one asset class for wealth creation/retirement?
- Are you regularly contributing to this "strategy"?
- Are you invested purely for capital gains or is income part of your strategy?
- How exactly are you going to live off your investments in retirement, and do they comprise different sources of income?
- How does your strategy work in a world of rising taxes?
Resolutions that stick take more than a superficial commitments; it often means changing habits and understanding psychological impediments to wealth creation. In other words, a fully functioning financial team requires work. You need trust, you cannot fear conflict and you have to embrace accountability (this is a joint responsibility).
You are cultivating your future together and if you can make it an enjoyable learning experience, your children will benefit too. They will learn about family finances and what teamwork looks like in the 21st century.