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Hi, you're listening to Mastering Money where we explore the many aspects of good financial decision making. I'm Doretta Thomson, Financial Literacy Leader for Chartered Professional Accountants of Canada. We provide no cost programs and free online resources that help Canadians own their finances and learn the language of money. This season, we're focusing on important money conversations. Why?
Because discussing finances may be uncomfortable, and in some circles talking about money can even be taboo. But it really shouldn't be. It's important to start conversations about money and keep those conversations going. Money is one of the most common causes of divorce and relationship breakdown. So it's no surprise that talk to your partner about money is common financial planning advice. But how do we have those conversations in a positive way?
To help us understand the how of money conversations, we're joined today by chartered professional accountant Wallace Howick author of the International Award winning book Love And Money, Conversations To Have Before You Get Married. With more than 40 years experience in financial services, Wally was elected a fellow CPA for his distinguished service to the profession. He's also a Harvard trained teacher of negotiation.
So who better to help us understand the importance of money conversations between partners and how to have those conversations in a healthy and supportive way? Wally, thanks so much for joining us today.
Well, thank you for having me, and thank you for the kind introduction. DORETTA THOMPSON: So before we begin, can you tell us a little bit about yourself, about your career, and what led you to write your latest book, Love And Money, Conversations to Have Before You Get Married? I think you encapsulated my background very well. Thank you. Part of that background was to go out and speak with advisors and their clients.
And it was in the course of those conversations, not so much the questions during the formal sessions, but the questions people would line up to ask personally after that began my curiosity about love and money. There's sort of three connected but quite distant events that led me to write the book. When I was really young, one of my good acquaintances divorced quite early, and I was surprised at that.
And in that same window, I read an article about the ever increasing divorce rate in Canada, and money was often mentioned. And I wondered why. Fast forward a number of years. I was speaking in Calgary one night about investment and tax planning. And a woman came up, in fact she was the last person in line, to ask a question after the end of the formal seminar. And in that conversation, she allowed that she was engaged in a very ugly divorce.
And I just waited, said nothing, and then she offered, we never talked about money. We either argued or we sank into sullen silence. And that had a big impact on me, because I started to wonder why is it that folks can't talk about money? And it's not that they don't have an understanding of the substantive issues. We can't spend more than we make. It's that they don't know how to talk about money. And that really sort of galvanized me to start to explore what would it take.
So that's the first part of your question. There's another question inherent in your question, and that is why financial literacy? Financial literacy has always been important to me. And financial literacy is certainly about skills acquisition, acquiring numeracy and budgeting skills. It is also most certainly about acquisition of knowledge. How credit cards work, how buy now pay later works. And these are important skills to have in order to gain financial literacy.
And what's the point of financial literacy? It's to make good, well-informed choices to become financially capable. Financial capability is more than that. Financial capability is more. And that more is at the intersection of social science, self-awareness, understanding your partner, understanding how you make decisions, understanding what influences your decision. It's also at the intersection of good constructive conversation and I would add principled negotiation.
DORETTA THOMPSON: So why do you think, if we really want to start with the basics, why is it so important to talk to your spouse or your partner about money? Because there's a 40% divorce rate.
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There is that.
We all know marriage is rich with hope and commitment to the future. Realization of that future requires an understanding each of the other and using that understanding to work together. And yet so many folks come to marriage and they don't really have an understanding of their own attitudes, beliefs, and values about money, let alone the attitudes, beliefs, and values of their spouse and don't have the skills to surface their own and understand their partners.
So among the goals in writing the book was to help each partner discover and explore their own attitudes, beliefs, and values and understand those of their partner and help them find constructive ways to talk about them. Because the attitudes, beliefs, and values that each holds are unlikely to be very coincident with those of their partner. I should say only partially coincident with those are their partners. So there needs to be a way to have a conversation.
Because in essence, what you're trying to do is merge two values, two voices, into one successful path.
It's such an interesting point that you made that we don't always even really understand our own values and beliefs around money, let alone have a way to talk about our partners. Can you give us a little bit of insight into what we might do ourselves to kind of explore our own values and beliefs and senses about money and where they came from?
Well, you're quite right, Doretta. They're very real. They operate below the surface and very seldom get conscious recognition. They sit there, but they are incredibly powerful. So one of the things I tried to do in the book was design a little list of questions, 13, to help you surface your own attitudes, beliefs, and values. And given your background, it won't surprise you when I tell you the first question on the list is what were the attitudes, beliefs, and values around money in your home?
Was money tight? Were there open discussions? Indeed, were there disagreements about money? Was money tight at the end of the month? Did promises get broken or deferred because of money? And each partner should do the list individually and then compare that list. How did you learn about money? Did you have an allowance? Did you have a part time job? Were you expected to contribute to things that were special, like a special graduation dress or a special bike?
And so the goal of that list is to try and get you quietly by yourself to surface your own attitudes, beliefs, and values. A lot of them are absorbed almost by osmosis. We take them up almost unconsciously.
I think that's so interesting and so true. And sometimes I wonder if maybe money conversations between spouses can go wrong because we haven't actually examined where they're coming from ourselves. And just by the act of shining a light on it, we open up the possibility of mutual understanding.
I agree. There's some art in there. And part of the art is the art of willingness. Willingness to ask questions, not judge, and to check in to make sure that what I send to you was in fact received. So one of the ways you can do that is I can say so, Doretta, I hear you saying that saving is important to you. Can you tell me more about that?
One of the dangers in conversations, and it happens in all kinds of conversations, just not the ones we're talking about, if I send an A, you may not receive an A. You might actually receive a B. And so it becomes incumbent on me when I'm talking to check in to make sure you've heard what I sent. Otherwise you're on a slippery slope to somewhere. I think the other thing in that process is not just checking in but being willing to have your mind changed.
One of the dangers, one of the things that goes wrong, like the woman in Calgary said to me we either end up in an argument or sullen silence. The way to avoid that path lies in not prejudging what you're going to hear. Or I'm going to set him straight. The one that just will lead to disaster is what's the matter with you, Doretta?
It's the difference between--
I'm going to tell you who to be and what you should do. What's the matter with you, Doretta, is just a conversation ender. And it may be very difficult once ended to restart.
The difference between talking to understand and talking to be right.
Well, was it Stephen Covey who developed the maximum seek to understand and then be understood? I thought that was some of the best advice I've ever read and I think very appropriate here.
I think that you've given us some really good things to think about in terms of basic principles of conversations between couples. And I do want to say that one of the things I love about Love and Money the book is those very practical scripts to help people and guide people through those conversations.
And I do want to say that although the book is targeted at specifically it talks about conversations to have before you get married, which is, of course, an ideal time, there are such important lessons for all couples to have those kinds of valuable conversations. So that whole thing that communicating to genuinely communicate, being willing to listen, checking in, making sure you're understood, et cetera.
So when we think about that, what are some of the basic conversations that couples should have about their finances?
I think just for emphasis sake, the very first conversation should be about how are we going to have a conversation. If you will, what are the rules of the road? And some of them are quite basic. One person talks at a time. And then use some of the tools for checking in and reserving judgment that we just talked about. I think the second conversation is where are we? Where are we? If you think about it, in a somewhat oversimplified form, financial management is really a four step process.
And each of those four steps seeking the answer to an inherent question. First step, where are we? Second step, where do we want to be? These are our goals and aspirations. Third step, how do we get from here to there? So those are the strategies. A budget is a key tool in that. And then lastly, and something often forgotten is a feedback loop. Check back in. How are we doing? This was the plan. These were our goals. How are we doing? What's changed? What needs to change.
So it's a four step process. So the answer to your question most directly is where are we? Start collecting some information. And in today's world, collection of information is a lot easier than it used to be. I mean, you can just pull the last three or four months credit card statements, take account for things that don't pass through there like the mortgage payment or the rent payment perhaps. And you can gather up where your money is going fairly quickly.
You might want to keep a little detailed little notebook for a couple of weeks to see where miscellaneous monies go. But you can capture the big picture pretty quickly with a pencil and a spreadsheet. You can get the answer to a very important question. Where is it going? In fact, I'm often when I ask people what's the best piece of financial advice you ever got, I tend to get one of two answers.
The iconic versions of those two answers are, know where your money's going and save a little, even if it's just a little.
I hear that very much, the same thing. It's interesting. Although I'd add a third one, which is never carry consumer debt.
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Well, I agree with that. I actually agree with that. I thought we might talk about debt a little later. But I actually agree with that. Debt begins with D and so does the word dangerous.
So one of the things, Wally, recent studies are showing that one in five Canadians keep money secrets from their partner. Why do you think people are so hesitant to talk to their partner about money?
That's an important question. It's a subset of a bigger question. Culturally, we don't talk easily about money. It's not a no go list. It's on a list of reluctant, on a list of reserved, on a list called uneasy. So it's not that we won't ever talk about money. We are very reserved, we are reluctant, and I think it comes down to three things. Fear of being judged, kind of embarrassment issues. In some cases, fear of being taken advantage of. And I'm going to add shame there.
It's not just embarrassment. There's an element of shame. I'm a chartered accountant and I went out and spent that money on a credit card. I should know better. I'm a CA. We're all human. Now, we will in the right circumstances come off that reservation list, come off that list of reluctance, but only if we think it's safe. And if I think I'm going to get Wally, what's the matter with you? Not likely I'm going to have that conversation. It can also be a sign of larger issues.
Mismanagement of money and a reluctance, the secrecy around money could be indicative of a deep rooted problem, perhaps gambling. Extravagance that I don't want to explain. I like Italian blue silk suits and I like them so much and I'm not going to explain that to anybody. I have that right to those suits. So there's a myriad of reasons. The one that worries me the most is, is it indicative of some very destructive behavior like gambling or perhaps drug use? Something of that ilk.
Because the others we can work our way through. Those take a lot of sophisticated, professional help. So there's really two different groups there. Now, that said, I am a firm believer in if we're sitting down to do a budget, we agree that we each get-- and I'm just going to pick a number off the wall here-- $200 a month, no questions asked, no explanations expected. I'm a big fan of that. And I can save up my 200's for 12 months and buy myself a nice suit or whatever.
So accountability has a limit. I think there should be this we'll call it bad money, if you will, or whatever we agree on. And I think that's important. And equally important is no accounting expected, no questions asked. That's your money.
I think a lot of couples who have very healthy relationships have that little space for personal freedom inside their sort of common goals as a couple.
Absolutely. It's what I call elbow room. Everybody needs a little financial elbow room, right?
Right. I do think when you talk about the two different areas of what difficulties or secrecy around money can cause, I can imagine how that first group, the shame, the guilt, et cetera, really the steps that you were talking about earlier are really the tools we need to get past that about listening without judgment, about finding that common ground to start with, moving from our life as individuals to our life as a couple.
And it takes time to build trust. I mean, we all know the old adage, trust builds slowly and a single withdrawal can empty the bank account. I think there's another aspect to trust and it's particularly among young couples. They're still finding their way in their relationship. And so we should always be forthcoming with our partner. But a real discipline around forthcoming is really important in the early days for the very reasons that our grandmothers have always told us.
Trust built slowly in a single withdrawal can flatten the account. That's what makes early in a committed relationship. It's important not to abuse trust, to give it, and engender it, engender trust.
So when do you think is an appropriate time to start talking about money in a relationship and where to start recognizing that, yes, in general from the time of commitment is a good time, but not everybody started there. So what does it look like to seize that good opportunity?
Let me give you a couple of benchmarks. I don't know that I have a perfect answer. So let me give you a couple of benchmarks. Waiter, two red wine. Doretta, what's the balance in your checking account? Not a good start.
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Not a good start. I think one tends to drift in and out of those things. I can pick a fairly finite window. In fact, Doretta, I suspect if I posed that question, we're not going on a second date. When a couple decides they're going to live together, right in front of that road, I think the money conversations start to take on real substance. Because now we've got to figure out things like how are we sharing expenses? Simple things like how is cash flow going to work?
So for example, do we each have our paychecks deposited in our own account with an automatic transfer to a joint account that sees that the rent and the mortgage and the utilities and the car are paid? Or do we both put our paychecks into the same account with an automatic withdrawal to each of our own savings accounts? I mean, those are two quite different things. One of the things that young couples in the late 20's even towards 40 have adopted is Mark's going to pay the car and the utilities.
Michelle sees that the mortgage gets paid. There's some I'll pay these, you pay those. Or maybe Michelle pays the mortgage and I have an automatic transfer to her account for my share of the mortgage. So you've got to decide how you're sharing expenses and how the cash flow works. And there's a myriad of solutions. And they each have quite different implications.
It's very different scenario to have each partner deposit their paychecks to their own account and then have automatic transfers to a common account. That's a lot different than what many boomers did, which was both paychecks went into the same account and then we sorted it out. It's the how we share, but how do we execute that sharing conversation. And I would say when we're getting ready to move in, that's sort of when the conversation really starts to take shape and substance.
While the book was written for young couples who are just starting a committed relationship, we have learned that folks who've been in committed relationships for extended periods have used the principles in the early part of the book to get on the same page is the phrase I often hear. I would add one other thing. It was important to me in writing the book that I not write to the reader. It was important that the book be in a conversation with a young couple.
And as a result, the platform for the book, eight conversations, became a metaphor for the message. That was very important to me. And one of the things that I hope people find useful is at the end of each chapter, there's a subsection called "Now It's Your Turn" with suggestions of things that folks might consider, adopt, or adapt as appropriate to them. And I say it in that order because there's no one solution that suits all folks here.
The best information you can have is an array of helpful information and then choose what is not only works but I would say workable for you. What works for me might not work for Doretta or Mark or Michelle. One of the goals is to inform yourself of alternatives or choices and then by understanding your own attitudes, beliefs, and values choose the things that you know are going to work for you.
And I think one of the things that your book does such a good job of pointing out is that there is no right way that's universally applicable. It's about negotiating the way that's right for that particular couple.
Yeah. And what might work for I and my partner just is not going to work for Doretta and her partner or Mark and Michelle. You've got to find your own way. That's why candor and trust become so important.
And I think there's a lot of advice that you've shared about negotiating that way, about bringing that to those conversations, honesty, lack of judgment, in terms of working out what is right for you as a couple.
I'm always reluctant to use the word negotiate in a context like this. And the reason I'm reluctant is what the word negotiate conjures up. I find it either conjures up the elbows out conduct of bankers and lawyers so vividly depicted in these financial movies, which people see as bad behavior, or conjures up Madeleine Albright or Colin Powell striding the world stage. Well, that's not what I do. So I'm always reluctant to use the word negotiate.
And when I do, I put the word principled in front of it. I would say two things around negotiating. There are hurdles. Sometimes we're reluctant to ask for what we really need in a money negotiation. Because to do so seems self-centered or self-absorbed. And you will find particularly in early relationships, early in relationships, there are one or both partners in a couple are reluctant to ask for what they really need because of this fear of seeming self-centric or self-absorbed.
There are other examples of reluctances. One of the most fascinating junctures for young people in terms of discovering themselves is they sit down to talk about money and they have this sort of back and forth for a while. If you and I were watching on tape, we would notice a dramatic turn. All of a sudden, one member of the couple acquiesces and accepts what's offered without using that moment, that moment, to explore alternatives or interests. And I always find that really interesting.
So I say to my partner, I need to go on vacation to, I'll just pick a Caribbean island, Anguilla. And my partner will acquiesce even though she might be uncomfortable about the amount of money or the destination. Destination is hard to argue with. Anguilla has some beautiful beaches and we're Canadians in the dead of winter. But she's reluctant to say, well, can we explore that for a minute? You need a holiday. I need a holiday. But does it need to be there?
Could it be somewhere else which might be less expensive? Maybe we could go for a shorter time. Maybe we could have different accommodation. What trade off will we make so we could afford that? And so often what you get, particularly early in a relationship, is this tacit acceptance of a stated need without seizing that moment to say, well, can we talk about that a bit? What is it you really need from a holiday? So negotiation has these critical moments, and there are hurdles.
And that's a real test of listening skills and the ability to ask good questions. Well, help me to understand. I love that question. I need to go to Anguilla. At that moment, partner should respond, help me to understand that.
And I think that the examples that you gave or the steps that you gave for those healthy conversations can really guide you through that exploration. So that you're exploring one another's responses in a really authentic way rather than challenging them. It's like an exploration to try to get to common ground.
Yeah. Help me to understand, as I said earlier, is a great question. Or just a simple, I hear you saying that x is important to you. Why is x important? And now by getting at the y, you've moved from a position I need to go on a holiday to a Caribbean island to exploring the interest that underlies that. I mean, it's maybe a bit strong to say that that was a stated position by the partner. I need to go on holiday in the Caribbean. Let's call that the position.
By asking the question help me to understand, you can look down through to the underlying interests. Because a stated position can only be solved one way. That position. If you explore interest, now you open alternatives.
And that is great advice for any couple. We've talked a lot about couples at early stages of their relationship. What about a couple who has had their own maybe less successful financial history together and are trying to recover from a previous financial mistake as a couple or of one of the people within the couple and are trying to recover and get back on a healthy ground? Do you have any guidelines for that couple?
One of the reasons people get in financial difficulty is they don't know where the money went. And it sort of overruns them. So at the risk of sounding simplistic, stop spending. Figure out where the money has gone and develop a plan to get that money or those accounts paid. And be proactive about it. If there's going to be a problem, better to call your creditor than have your creditor call you and say, explain the circumstances such as they are. And here's what we're trying to do.
Now, in some cases, you may actually have to have professional help to do that. And there's good professional help out there to be had. I should maybe back up one step. Doretta, I don't believe debt is inherently bad. Debt can actually be constructed. What's important about that is what's its purpose and what's the plan to get it paid back? So I don't want to leave the sense that I think debt is bad. Debt is bad if the purpose is not a good one.
I mean, debt to buy a home, that's a constructive thing. Debt to go on the holiday to the Caribbean that we were talking about earlier, not such a good idea. So what's the purpose? What's the plan to get it repaid? And I think the kind of person you describe missed the two P's of that purpose.
And again, those important steps that you outlined and having money conversations apply perhaps even more importantly here to help people get on track.
When I said stop spending, I actually meant it. It doesn't mean you can't order a pizza on Saturday night or order a good movie since we're not going into theaters regularly yet. It's not that you can't have a life of pizzas or movies. It's you've got to know where the money is going and that you can meet your commitments. It really does matter in today's world to meet your commitments. And not only that, it's the haunting of mismanaged affairs.
I had a chat many years ago with the adult daughter of a long time client who was having money trouble. And she came from a very well-to-do family. And it really worried her father. And he asked her if she would talk with me, because he'd already asked me and I said I would, but only if she thinks it's a good idea. She said something very interesting to me. She said when the credit card bill comes on a Friday night, I put it on the desk and pour a glass of red wine. I'll deal with it Monday.
And that's a really bad sign. And that's why her credit card bill was so big. That story actually has a good ending to it, but avoidance plays a huge problem in a continuation of ill advised financial affairs. It's a shame, but it's I just can't deal with it.
A really serious red flag that it's time to ask for help.
Yeah. DORETTA THOMPSON: One of the things that we've been through such, and are still in the midst of such, a challenging time with COVID-19, and it's had a lot of effects on a lot of aspects of our lives, including our relationships. I'm wondering if you have any advice about having these difficult conversations during these times about finances. I don't think the principles are different. I think there's a greater urgency to have the conversations.
And there may be slightly different in the sense that options are narrower because of the times. I would say two things. There's a greater urgency to get on these issues and have those conversations. And that urgency can create stress that needs to be managed by the very things we've been talking about. Options may be narrower. There may be fewer. And that in addition creates stress.
So the very principles we've been talking about in terms of how to have conversations become of elevated importance. And once again, it may be for some that professional financial help is warranted. DORETTA THOMPSON: Looking back, I'm wondering, is there a financial lesson that you've learned personally that you wish you'd learned at a younger age? Personally, I'm reluctant to take on debt. And I think part of that is my upbringing. That was not something that my family took a lot of.
And that's a good thing to be reluctant to take on debt. I'm very mindful of the two P's I mentioned earlier, purpose and plan. In today's world, debtors have made out pretty well in terms of the cost of debt. We'll see where that ends up. I guess the lesson for me is I was maybe very reluctant, too reluctant, to incur debt, As I say, this goes back to what we talked about earlier. That's a transmission of a family value.
Right. Wally, thank you so much for taking the time to talk to us today.
It was my pleasure, Doretta. I enjoyed it.
You've been listening to Mastering Money from Chartered Professional Accountants of Canada. You can click to all the resources mentioned in this episode in the description for this podcast. In your podcast app. Please rate and review us. And if you'd like to get in touch, our email is financialliteracy@cpacanada.ca. Please note, the views expressed by our guests are theirs alone and not necessarily the views of CPA Canada. This is a recorded podcast.
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