The Couple That Invests Together...
on Monday, June 7, 2021
Making investment decisions is challenging for anyone. However, when you're part of a couple, the challenge is even greater. Though you and your partner may share the same dreams and goals for your life, you may not share the same investment approach to meeting them. For example, one of you may be an aggressive investor while the other may prefer a more conservative approach. One of you may be actively involved in managing finances, while the other may prefer not to be involved.
The challenge lies in finding a way to compromise. Here are some strategies that could help:
- Talk about it. Open communication is key to the health and long-term success of a relationship. It's also helpful when it comes to your joint finances. Carve out some quiet time to talk about your individual financial goals and dreams for the future.
- Find a middle ground. It's likely that you and your spouse will share a lot of the same goals. There may, however, be differences in how you approach them. For example, one of you may dream about early retirement, while the other may want to continue working for as long as they can. Try to find a middle ground.
- Prioritize and budget for your goals. Once you have a list of goals, determine which are the most important to you both. Then, think about how much you will need to achieve those goals. If you each want to save for college for a child, estimate tuition costs in the future. If you're planning for retirement, you'll have to really think about what kind of retirement you each want and make an estimate of what you need.
- Understand your current investments. It's not uncommon for one partner to take a more active role in financial management. While that may work well for your relationship, it's still important that the financially passive partner have a basic understanding of your finances, accounts, holdings, insurance policies, providers, and contact information. This will ease the burden if something were to happen to the financial manager.
- Understand each other's risk tolerance. Though one partner may be more actively involved in money management, you should be aware of the other's feelings about risk — and work to compromise on how investment decisions are made. If, for example, you're an aggressive investor and your partner is more conservative, you need to work out your differences before investing. You could compromise by investing in mutual funds or exchange-traded funds or by investing smaller amounts.
- Consult with a neutral third-party. In some circumstances, it may benefit you and your partner to sit down with a neutral financial professional who can help you make decisions to manage your individual preferences.
By taking these steps and making your finances a priority, you and your partner can get to where you want to be...together.