Dare to Change Life Coaching & Mentoring

Tag: spending

  • SAVE, SPEND, INVEST: 3 Guidelines for Making Financial Decisions as a Couple

    SAVE, SPEND, INVEST: 3 Guidelines for Making Financial Decisions as a Couple

    Whether you choose to invest on your own or decide to outsource your investments to financial professionals, I want to encourage you to make sure that you are both aware of where your money is invested, how well those investments are doing, and whether you’re on track with your retirement goals.  The Bottom Line:  Both partners need to be on the same page when it comes to family money. Making important financial decisions together improves the level of bond and trust in the relationship. 

    Last week we talked about sharing financial responsibilities as a couple -how to share the common expenses. Today I’ll continue this conversation and talk about making financial decisions as a couple!

    Managing money is NOT just about figuring out how to share the expenses.

    It’s also about making sure the responsibilities of managing money are equally distributed. It’s also about planning your savings and spending, and making investment decisions! So, managing money as a couple is much more than simply paying the bills, it’s also about making financial decisions together….

    Based on my clients’ successes and my own experience of making financial decisions in my own relationship, I want to share with you these THREE Guidelines for Making Financial Decisions as a Couple:

    GUIDELINE #1:  HAVE MONEY DATES TO DISCUSS YOUR FAMILY FINANCES

    It is very common in a committed relationship that one partner takes on a role of a money manager and the other partner just kinda knows what’s happening but…not really.  And I must admit that when one person does all the money tracking and makes all the decisions, it may seem simpler and, therefore, easier…on the surface. 

    WHY?

    Because being willfully ignorant about your family financial matters can backfire…and it often does. 

    Besides, not being intimately involved in making decisions that affect your family finances may lead to a sense of dis-empowerment and disconnect in the relationship.   

    Interestingly enough, making important financial decisions together improves the level of bond and trust in the relationship. 

    For that reason, I recommend to all my clients to have regular casual money dates. The main purpose of the money dates is to make sure that BOTH partners are on the same page when it comes to family money and that the person who is mainly in charge of paying the bills and managing family money is not the ONLY person who knows how much money there is, where it’s going and where it’s kept.

    I’m going to talk about specifics pertaining to money dates next week but for now just contemplate the idea of having the money dates with your partner routinely. 

     GUIDELINE #2: MAKE SAVING & SPENDING DECISIONS TOGETHER

    I believe that SAVING for the future is a super important aspect of managing family finances. Therefore, it’s a good idea to make your savings’ decisions together, based on your family’s long-term and short-term goals. 

    Once you decide how much you want to save and for what purpose, you can then make your spending decisions easier because you’re both motivated to achieve your financial goals.

    Your short-term financial goal could be to take a family vacation next year or to buy a house in a couple of years. And your long term goal could be to retire in 10 years and move to a sunny place by the water, or to travel the world. 

    Whatever your own short and long term goals might be, make sure your partner not only knows about these goals, but is also on board with them. 

    First of all, it’s more fun to have common goals with your partner. And also, when you’re both motivated to save toward the same goals, you will get there faster.

    When you discuss how much you are both going to contribute toward savings, don’t forget to take into account your individual contributions toward retirement accounts (e.g. 401(k) or IRA contributions), which could be automatically deducted from your paycheck (if you’re an employee) or you could set up to contribute automatically yourself (if you’re self-employed). 

    For example, if you are putting 4 percent into your 401(k) and your partner is putting only 2 percent, have a discussion about how you will both meet your retirement goals, and whether those contributions need to be adjusted.

    Once you commit to a savings’ level that you are both comfortable with, deposit that amount monthly into your joint savings account.

    GUIDELINE #3: MAKE INVESTING NON-NEGOTIABLE 

    Whether your partner wants to invest, or is skeptical about investing, or lacks knowledge about investing, it’s important to have a conversation about it and make investing some of your family money non-negotiable. 

    It’s very likely that one of you might want to be very aggressive in your investing while the other partner is content with keeping family money in a low-risk, low-interest savings account. 

    If that’s the case, consider taking the investment training together, so that you’ll be on the same page in terms of your investment knowledge. Being well educated about strategic investing will likely help align risk-tolerance dynamics between the two of you. 

    In addition, you may consider meeting an investment adviser who could  review your financial goals and available investment capital and come up with an investment strategy that would not duplicate your individual investing efforts and would make sense to both of you.

    Whether you choose to invest on your own or decide to outsource your investments to financial professionals, I want to encourage you to make sure that you are both aware of where your money is invested, how well those investments are doing, and whether you’re on track with your retirement goals. 

    The Bottom Line:  Both partners need to be on the same page when it comes to family money. Making important financial decisions together improves the level of bond and trust in the relationship. 

     

    If you want more resources on various financial topics, sign up for my youtube channel Millen Livis Channel Wealth 

    And for additional support, I invite you to join my Wealth Building for Powerful Women Facebook group.

    To your Health, Wealth, and Freedom!

     

  • Competing Financial Priorities: 3 Human Biases About Money

    Competing Financial Priorities: 3 Human Biases About Money

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    I recently saw the statistics that 60 % of baby boomers are more afraid of running out of money in their retirement than they are afraid of death. Millennials are buying cryptocurrencies, often using their credit cards, with hopes of become overnight millionaires.

    Over 70% of businesses fail within the first 5 years because of cash flow problems.

    From my personal experience and observations, awareness of your money habits, planning your financial future, and having financial discipline are the most critical factors for creating a comfortable retirement.

    As Robert Kiyosaki once said, “It’s not how much money you make that matters most, but how much money you keep. How hard it works for you and how many generations you keep it for.”

    Making a good living does not automatically put you in the “more than enough” or “affluent” category. Because it’s not just about how much you earn but also what you do with what you earn. Do I hear “Yes”?

    Now let’s go over different ways you can choose to manage your competing financial priorities.

    If you want to become financially independent, one of the most important skills you must acquire is managing your money intentionally, so that regardless of your current income, you become richer every month and every year.

    How do you accomplish this?

    By managing your competing financial priorities while saving and growing your money.

    When it comes to managing your financial priorities, it’s a good idea to be aware of the three human biases that may affect you financial choices and decisions.

    1. The Present Bias

    As a human being, you are wired to take care of immediate needs first, making sure your essential requirements for food, shelter and security are met. So it’s understandable that when current, short-term financial needs and goals compete for your attention, saving for the future gets neglected. For example, when you focus on car and home repairs, your kids’ day-care or private school, or a new heating/cooling system, your long-term savings for big purchases such as education, financial emergencies, or retirement go to the back burner.

    The famous Hierarchy of Human Needs by psychologist Abraham Maslow outlines the progression of human needs and human awareness as we ascend from meeting our immediate survival needs to the need to feel fulfilled and self-actualized.

    We like to say: “Live in the moment”, right?

    Right, but not when it comes to your money; with money you must be intentional.

    Most people have difficulty envisioning distant events. It’s easy to envision, associate with and express immediate financial needs. This is something that financial professionals refer to as “the present bias.” The “present bias” makes you handle competing financial goals by assigning your highest priority to immediate needs and nearest goals, and overlooking the long-term financial priorities.

    1. The Availability Bias

    The availability bias is another mental pitfall when you are very comfortable with your current available income and assume that you will always have it. So, why bother thinking about long term financial goals?

    While this bias pertains to all humans, it’s especially common among new entrepreneurs and famous sports figures, who often go through feast/famine experiences and some end-up in financial ruin. Many of the currently well-off folks treat their businesses or contracts as their piggy banks that are available to cover any and all desires.

    1. The Busy-bee Bias

    The busy-bee bias is very common among highly paid professionals who are so busy making money that they don’t make time to plan how they can grow it, let alone how they can make their money work for them!

    These people rely heavily on the easily available information and often don’t do their due diligence on the accuracy of the advice and integrity of the source from which they receive their financial advice. As the result, they put more value on the easily available solutions rather than more strategic ones and end up disappointed.

    The tendencies and biases I have mentioned often cause people to spend everything they are currently earning. They want to enjoy their money to the fullest while they can, or save and invest first for their family’s educational goals, rather than diversifying their savings across different financial priorities like planning their financial future, retirement, health-related needs, and creating financial independence.

    More often than not, goals like buying a new car or a house, financing private school or college tuition for your kids, become top priorities relative to retirement or financial independence goals. However, you don’t want to burden your kids by depending on their financial support when you get older, right?

    So, how can you manage competing financial priorities, the immediate and the upcoming ones? The solution may be as simple as asking yourself if the financial priorities you’re focusing on now are really the most important ones, given your overall goals in life, not only your immediate needs.

    Here are two simple questions you can ask yourself:

    1. What are my short and long term priorities in life?
    2. What are my core values that help me experience more joy and fulfillment in life?

    The answers to these questions will help you sort out your financial priorities.

    For example, one of my core values is FREEDOM. I can be content driving an older car, leading a modest lifestyle and wearing stylish but not necessarily designer clothes and shoes. However, I am willing to do whatever it takes to achieve financial independence so that I can have the Freedom of Choice in my life.

    Now, pause and write down answers to the two questions above.

    Share your experiences in the comments.  I would love to know how you manage your competing financial priorities.

    And here’s the recording of the mini-class on this topic

    To Your Health, Wealth, and Freedom!

    Millen