Five Essential Money Conversations You Need to Have
“Money talks.” We’ve all heard this age-old expression. Why, then, are we so hesitant – even afraid – to have honest conversations about money with ourselves and those who matter most to us?
More than 30% of Americans consider salary, savings and debt to be taboo topics, according to a survey by Capital Group, and 61% of women would rather discuss their own death than talk about money, according to research by Merrill Lynch.
Is avoiding the topic easier than facing your own money flaws? Of course! Will procrastination allow you to live the life you dream about? Probably not. To help you get started, KeyBank suggests five essential conversations to have about money.
1. Talk to Yourself
It’s time to have a money conversation with the most interesting person you know – you. Your honest answers may help you determine a plan to achieve the life you want to live. Write down your personal goals relating to education, marriage (or not), children (or not), travel, charitable giving and hobbies that fulfill you. Here are questions to get you started:
What are my lifestyle priorities long-term?
How much money do I need to make these a reality?
How much debt do I really have? What is my plan to pay it off?
If you have a wish list or bucket list, then can you turn those desires into goals and outline steps to reach them?
Your answers should make the following money conversations that much easier.
2. Talk to Your Friends
You’ve thought through your personal goals and possible ways to make them a reality. Now, having money conversations with friends can help you identify and solve problems. Here are helpful things to talk about with friends:
What tips can we share for saving money, investing or spending?
What tools do we use to keep track of finances? What are our favorite books or apps? Which financial gurus do we follow?
How can we support each other in changing or improving money habits?
Can we create an accountability plan or group and check in regularly to share goals and support each other?
3. Talk to Your Significant Other
Wanting to share a life with someone doesn’t mean you are money-compatible. If fact, there is a good chance your ideas about money – and your tolerance for risk – may vary greatly. A Ramsey Solutions study of 1,000 adults in the United States found the following results:
Forty-one percent of couples with consumer debt say they argue about money and it’s what they argue about the most. Conversely, only 25% of couples who are debt-free say they argue about money.
The larger the couple’s debt, the more likely they are to say money is one of the top issues they argue about. Almost half (48%) of couples with $50,000 or more in consumer debt say money is a top reason for arguments.
One-third of people who say they argued with their spouse about money say they hid a purchase because they knew their partner would not approve.
Ready to tackle this conversation about money? You and your partner need to be transparent and honest. To get started, here are a few questions to ask each other:
How comfortable are you in being open with me about money?
What are your top three financial goals?
What do you like about how I manage money? What don’t you like?
What about money keeps you awake at night?
How can we handle disagreements about money constructively?
4. Talk to Your Parents
A money conversation with your parents is not necessarily about you – it’s about their goals for retirement, their care and the role they want (or will allow) you to play as they age. As with all other money conversations, the more you know, the smoother the plan will be going forward. Here are some topics to discuss:
What are your parents’ retirement goals?
Do your parents have enough money to support this plan? If not, are there other family resources that can support their plan?
Do your parents have life insurance or long-term-care insurance?
What are their desired care options as they age? Do they want/need to turn over their power of attorney to you or one of your siblings?
Lastly, and possibly most difficult, how will their final wishes and funerals be paid for?
Agreement among family members about the topics listed here will help ensure smooth sailing into retirement and beyond for your parents, and you.
5. Talk to a Professional
A professional may be the first person you want to go to with your money concerns. They’re well practiced in helping others establish a vision and goals for their money, in addition to putting a plan in place to achieve them.
Professionals can also take the guesswork out of interest rates, investments, loans, debt consolidation and more. They can help you navigate life insurance, long-term care, saving for college, wills and taxes.
If your dreams include starting a business, owning a second home or paying off your current home, a professional consultation is highly recommended.
Money Talks Pay Off
Money conversations can be awkward. However, having these conversations with yourself and others can help you identify problems and solutions that give you a greater sense of fulfillment and ease throughout your life.
For help getting started, visit a Key banker today.