One of the most common sources of conflict in relationships is money. If you are lucky enough to have found someone who you are compatible with, the last thing you want to do is jeopardize the life you are trying to build together because conversations around money are getting in the way.  Discussions about finances between partners often become emotionally charged, especially when it involves different values around money.  Fortunately, whether it’s about spending habits, saving for a desired goal, investing or paying off debt, having healthy discussions about finances is a skill that couples can learn to develop together.

Understanding what drives your partner’s emotions about money is key to turning these discussions into honest and productive conversations.  It can be helpful to discuss together what your experiences were like with money growing up.  In some households, speaking about money can be considered taboo while in others they are open discussions. These early experiences shape the way we view money and inform our decisions as adults on how we choose to spend, or not spend. Understanding that your partner grew up with a financially irresponsible parent due to a gambling problem can go far when trying to understand why your surprise purchase of an expensive custom suit quickly became a serious issue. On the flip side, your partner’s understanding that your purchase of a custom suit was because you felt you could finally afford it and deserve it seems less frivolous when it’s known that you grew up with years of being bullied as a child for your second-hand clothing.

The benefit to understanding your partner’s emotional connection to money is that it can open the door for truly honest conversations.  If you both come from a place of understanding you create a safe space to share information, even if it means sharing things you may not be proud of.  Hiding debt or overspending is a deception that can have serious adverse effects on a relationship.  Like lying, it can wear away at the trust that exists between you and could be your downfall.  It’s imperative to have an honest conversation about any debt or unhealthy spending habits.  If you can agree to a plan to pay off the debt or plan a budget that includes a set amount of savings these issues can easily be figured out before they become your undoing.

Starting and regularly having these money discussions can be difficult but money is a part of life – and maintaining openness around it with your partner is key to prevent it from becoming an issue.  Like most aspects of a relationship, communication is everything.  Sharing priorities and agreeing on common goals together will allow you to more easily create a path forward. Focus on each other’s strengths, always keep each other in the loop and your money conversations can become a part of your relationship that serve to reinforce your shared visions and dreams and further strengthen your partnership.

For the past 20 years Lighthouse Financial Advisors has been committed to reducing stress and keeping couples happy by coaching them through financial matters.

2020 has been a year like no other with Covid-19 having derailed all of our plans and expectations. Unfortunately, the United States is officially in a recession, ending the longest economic expansion in history. More than 40 million Americans have filed for unemployment since the pandemic began and uncertainty seems higher than ever. The word recession often triggers negative thoughts, feelings, and fear of the unknown. The question is, when do we get back to how life used to be? Below are several ways to help navigate through a recession and these uncertain times.

  1. Building your emergency reserve.
    1. What is your “sleep at night money”, what is your comfortable minimum cash balance to have at all times for large expenses, emergencies, etc.? If possible, adding additional funds to your reserves will help ensure that you will continue to pay all of your necessities. Recommend using an online high yield saving such as “Marcus by Goldman Sachs” or “American Express” to earn the highest interest possible.
  2. Paying down debts if possible
    1. Priority is to eliminate existing debt such as credit cards which may involve high rates of interest. Auto loans and mortgages can be refinanced at lower interest rates due to the Federal Reserve cutting rates. Federal student loans offer deferred payments interest free to help for several months.
  3. Think with the end in mind
    1. This expression by Franklin Covey means to think with a clear vision and destination, then proactively incorporate a plan to achieve success. The path forward may be uncertain, but your long-term vision should never change. Making drastic short-term changes will severely impact long term financial security.
  4. Identify your risk tolerance and stay the course
    1. Understanding your risk tolerance is a major factor when building a financial plan. At Lighthouse, we believe that allocation should focus around a spending plan. Someone who may depend on their portfolio with a short-term mindset would often focus on CD’s, money markets, and bonds. An investor focused on needing income from their portfolio several years down the road would rely on equities to maximize their potential return. Although thinks can be shaky in the current markets, stick to your plan and identify your objective.
  5. Identify your budget and cash flow
    1. What makes you happy, what is essential? Only you know that answer. It is helpful to take a look at current income and expenses to see where you stand. Identify possible ways to cut back to make sure you are living within your means.
  6. Focus on your health
    1. This is the most important of this list. Having strong mental & physical health during tough times is what will help you achieve success. Whether it’s going for a walk, going for a drive, playing a video game, etc., do what makes you feel good. Options may be limited, but take advantage of what makes you thrive. Take advantage of spending time with your family and friends. They are your most invaluable assets.

There is no specific timetable as to when a recession will end, but we can at least navigate these unprecedented waters a little easier together. Think of all you have, especially your family and friends. We often look back in life wondering how we ever got through various life challenges. Covid 19 may be disruptive, but in the end this too shall pass. In the future we will look back and learn from this experience together and be better for it.

When you know what you want in life and you strive to reach it, you can accomplish almost anything.  It’s easy to dream big and create goals, but how do you go about accomplishing those goals?  Below are a few steps to follow to keep you on your path:

  1. Write down all of your goals – seeing them written down on paper helps to solidify them in your mind.
  2. Prioritize – Now that you have written them all down. Decide which goals are most important and what you want to accomplish first.  Trying to focus on all your goals at once often leads to being overwhelmed, stressed, and disorganized, making it much harder to accomplish any of your goals.  Focusing on your top 1,2, or possibly 3 goals creates a better chance of success and enables you to then focus on your next set of goals.
  3. Clearly define your top goals and create a timeline – This allows you to focus in on exactly what you want to accomplish and how long you expect it to take. Be sure to consider outside pressures and set realistic, attainable expectations.  Having appropriate expectations creates manageable action items, reduces stress, and increases your chances of success.
  4. Break down large goals into smaller goals – Very large goals can create stress and lead to you to feel overwhelmed making it hard to focus on what needs to be done to accomplish them. Breaking large goals into multiple smaller goals enables you to create manageable action items, which will enable you to stay positive, and hopefully stress free.  Accomplishing multiple goals also creates consistent success which in turn encourages you to keep going on your path.
  5. Create a plan and track your Progress – Creating action items helps you to plan ahead to ensure you have the materials and time you need. Tracking your progress keeps your mindset positive and encourages you to continue on your path. This can be done several ways depending on the goal.  Sometimes the progress is evident just by looking.  For example, repainting a room, you can see the difference when you cut in, apply the 1st coat of paint, and the second.  Other goals can be measured and tracked numerically such as increasing your savings account to a specific amount.  You can track your progress by watching the balance increase.  Other goals are harder to see such until completed such as obtaining a degree.  One way to track your progress would be to create a master checklist of all the classes you need to take and mark them off as you complete them.  Whatever method you choose make sure it is one that will help you stay motived.
  6. Tell a friend – Having someone to hold you accountable when you slack off on your goal and encourage you when you are struggling makes it easier, and hopefully more fun to stay on task and keep you motivated.

No matter how much you plan you will always run into obstacles.  Sometimes the obstacle is yourself and you lose focus, get discouraged, and cease to make progress.  Other times the obstacle is an unexpected event out of your control, such as a car crash, illness, unplanned child, loss of job, a promotion at work with additional expectations or even a required relocation.  Regardless of what causes you to derail your progress it is important to find a way to get back on track.  Here are a few suggestions to get you back on the path to your success:

  1. Acknowledge mistakes – Everyone makes mistakes from time to time. It is important to recognize what you have done wrong so you can hopefully avoid it again in the future.
  2. Forgive yourself – Don’t harp on the mistakes you have made. Focus on moving forward and remaining positive.  A “you can do it” attitude goes a long way when trying to accomplish a goal.
  3. Identify roadblocks – Knowing what your difficulties are enables you to manage the impact they make or even makes it possible for you to avoid it in the future.
  4. New action plan – Sometimes you get so far off course that some of the steps or timeline expectations need to be changed. Other times the obstacles that occur force you to reevaluate your priorities and change your goals.  Do not resist altering your goals if they are no longer what you want.  Life is everchanging so it is important that your goals change to fit your wants and needs.

There are many different events that affect us throughout our lives. One of the most heart-breaking is death. As we live our lives, it is likely that at some point we will either receive an inheritance or know someone that does. It can be a stressful time as you are trying to manage your emotions along side managing financial decisions. What do you want to do with the money? And what should you do first? Below are a few things to consider:

  • Grief. Grieving is a natural part of the process of the passing of a loved one. It is a crucial step before any major financial decisions are to be made.
  • Consider emotional, spiritual, or practical uses for the inheritance. There are many ways to honor a loved one. You could utilize the inheritance in a way that they would see fit for themselves, in a way that makes you happy, or in a way that unites both ways and establishes a connection with them. An example of this would be to purchase something small, that reminds you of the person that was lost.
  • Once you have come to an agreement with yourself in terms of basic ideas of how you would like to utilize the inheritance, it is time to start really planning out the angles of how to manage the funds that are not always clear as day for non-financial folk. The boring stuff – and the stuff that can have an immense impact on an inheritance and the way you choose to take / use it. This includes tax planning, estate planning, investment and spending options. There may be options available to you that you do not realize. (lump sum vs. annuity; selling real estate vs. utilizing it for income etc.)
  • Once you are ready to take these steps, it can be crucial that you work with a fee-only, fiduciary advisor to assist you. With them it is important to discuss:
    • Tax Implications
    • Distribution Strategies
    • Gifting Strategies (if charitably inclined you can possibly lower the tax liability)
    • Estate Planning
    • Insurance (insurance coverage should match your level of net worth/item value)
    • Annuitization / Income strategies to manage & create a reliable cash flow system
    • Debt management
    • Investing, Investing, Investing!

As mentioned above, it is a great idea to work with a Fiduciary, that has no conflict of interest in any area they advise on. This is not only helpful when you are stricken with a windfall from inheritance sums, but at other times and parts of your life. It is always good to take a moment and reflect on what you wish to accomplish with your money, and to make sure your advisor knows your goals as well. Working with your advisor closely to achieve your goals ensures the fastest and easiest approach to your financial and personal freedom.