New Year’s Resolution: Improving Financial Communication in Your Home
Kathy Longo, CFP®, CAP®, CDFA Tuesday, 01 January 2019
It’s that time again, the time to make resolutions: to lose ten pounds, to eat better, to read more, to get serious about your finances. While we can't chase you into the gym, we can go over some ways to tackle your finances. Too often we find ways to put aside our financial long-term health for short-term, day-to-day distractions. The good news is that you can improve your finances in the new year by communicating and setting goals. We describe some helpful themes to foster positive money conversations in the New Year. The first step to making this resolution a reality is to get your calendar out now and start blocking out time for your finances.
Money Talk with Your Family
Money Talks can be hard, as we have been conditioned to see open money conversations as taboo for generations. The first and most important step to reach your long-term goals is to make sure everyone in the household is on the same page. Regular Money Talks are an important tool and should be treated appropriately. Cover all the bases at this talk, including an overview of your current financial picture which includes a list of all your assets and any outstanding debt, and an overview of the household budget including what kind of big expenses are coming up. Time should also be spent on savings and long-term plans. These conversations can be with your spouse as well as your kids. They should not be sprung on the family so you will need to schedule a time, ideally when everyone is calm and there is no impending financial crisis. Conversations with family can include discussing financial goals for the family, allowances for the new year, potential one-time purchases such as a vacation or major appliance that is being saved for, or paying down debt. Make sure everyone, including the children, has space to ask questions and be honest. Money Values differ, even within one family, so the more open the dialogue, the better. If kids are expecting college tuition to be paid by the parents and you plan to have them take out loans, for example, this may change the type of schools they look at. If you or your spouse aren't on the same page about downsizing or when to retire, that can also make a big difference and can be proactively addressed through a conversation. If tackling debt is the major focus, it's important to have the whole family aware and on board which may also lead to some good suggestions. Money Talks teach your family how to be open and responsible with finances and that is a gift that can carry down for many generations.
Now that you’ve had the big Money Talk, the next step is getting on the right path to actually reach the goals that you set. Since Money Values vary person to person, having frank conversations about what you want your career and retirement to look like, including where and how, is key. This is an opportunity to make sure that you and your partner are taking advantage of every opportunity to save and invest, especially through your workplaces. For example, an estimated $24 billion in unclaimed 401(k) company matches gets lost every year.[i] This is also a good place to enlist the help of a professional to look over your finances and advise how best to proceed to help your goals become a reality. Once goals are set, ideally you will have a plan, a diversified portfolio, and some trusted experts keeping you on track.
Wealth Transfers and Charitable Giving
Another aspect of Money Talks past the immediate topics of tackling debt, sticking to a budget and saving for retirement and big expenses, is to consider what comes after all that. While it is often hard to have these conversations, the more ground you can cover about building an effective estate plan, creating a will, and designating a power of attorney will save a lot of heartache on the other end. Starting the tradition of having regular Money Talks, perhaps even yearly, will help to demystify some of the awkwardness around money and avoid the pressure of having this conversation during emergencies. It is a much more mature way to create an atmosphere that plans, budgets and reassesses as things change, covering everything from buying a new fridge to a funeral plot.
Keeping Your Resolutions
Passing along Money Values that encourage being transparent and goal oriented is the perfect gift for yourself and your family this year. Getting on top of your finances has a ripple effect outward, benefiting not only you but also your partner and family. Money disagreements are a top reason that couples go into marriage counseling, as couples who disagree on finances once a week were 30% more likely to divorce.[ii] This is a good motivator to start making Money Talks a priority! Find space to talk openly and honestly, invite questions and brainstorming, and bring in professionals, experts, and mediators as needed to help. Having the peace of mind that you are on the right path moving toward your future, spouse and family in tow, is a great resolution to keep. If you are looking for some more ideas on how to have effective money conversations, check out my book, Flourish Financially: Values, Transitions, and Big Conversations, which is all about having the necessary and sometimes uncomfortable conversations that we can be having with our spouse, parents, kids and even friends.
Happy New Year!
About the Author
Kathy Longo, CFP®, CAP®, CDFA
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.