How Couples Can Invest Together
This article was originally published on this site
Investing is an emotional seesaw. It can be the best of times, and the worst of times. Full of wisdom and full of folly, the epoch of belief and the epoch of incredulity. In short, investing is enough to make any of us crave a Xanax. And when you pair the tumults of investing with the potential contentions of marriage, the emotional tension only rises.
But investing is also a necessary part of marriage, as important to obtaining your financial goals as agreeing if the toilet seat should be left up or down is to preventing midnight mishaps. So how can couples invest together without letting the emotional turmoil strain their marriage?
How to invest together:
- Start with a conversation about your investment goals.
- Define success for each goal.
- Build an investment strategy for each goal.
- Use education and a neutral third party to handle disagreement.
We need to talk about investing. As with most relationship decisions, communication is essential to successfully investing together. In fact, “open and honest communication (about money) may be the key to happiness,” says Jason Thacker, head of U.S. deposits and consumer payments at TD Bank. According to TD’s 2018 Love and Money survey, 80 percent of couples who characterized their relationships as “extremely” or “very happy” talk about money at least weekly, he says.
“Investing should be a joint venture with both spouses feeling like they have an equal say,” says Michael Landsberg, member of the American Institute of CPAs’ Personal Financial Planning Executive Committee. “There are synergies to be had when combining forces so take advantage of those potential benefits.”
Start by discussing your goals. “People invest to accomplish outcomes,” says Michael Farrell, managing director of SEI Private Wealth Management in Oaks, Pennsylvania. Approaching the investing conversation through the avenue of what you hope to accomplish with your investments puts both couples on equal footing because everybody, from the most investment savvy person to the least, has aspirations.
What do you hope to accomplish with our investments? And when do you hope to achieve it by?
Define what success looks like. This leads to the next step in how to invest together: defining what success looks like for each of your goals. If your goal is providing for your children’s education, success may be having a fixed dollar amount in their college savings account by their 18th birthday. If your goal is to maintain your lifestyle in retirement, it may be a certain level of income from your investments.
This stage is about defining your desired outcome in more granular terms so you can build an investment strategy to get you there, Farrell says. Taking the time to agree on a successful outcome can de-stress investing for couples.
How to invest together. Thus far it’s probably been pretty smooth sailing for you and your significant other. Goal setting is often the fun and easy part of financial planning. Putting an investment plan into place to reach those goals, on the other hand, can get a little dicey.
No two investors are alike. Chances are you and your spouse have different ideas about how to invest together. Alas, agreement is key. “Couples who require all investment decisions be approved by both spouses tend to have more success,” Landsberg says. When you agree on how to invest together, you’re more likely to stick to your investments over the long-term. You’re also more likely to avoid marital spats over investment returns.
“Building a common foundation on the mix of stocks, bonds and other investments you’re comfortable with as a couple can help you avoid those ‘I told you so’ moments when fluctuations come along,” says Neal Stern, CPA member of the American Institute of CPAs’ National CPA Financial Literacy Commission.
When investing conversations become challenging, use your agreed-upon goals as guideposts, says Mark Astrinos, CPA financial planner member of the American Institute of CPAs’ PFS Credential Committee. “Revisit your life goals and values to remember why you’re embarking on this financial journey to begin with.”
For example, if one spouse is risk seeking and the other risk averse, exploring how each partner’s views will contribute or detract from the shared vision can help navigate contentious waters, Astrinos says.
If risk aversion is holding one spouse back, a little education can go a long way. Without the compound growth of investments, you may not be able to reach your financial goals. So the question is: “Do you have a greater fear of not achieving your goal, or of what it takes to get there?” Farrell asks.
Making sure you have access to short-term funds can also alleviate some of the anxiety around tying other money up in long-term investments. “People need to solve for self before they can solve for family or community,” Farrell says. When couples know their personal needs are taken care of, they can “be more open to how to resolve the differences they have in those other categories.”
Couples should have individual and joint investment accounts – retirement accounts must be individual – but make sure you “maintain a level of transparency across the board,” says Ken Thompson, head of Trust & Investments for TD Wealth.
Find a neutral third party. When fear and disagreement rear their heads, it can help to seek a neutral third party, says Michael Lynch, vice president of strategic markets for Hartford Funds. Financial advisors can help you find the middle ground.
Or, if the better ground isn’t in the middle, a financial advisor, like a doctor, will tell you what you need to hear, even if it’s not what you want to hear, he says.
“Advisors play an important role in facilitating tough conversations,” Thompson says. They can be the mediator for your investment differences so investing together doesn’t have to come at the expense of a happy marriage.
