Talking About the Tough Economy at Home

Suzanna de Baca -- Expert Business Source, 10/7/2008 6:06:00 AM

With many Americans worried about their investments, job security and the economy in general, financial stresses can take their toll at home. Are you and your spouse or partner talking openly about your financial situation?

In many relationships, one person takes the lead, managing the finances and investments. Regardless of whether that person is the major breadwinner, it can create an imbalance in the relationship simply because one person is more informed. In a difficult economic environment, it is important to have family meetings to compare notes on your actual financial condition and also to keep open the lines of communications about your feelings.

Everyone brings different financial histories and personalities to the table. In good times, life may be fine between a spender and a saver or between two people who have different attitudes about risk. But in tough or uncertain times, these differences can cause problems.  Talking about your finances candidly and honestly can be difficult, but it can help to get issues out in the open, look at alternatives in the event that times get worse, and to simply express your feelings, fears, hopes, and concerns. And if the economy gets better soon, you won’t have wasted your time – you’ll have reviewed your situation and your feelings.

Here are some simple tips to help you talk about the economy and your financial situation with your spouse or partner.

• Set a time to talk – Do not wait for a moment to appear out of nowhere. Life is busy but money issues are serious and deserve to be handled in a dedicated “meeting.” Rather than comparing notes while running errands, on cell phones during the day, or in bed (a real downer!) at night, set a time to talk. Find a quiet, private place. Maybe it is your kitchen table or a home office, but make room to spread out paperwork, statements or other information that you may want to review.  
• Review your goals – If you have not already talked about specific savings, educational or retirement goals, discuss them. When are you hoping to retire? What contributions will you make to your childrens’ or grandchildrens’ education? Are you hoping or planning to make charitable contributions now or in the future? Are you saving for a particular purchase, large or small? Review where you are in terms of these goals and if you find that the current economy has put you behind, discuss your alternatives. Should you adjust your budget? Change your goals? Adjust your expectations? If you can reach consensus now, it will be better than someone being disappointed later.
• Look at your savings, assets, and liabilities – Similarly, take stock of your financial reality. While losses on paper will likely come back eventually, your net worth may have taken a hit. Your home equity may have declined. If you have debt, that burden may have become heavier. Take a good look at where you are and ask yourself if you want to make changes or if you need to adjust in order to remain financially healthy and emotionally comfortable. Do you need and want to reduce your debt? Should you increase your contributions to retirement or taxable savings in order to feel more at ease?
• Do you have sufficient emergency savings? Many Americans are looking at the current economy and wondering what they’ll do if one person in their relationship is laid off or loses their job. From executives at lofty investment banks to hourly workers, this possibility can be devastating if you do not have enough emergency cash to tide you over. Liquidating investments right now to raise cash could be problematic since the market is at a low point. Most advisors recommend that individuals and families have at least six months of savings in cash readily available in case of emergencies. If you don’t have such a fund, consider trying to reduce expenses and sock away cash.
• Review the health of your investments – Examine your investment portfolios, including retirement plans (IRAs, 401(k)s, etc.), taxable securities accounts, real estate, or other holdings. Are these investments sound, even if they’ve declined? If you need to make adjustments because of investment quality, do so; otherwise, if both of you are comfortable, agree to stay the course with your investments.
• Respect each others’ attitudes - Each person has different feelings and attitudes about money. If you disagree, try to understand the other person’s perspective. Are there issues in their background that make them more conservative or risk averse; or by contrast, formative experiences that allow them to feel comfortable with risk or uncertainty? Whatever the reasons for your potentially differing attitudes, value the other person’s feelings and concerns. Discuss these things together. If you can reach common ground and respect each other’s different opinions, your relationship will be stronger and more able to withstand financial stresses.

Suzanna de Baca is president of Private Capital Solutions Group. Securities offered through Broker Dealer Financial Services Corp. Member FINRA & SIPC. Investment Advisor Representative of Investment Advisors Corp., A Registered Investment Advisor.  Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.