This Valentine’s Day, choose the gift of financial engagement
On Valentine’s Day, talking about household finances may seem like a pretty poor accompaniment to roses and an intimate dinner. But it could be exactly the kind of (admittedly non-romantic) gift that strengthens the bond between you and your partner longer-term.
Working to build mutual financial awareness and alignment helps ease the fear, finger-pointing and misunderstanding that can sometimes swirl around money management. It can be one of the keys to long-term relationship success—and it’s a process that shouldn’t be delayed.
Focus on your engagement, financially
It’s not uncommon for one partner to be more financially-minded than the other. And looking after the finances is like any other household task that couples may choose to assign to one partner to manage. That’s understandable, but it’s also no excuse for complete disengagement.
“There’s a huge difference between delegation and abdication,” says Vincent Didkovsky, Newport’s Director of Wealth Management. “I’m a proponent of financial understanding; both partners should understand the basics of their household budgeting, know what they’re earning compared to what they’re spending and have at least a rough understanding of their net worth.”
A lack of financial engagement can create significant knowledge gaps and situations where one spouse is spending beyond their means, or even underestimates their wealth and disposable income.
“There are so many instances where wealthy people run out of money, although they’re surrounded by financial and wealth management professionals,” Didkovsky points out. “You can’t completely outsource the task of managing your wealth, and the same goes to outsourcing that responsibility to your spouse.”
Build common goals
Countless studies have shown that money is one of the greatest sources of relationship tension. It’s the number one topic couples argue about and money conflicts are frequently cited as the cause for divorce.
The key to avoiding discord is to work with your partner to build alignment. A good place to start is to understand your mutual goals and ensure your values are aligned around money. With Family Day right around the corner, now could also be a perfect opportunity to bring other loved ones into the conversation to help ensure values alignment across generations.
“Rallying the family around financial goals can be very positive,” Didkovsky says. “At the very least, it’s important that couples set financial goals they can achieve together.”
Those targets could include creating a lasting philanthropic legacy through a series of charitable donations, growing a business together, sharing wealth with family members or building a dream destination home.
Having a long-term financial plan also helps. If you haven’t prepared or updated yours recently, maybe now is the time to revisit this—especially if retirement is on the horizon.
Book regular financial check-ins
High income-earning entrepreneurs, executives and wealthy retirees are typically busy people. They work and play hard, spend time with their families and prefer to devote the rest of their days to favoured pursuits.
So, when it comes to fostering greater financial awareness, it can be a challenge to slot it into an already packed schedule.
Newport Managing Director and Portfolio Manager Stephen Hafner urges his clients to book monthly financial check-ins with each other to review the family finances—from account balances to portfolio statements—and to discuss progress on any wealth planning issues that may be underway. That might include renewing wills, refining the mission for their charitable foundation, or getting an updated valuation on their art collection for insurance purposes.
Of course, not all conversations have to involve a formal sit-down with spreadsheets. Sometimes free-flowing discussions are best had on the way to the cottage, while having dinner or enjoying a walk on a Saturday morning. Have fun and use the opportunity to dream a little.
“Achieving financial alignment and reaching goals together can be very unifying for the relationship,” observes Didkovsky.
In some cases, your portfolio manager or another trusted advisor such as an accountant will be part of the conversation. “At least one half of the couple should speak to their portfolio manager on a regular basis, but both should meet together with their advisor at least once a year,” Hafner recommends.
Health scares, or worse, the death of one partner, will often ignite panic over the family finances if one partner is in the dark about fundamental details—even though the focus should be on grieving or caring for their loved one.
This can be eased by having an up-to-date and complete financial dashboard that each person has access to. Have your passwords, banking and investment information, estate documents, contact details for your wealth advisor/accountant/lawyer, the location of your family assets—and a plan outlining which advisor to call first—in a readily-available format for quick reference. Today, there are secure digital vaults that allow you to store and share important documents.
In certain cases, Didkovsky has even recommended having a mock terminal tax return completed to highlight potential estate and tax-planning gaps that you can act on now. This may include everything from designating a power of attorney to finalizing wills and optimizing more tax-friendly structures such as family trusts—while helping you prepare for any future tax liabilities.
“It can be very difficult to pull that information together in a short period of time, which can lead to difficult decisions, errors or Canada Revenue Agency penalties,” says Didkovsky. “Going through the process saves a great deal of anxiety down the road.”
While you may not impress Cupid by breaking out the balance sheet this Valentine’s Day, making sure you and your partner are financially engaged (and secure) could be the most caring gift you can exchange.
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