Shhh…We’re Talking About Money

According to a recent survey by Lexington Law, most people would rather talk politics or religion (before money) around the dinner table. Young adults are more open to discussing money matters than their parents or grandparents. In fact, nearly a third of 18-24-year-olds would even be willing to ask a friend how much they make. Men are more comfortable talking about salaries than women, but only slightly so (53% vs. 47%). Perhaps, most surprising is that 43% of us don’t even know how much our spouse earns.

 

While talking about compensation may be an uncomfortable topic for most, it can be beneficial to step outside your comfort zone, especially for women, who tend to earn less than their male peers. Learning how to talk about and negotiate pay with your manager (or in an interview) is a valuable skill and is worth practicing. There are many online resources on this subject, but the best resource is probably your mentor. And if you don’t have an industry mentor, you need to find one.

 

Another person you might want to share more financial information with is your spouse (see above). If you don’t know how much your spouse earns (and vice versa), you’re probably not spending enough time talking about and planning for your future. Most of us are probably aware that money is a leading cause of stress in relationships, but avoiding the issue is not the answer. One way to help keep financial conversations professional and productive is to schedule them on the calendar. A good financial advisor will be proactive in scheduling regular meetings and raising questions—which can take the pressure off both spouses and lead to better outcomes.

 

At some point, it will be important to talk to your parents about their financial situation.  Or, if you are a wise and a progressive parent (hint, hint), you will invite your adult children into a conversation about your personal finances and how you see the future playing out. You don’t have to share the nitty-gritty with them, but just letting them know that you have a plan and a team of professionals you trust—this can provide a lot of comfort to your children. If you have charitable giving goals, including your children in those conversations may help to encourage and educate the next generation of philanthropists.

 

The repercussions of not talking about our finances with those we love can be significant, with negative consequences to health, wealth and happiness. In a 2009 study, researchers found that students from households where finances were not discussed frequently, had more problems with credit card debt and impulse spending then students whose parents had been more open with them about money. Simply asking friends and family about their personal finance strategies and experiences can lead to valuable insights. Another proven method of increasing financial discipline is to enlist the help of an accountability partner. This can be a family member, friend, or professional advisor. The simple act of creating goals, writing them down, and then sharing them with a trusted confidant has been shown to increase the probability of achieving said goals by a factor of 3x-4x.

 

Once you have successfully set a meeting with your spouse/child/parent, it might be helpful to write down a list of starter questions to get the conversation going down the right path. Here are just a few:

  1. What is the best piece of financial advice you ever received?
  2. What are your long-term financial goals? What is important to you about money?
  3. How do you measure success in life? How do you measure financial success?
  4. What is one question about money/finances/investments that you have always wanted to know?
  5. What percent of your income do you spend on housing? How did you choose that amount?
  6. How do you deal with large, unexpected expenses?
  7. How do you save for retirement? How do you know how much to save?
  8. How do you decide how much to give to charity? What is the best way to give?
  9. Have you ever successfully negotiated a pay raise? What was your approach?
  10. What is one thing you wish your parents had done differently with respect to their finances?