Love and Money: Why Financial Intimacy Is a Must

The odometer on our family's 2007 Toyota Highlander Hybrid hit 100,000 one recent weekend and the kids went wild. Sure, they were jazzed that our family ride was hitting an important milestone. But they really hoped the six figures on the dashboard would finally prompt my wife and me to retire our current car and buy a snazzier set of wheels.
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The odometer on our family's 2007 Toyota Highlander Hybrid hit 100,000 one recent weekend and the kids went wild. Sure, they were jazzed that our family ride was hitting an important milestone. But they really hoped the six figures on the dashboard would finally prompt my wife and me to retire our current car and buy a snazzier set of wheels.

Not this year, I informed them. A car is a major purchase and this expense needs to take a back seat to some other financial priorities, like saving for college for these junior car buffs. I delivered this unwelcome news with authority because my wife and I had run the numbers. After huddling over a spreadsheet, reviewing income and expenses, we decided now isn't the time for a new car because although the car is long paid off and we've been putting money away for a new one, my wife and I have decided to use those savings for a home improvement. We also think it's an important lesson for our kids that you don't just get rid of a car because it hit some mileage marker or because it's a few years old. This car runs perfectly well and, as I explained to my kids, I am happy putting some money into maintaining it while investing the savings for the new one, or spend it on another priority.

My wife and I talk about money on a regular basis. It's habit; I'm in the business. We take a look at the money coming in -- who's earning how much? -- and going out. We break our expenses out into monthly recurring expenses like food and housing, and non-recurring purchases like a new car or a home improvement. We have created a spreadsheet with the cost of our major long-term goals laid out by year. Our intent is to plan around the discretionary expenses (like a new car) so we don't tap too much of our savings during a year where we can't move the goal (like college tuition).

These conversations keep our family on track financially.

Usually these talks go smoothly. Sometimes, they make one or both of us squirm. This isn't surprising: Talking about money means discussing decisions about work, ambition, spending habits, debt and more. Still, nearly 20 years into our marriage, my wife and I feel better for having an open dialogue about what we're spending and saving.

But this isn't the case in many households. I've been thinking a lot about couples and communication since the results of a survey[1] by Fidelity, my employer, was released recently. The survey, of 1,051 couples, was an eye opener. It showed that for all too many, the dollar sign is an exclamation point -- or a question mark. A number of married partners, it seems, are completely in the dark when it comes to shared money matters.

Among the findings:

•43 percent of couples surveyed couldn't accurately say how much money their partner makes. One in 10 missed the mark by more than $25,000.

•36 percent disagreed on the amount of the household's investible assets.

•When asked how much they will need to save to maintain their current lifestyle in retirement, nearly half of the couples said they have "no idea" -- and 47 percent were in disagreement about the amount needed. This level of disagreement was highest among those who are closest to retirement: Baby Boomers.

•60 percent of couples and almost half (49 percent) of Boomers don't have an idea how much their Social Security benefit might be, even though the information is readily available on the Social Security website.

•Couples aren't even on the same page when it comes to describing their expected lifestyle in retirement -- with one in three disagreeing on how comfortable that lifestyle will be.

Just as surprising? The majority of couples surveyed -- 72 percent -- reported that they communicated exceptionally well about money. Amazing! At a time when sex, religion, politics -- you name it -- are ripe topics for discussion and debate, money seems to be "off limits" in some households.

This is a problem -- and not just when it comes to crunching numbers before a big purchase, like a car. Couples who don't discuss money openly can't make sound financial decisions about saving, spending and making sure there's enough money when it's time to retire.

Ideally, conversations about financial basics should start long before a wedding and continue throughout a marriage. The topics should include: How much money does each person expect to make this year -- even if it's a rough guess based on the past few years? How much debt is there? How to pay it off? Buy or rent a home? Renovate or wait? Have a kid? How about another? Stay at home with the kids, or remain at work and send the kids to daycare? How much to save for the short term, for the kids' college -- and for retirement? These questions are just for starters and the conversation needs to continue for years. But, you get my point: It's impossible to plan for the future without having these talks.

My wife and I have a very good division of expenses and our monthly budgeting is divided up much the way we split our chores: She is a better cook than I am and is home first so I am happy to stay up late and clean up after dinner. Other chores are shared.

In breaking out our spending, we carve off contributions to retirement plans and healthcare through my employer, so those never enter the picture as part of income that we might spend. When looking at the monthly bills, we divide up monthly bills and I pay some and she pays some. It's not important how we divide up the chores or expenses, but we do have a clear understanding of who's doing what so we don't both stare at a pot in the sink or a bill on the counter and hope the other person will clean the pot or pay the bill. What is important is that we each try to stay within our monthly budgets and not tap into savings unless we discuss it with the other partner.

In a recent conversation about money, I could feel some discomfort from my wife. She needed to tap into the savings to pay for some agreed-upon purchases that she had made for the family, including a bigger bed for our sprouting teenage son. We had talked about the need for the bed and agreed on how much we'd be willing to spend. It just so happened that she paid for this expense because she happened to be the parent at the store, but the purchase was outside the normal monthly spending for either of us. Sensing her discomfort, I said to her, "Honey, if I am doing anything to make this conversation uncomfortable, please let me know because I think you make great decisions about money and I don't want these conversations to be uncomfortable." Even in families where the purchases are well thought out and agreed upon, conversations about money can still create anxiety!

Let's be honest: Money, and feelings about it, dictates a lot of what happens in a couple's relationship. But marriage takes two and true intimacy in a relationship includes an open-book approach to sharing and talking about finances. Sure, these conversations may be difficult at first but they are necessary. Over time, they become easier and our relationships are better--and perhaps stronger -- for having them.

Aside from the occasional squirm, my wife and I actually enjoy these financial "meetings." It's great fun to talk about our next family vacation and discuss where the kids might go to college. And, when it's time to pick a new car, we'll all get a kick out of debating the car we'll buy when it is time to retire our aging ride.

Sorry, kids. No Corvette.

About the author: John Sweeney is executive vice president, Retirement and Investing Strategies for Personal Investing, a unit of Fidelity Investments, in Boston. Follow him on Twitter @SweeneyFidelity.

[1] The 2015 Fidelity Investments Couples Retirement Study analyzed retirement and financial expectations and preparedness among 1,051 couples (2,102 individuals). Respondents were required to be at least 25 years old, married or in a long-term committed relationship and living with their respective partner, and have a minimum household income of $75,000 or at least $100,000 in investable assets. GfK's Public Affairs & Corporate Communications division executed the study, which was fielded in April 2015.

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