¶ Navigating Financial Conflict in Marriage
Welcome to a Wiser Retirement Podcast . Before we get started with the episode , I want to tell you about a new e-book available on our website called 'Buyer Beware, Why do they keep trying to sell you that annuity ? ' . This e-book covers the various types of annuities , negatives to owning annuities, and better investment alternatives to annuities .
To download this e-book , you can click the link in the episode notes or go to wiser investor . com and you'll find it at the bottom of the page . Now on to today's episode .
Welcome to a Wiser Retirement Podcast . Where we believe the best financial advice should always be conflict-free . I'm your host , Casey Smith , guiding you to financial freedom today is my co-host , Missy Beach . Hey , Missy .
Good morning , Casey .
You know , Hadley always tells us that we have so many new listeners . We should introduce ourselves . So I'm Casey Smith , president of Wiser Wealth Management , and you are ?
I'm Missy Beach, senior financial advisor here at Wiser Wealth Management .
Missy is great .
Well , gee , thanks , so we call them the M&M team .
So Missy and Michaela work together as a planning team and we have nothing but compliments with you guys doing a great job . Missy , okay , thanks . I also want to announce a new team member that will be joining us soon , Andrew Pratt . This will post, this podcast posts here in mid-September , but tomorrow it'll be his first day with us .
Georgia Tech undergrad, Master's from Georgia State and he's a chartered financial analyst , CFA and he'll be in charge of portfolio management and probably has some direct interaction with clients as he gets some tenure here .
Comes with 10 years of experience from a large firm in Atlanta and you knew him yeah , in fact , he was getting started actually , In fact , I worked with a very young Andrew over a decade ago . Well for the record , he's still young by my opinion .
Okay , well , yeah , everything's relative Casey .
That's right .
But yeah , I got to know Andrew at this big firm , yeah , over a decade ago , and so saw him when he was up and coming just studying for his CFA exam . And so now he's gotten into the trenches , gotten his CFA , gotten great experience at a really huge firm , and so I can't wait to get him on the Wiser team working for us .
I'm excited to have him on the Wiser team and you on the Wiser team because when I look at our team right now as a firm matures over time , you go from me being a solo practitioner , where it was just me and one other support person , to growing to number 10 now in our group .
It's just great for the clients and I'm just really excited about everyone here right now and then as we continue to add to the group , we're doing amazing things in this fiduciary , fee-only environment that we work in .
Exactly , and we do have kind of the dream team here and that's exactly why I found my home at Wiser , because of the people here and the fact that we're the size we are .
Yeah . So you can be too big , you can be too small , and we're in the sweet spot right now , even with continued growth . You know a Schwab report came out . It's a benchmarking study .
So how it works is you submit it takes like two and a half days to compile all this data that you submit in a report to Charles Schwab and then they , in return , take all the data , take our names off of it and then turn around and hand it back to us and say this is how you compare to other firms in your space and tell you what we won every single
category . We were the best . We, average firm grew over the last five years at 17% . We're growing at 37% right . Now our marketing budget was almost 10 times what others are spending . But there's just a lot of sleepy mid-sized firms out there that are sitting there scratching their heads going how do we get new clients ?
Yeah Well , and some don't want new clients either . That's true , that's true , some are just lifestyle practices .
They call them lifestyle practices , where the owner's happy doing what they're doing and don't want to do anything else .
But that's kind of scary too , in my opinion . I did not want to be part of a lifestyle practice because I think sometimes they get complacent and I worry are they up to date on new trends and planning strategies or are they just doing it the way that it's been done for the past , however many decades ?
So while a lifestyle practice is good , you know keeping it close to the vest and carving your own path I think there are some inherent dangers you have to keep an eye out for .
True and , just to be clear , those metrics that were measured against are business operation metrics . There was client retention ratio that was part of it in there , but they're not . It wasn't about portfolio performance , it wasn't about anything other than operating the business . And how do we rank ? How healthy are we as a firm versus other groups ?
And so I was very pleased by that . I wish it's kind of like you know you're beating everyone in a ballpark but you really want to travel to that one bigger ballpark that tried the other team . I wish they would rank this also . And , yeah , the billion dollar firms , because I think we could have held our own there as well .
Obviously , they just had bigger numbers . That's what it all comes down to , but yeah .
But I think you know a business's health other than you know investment returns and things like that that clients typically focus on, is also really important for a client base to look at , because it shows that you know how to run a business and it's maintainable and we can keep it going .
It's not like we're flying by the seat of our pants and just kind of chaining in it a long day to day . So that's what gives me comfort in working here at Wiser knowing that , okay , look , the Schwab study shows that we're doing all the right things and we're kind of paving the way for our category .
So a lot of what we do in our podcast is focused on what we see in our practice on a daily basis , and so today's topic is how to avoid financial conflict in marriage , and it kind of comes from something that Missy and I are seeing in our meetings , which is why husband and wives having separate bank accounts which is very interesting .
Now I will say I was saying about this driving in . I think most of the families that have separate bank accounts, we're the first financial planner they've ever worked with . I think that's pretty common , and so we're the first plan . Correct . They all have systems that they think work .
Or , in my case , recently one spouse was adamant , like I told you to merge accounts three years ago and you wouldn't do it . You know , but you know , I went at this going you have to merge accounts . That's kind of took the Dave Ramsey approach to it After doing some research for the podcast . I don't know , I don't , I don't know .
So I don't want to be , I don't want to be pushing people into marital conflict because , hey , I listened to this podcast and this is how it has to be , but I don't know . So I guess the question is should a married couple have joint checking and savings and pay bills out of that joint account and do everything jointly .
Okay , I feel like the studies that I'm reading advocate for joint accounts , but you need to do it early on in the marriage , because there was this study out of Northwestern , the Kellogg Graduate School of Management , and they looked at this group of newlyweds, and some of them had joint accounts , some had separate and others they just said , okay , we're not going
to assign you joint or separate , you just self select . And so they looked at it I think it was over two years and they looked at the overall marital happiness of these couples and they found that those with joint accounts were significantly more happy in their marriages after two years than those that had separate accounts .
And those that , even self selected into the separate accounts , reported that they had significantly less of marital satisfaction or happiness .
So , and these people were not even trained on communication skills and how to navigate working with joint accounts and how to talk about money and how to deal with finances and blend them , so they just did it on their own , but purely by having those joint accounts .
This study was able to clearly demonstrate that the joint account structure led to better marital communication and satisfaction . So I was like who ? Okay , so that was early on in the marriage , because they said that newlyweds have that ability going into it to have communication patterns set up from day one .
And so that's the critical , like I don't want to say , I don't know like point to get involved or interaction point , yeah , exactly .
So you know me , I don't always take things on the face . Right . So my thought is so , if people who've joined accounts were happier , maybe that's because they also communicated more about money , goals and the future .
I think that is it , because I think even the structure where you have like a joint account and then a his and a hers still allows for outside decisions and purchases .
So even if you're putting money into that joint account to pay bills , you're still maintaining that like , ooh , this is mine , that's his , and that separate nature of things versus the marital pot of assets and you and I have talked about that before that everything earned during the marriage it's all one big pot of assets .
So- that's true . After your married it's marital assets , even with a prenup , so you know not the money you brought into it , but the money earned after .
Yeah , so he's putting his paycheck in his checking account . She's putting her paycheck in her checking account , but so what ? Because it's all marital assets at that point .
Or maybe it doesn't matter at all .
¶ Communication and Finance in Marriage
There's a book called Freakonomics . There's actually a video or a movie , short movie or documentary , I guess about it . Basically , it's a psychologist and an economist that do all these different studies , and so they said this reading a parenting book make you a better parent ?
And the study basically came out and says , no , reading a parenting book doesn't make you a better parent . It's the fact that you wanted to read a parenting book , yes , makes you a better parent .
So maybe the fact that you have great communication , have goal planning with your finances , is what makes marriage happier versus having separate accounts , because typically when we think about it , when we see separate accounts , it's usually because , well , she's a spender or he's a spender , he won't let me spend a nickel on anything , right , exactly .
So maybe we're asking the wrong question , but in the end , what we find is that people have joined accounts . You can't imagine the stuff that I read in prepping for this .
It's like some families if you make 30% of the household income , you pay 30% of the bills and then the other person would contribute 70% of the bills because they make more money and you keep your percentage difference and that's your money . I don't understand how that's even being married .
Oh , I know , and that just goes down the ugly ugly path of highlighting pay inequity and like . So why does one spouse make 70% of household income and the other spouse is only making 30% ? You know ?
So then , what happens when you retire ?
Exactly .
One spouse is gonna have a higher lifestyle than the other spouse . Yeah , and be like hey , sorry , you should have made different career choices , exactly .
Oh sorry , you can't go to Palm Springs with me this weekend because you can't afford your percentage of the plane fare . Right .
And then what happens with the kids ? You have a mom that stays home with the kids, that's invaluable .
Exactly . So what is she supposed to do ? Yeah , dad does not want to know what percentage of his income he needs to allocate to her . The answer is couldn't afford it . That's the answer .
So I guess I don't know . I mean in my notes here . I think that you have to discuss money openly and it has to not be a fight .
Even in my own household , in the very beginning of all this , I used to say , hey , we need to dial it back a little bit , we need to kind of set a budget for the next few months as we transition into whatever we're transitioning through , and that was met with a firestorm .
Oh yeah .
And finally , one day I was like I don't want to fight about this . What does the word budget mean to you ? And the answer was can't do all these things .
Yeah . It said can't do yeah , and I was like that's not what it means at all .
It means that every dollar has a purpose . So there's money carved out for absolutely nothing , and that's fine . Go spend it on whatever .
Yeah , discretionary dollars .
And so that discussion got a little better after that . But finally I just realized for me I just have to go make as much money as possible , so we don't have to have discussion .
Avoid the discussion . Load up the discretionary budget .
Exactly . Just get it where I don't ever have to say no to something and we'll be all right . That's not the best way to live . I will don't do what I do . Just do what I say right , not what I do .
Well , the whole thing with the separate accounts is just that it allows people to still do their own bad habits of hiding purchases and spending recklessly because hey , it's all my money , so I can do whatever I want with this surplus . Versus if it was all in a joint account , would you still make those same decisions ?
Would you still go buy that $1,000 purse if that was joint money versus your own money .
I haven't seen too much of that attitude . I have a few times . The few times that I have has been the same . It's been men say this is my money , I make this money . She does her little $20,000 job . She can do whatever she wants . But they also say why do I need a will ? I'm dead . And they also say why do I need life insurance ?
I'm not here .
And so that's the conversations when the wife excuses herself to the bathroom . Eventually , in every meeting we have someone goes to the restroom it seems like and that's when I look and I'm like , hey , you're not living up to your responsibilities . We have a little man to man talk . I've only had two of those in 23 years .
But , it's like dude , yeah , you got married , you had kids . There's responsibilities . Why are you only thinking about you ? But again , that person's not listening to this podcast .
No .
But yeah , I think that it comes back to I don't want this to be an infomercial for financial planning but meeting number two , our design meeting .
That is when everyone can get on the page with how much needs to be saved or how much debt needs to get paid off right , and you make it a goal that you do together , you celebrate together and then eventually you're really succeeding together because you did it together and typically there's one person that has to be the accountability partner and you have to
understand , as a human being , that I have . This weakness happens to be in this particular financial aspect of my life , but my spouse is gonna make sure that I get there . We had a planning meeting yesterday where the wife is second marriage but the wife is like I'm gonna marry you with all this debt .
So what's the plan ?
And he's like , well , I'm not gonna not go eat out and so , but they work together and he eliminated hundreds of thousand dollars worth of debt because that was the deal to get married and they did it . And now they're coming to us going okay , now we have extra dollars because we eliminated all this debt .
So that's how it's supposed to work , is that you're moving together as a team .
Team . Yeah , you don't like your teammate .
Maybe you gotta rethink the whole thing .
That's just it . Yeah , if you see your teammate as like an adversary in the whole process for creating the debt , or like it's their fault , it's a fact . At that point it's in the liability column , so you have to decide how you're gonna deal with it . Right , you should partner up with your partner and make a plan of attack . Communicate about it .
And that's where a third party comes in . We're not counselors in this area , but we are .
Yeah , let's figure out a plan to deal with it .
I tell every finance major if you can take psychology classes , take it , because I feel like we spend 30% of our time is probably spent on helping educating and helping people get over hurdles .
Yeah .
That's you know .
Mm-hmm , and that's what I tell our clients too is we don't tell you what to do . We show you the outcome of what it looks like , of whether you do something or not . So if you enter retirement with hundreds of thousands of consumer debt , your cash flow is going to be just behold into that debt and that's not viable long-term .
But if we work on whittling down that debt over the next few years , suddenly you've got thousands of dollars a month freed up which you used to send to all these debt servicing places and now you can save that for retirement . And they're like holy cow . I never thought of it like that .
You know , I've just been paying all these credit card bills and student loans and car payments .
Retirement's about cash flow . We talk about that all the time . I mean this is episode 184 , by the way , wow , so I'm pretty sure on at least 60 episodes we've said retirement's about Cash flow .
It's all about cash flow .
Mm-hmm .
Not less about even rate of return . Just so , less money out , the less money to have coming in . It's really simple . But people , just well , I've always paid a mortgage , I've always had a car note , I've always had a little bit of personal debt , I know .
And that's not how you win . They're just used to it . Yeah , they're just always trading in a car and getting a new car payment , and no , stop the cycle .
So you have to build your family financial values . In our planning process we create a family mission statement centered around finances a little bit , I guess a lot because it takes dollars to make dreams come true in most cases . So a lot of times it's to build a financially secure future while traveling the world and helping others .
I think that is , a lot of times , the generic term that we'll come up with for families entering retirement right , and so you think about that and you live by that , you create a plan based on that , and so that's understanding what your value system is and what's important to you and where you want your dollars to go .
And I think that's something that spouses have to talk about , and it can't be a fight . It has , and sometimes in a planning meeting , a lot of that can come out and everyone gets on the same page , and then when there's conflict , they'll call me and say this is what we're struggling with .
And I say , well , the data says this is what you have to do to achieve these things , and then everyone's like , oh , okay , I got it .
Yeah , when you bring in the data .
When you bring in the data
¶ Importance of Joint Financial Planning
, yeah . And then occasionally we have a spouse or two that will say something alongs like I don't , I want to spend it all . I don't understand why we have to have this money . And occasionally there's someone people you just can't reach . They just don't get it .
Oh , like yeah .
And they'll always . They would have nothing if it wasn't for the other spouse , but if left on their own , they probably would have nothing , because they would spend it all and wonder what happened .
Exactly Playing the system . Yeah , the whole probability of success and forecasting is lost , yeah .
Another thing is like addressing power imbalances . So just because you make the most money in the family and the other spouse makes nothing or brought nothing or brought debt that you paid off , you have to reconcile that as you are one cohesive unit . Now , yes , there is no , I'm going to do this because I can and your spouse is just along for the ride .
It just there needs to be a discussion to the point where there's compromise .
So oh , absolutely . And I tell you know maybe that second spouse you don't have to be a financial expert .
You don't have to be able to explain this in great detail to anybody , but you have to have a working knowledge of where your accounts are and know who Wiser is , who your custodian is and your basic account structure and how much you're spending and you know how long you're working . Just a cursory overview of everything .
Just like I'm not an expert in whatever you do for a living , mr client , you know you don't have to be an expert in your financial plan , but you've got to understand the basic underpinnings .
For those you know stay-at-home moms out there , I will say that you know that was more common back in the like the World War II generation .
Yeah , the baby boomers and .
And so those are my favorite women to work for . They named themselves the Wiser Women they were, they were widows , or husband had passed , their husbands had passed away . We would do quarterly lunches with them , and we still have a Wiser Women category . Our widows here get categorized as Wiser Women . But they're less social .
Now I think that COVID had a lot to do with ending all all those programs we used to do . But what I found was the ones that managed the household finances . They were so sharp , even in their late eighties they were so sharp .
And the ones that kind of just existed and and didn't really do , didn't know anything about the finances , like we literally had to help them with bill pay and all that all those things after a husband husband passed away were much more mushy . Yeah , Not very sweet but very mushy and things , and so it's .
It's really good , it's a really good idea that , both people being involved in finance , maybe one's just paying all the bills , but you have to understand what's what's happening , what's going on and and and be active , yeah .
Just talk about it once a month , get a you know state of the union for the family .
Another thing I'll add is I think this would go without saying , but there's some crazy relationships out there , is the no secrets . Oh gosh , you can't be ordering Amazon packages and hurrying home to get rid of them before your spouse sees them .
No cause , I'll see the boxes and recycling .
Right it just you just need to have some accountability and own up to it . Yeah .
There are no secrets in this day and age . That's true , yeah .
So , yeah , don't , don't be keeping secrets running behind the scenes . No , and but also on the other side . You know , you got to have , you got to listen . Maybe this is really important to that person , True , you know ?
And you know , Casey , I work with a lot of divorced women clients and I tell them I said there are no secrets when you look at a tax return .
This is where we see all those accounts that maybe you didn't know about that are generating dividends and interest or sales and right , so the tax return doesn't lie . Yeah , no , very true .
So , yeah , I think the lesson here is you have to have a joint plan and if , if that includes a joint account and bills are being paid out of that as a single unit , I think that's better . I think it's better , I think it's better to do it that way .
If you want to carve out so much money per month that goes into your own checking accounts and that's like your fund money , then you can go do that too , sure . But you can't have separate accounts , be splitting bills down the center and expect in the longterm that you're on the same page about things . That just doesn't make sense to me .
No , I agree . Yeah , have your little separate accounts so you can buy each other birthday presents and you're not going to see that tool that that you know , it costs a hundred dollars or $500 or $1,000 . Yeah , that little plane tool , but it doesn't but it doesn't matter .
It doesn't matter because you have that that way . That's what that money's for . Yeah , and as far as the budget goes , I mean we're we're talking about income , high income families , families with plenty of assets , but ultimately , if there's debt in the way , you don't be doing separate accounts and fund money . You need to be eliminating your debt .
Exactly . Right , and this would be real about that , yeah .
You're sitting there and $80,000 in credit card debt . We don't even be buying anything .
We're we're irresponsible at this point , Right .
And and then obviously , you know , I like I've talked about this in the past too , but I like pay yourself first . So how much do you need to have for retirement ? And maybe maybe one spouse is maxing out their 401k plan , maybe the other spouse is two , but it's almost all their salary , yeah .
Right , well , that's a huge advantage , because you know what it's a joint tax return . You know why , cause you're fricking married .
Yeah .
Yes, exactly , exactly , but I don't know why it was . We just seem , lately , seem to have a group of people coming through that need to hear this .
Exactly .
And they do . Its fine to combine . They pay for it , and these people here today are getting it for free . Yeah , but yeah , you know , it's a it's a crazy world that we're living in right now , and you don't need to have a crazy household .
No , in a negative way .
No secrets and communicate and create a plan . Focus on the plan . What's the family mission ? What's the family purpose ? You know , I asked that in my planning meetings . I say you guys go to work every day , you work hard . What's it all for ? What's it all about ? It was very philosophical .
I hate asking the question because people kind of look at you like oh , I prepped them .
I'm like this is going to be a hard one .
Isn't , you know , isn't that the whole question of human existence at that point ? But , but not really , you can dial it down to a household level . Yeah , this household only , what do you ? What do you want your kids to , to , to be modeled their life after right ?
I so many clients now are starting to say , yeah , I want to live for today but save for the future , so they're trying to find a happy balance .
There is .
And .
There is . A dear client he he's passed away but but I worked so hard to get him retired so hard and wife died of breast cancer , just like within a year of when I got him retired . Finally , oh man .
Yeah . And you just never know .
We . It was like 2009 . We got the house paid off because didn't have enough money to get the house paid off , but we were able to get a lump sum pension in the market in 2009 . He was a very conservative investor but , man , that was a good time to put new money .
It was like at the low , like that week of the low , and , being conservative myself , I was like I want to put half of this to work . Hindsight being 2020 , right , but yeah , the wife didn't , didn't really make it into retirement , they didn't really get to do their bucket list items , and so there's .
There's something about doing things you want to do today , but also understanding that you don't want to be living on the state . And ramen noodles and rice and beans in the future . All right , Missy , a good conversation as usual , and thanks again for all your hard work here .
Thank you .
Thanks for listening today's episode . If you're interested in learning more about Wiser Wealth Management or want to schedule a consultation to meet with one of our fiduciary financial advisors , you can do so by going to wiserinvestor . com , where you can click on the episode link in our show notes and the schedule online . Thanks again and we'll see you next week .
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