42 – The Building Materials of Financial Success in Marriage

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Episode Overview:

Continuing on from the last episode, Ken addresses the concept of Financial Literacy. The lack of literacy acts as an obstacle to financial-marital success; with literacy, you have the essential building materials for financial success. Ken offers some great insight on learning to live within your means and learning to save; Budgeting and how essential it is for your marriage. Debt and credit cards and “playing the game,” plus so much more. Finally, get Ken’s reading list that act as a great resource for attaining financial literacy. This episode is jam packed with valuable insights, be sure to tune in.

Transcriptions are auto-generated, please excuse grammar/spelling!

Happy day to you. This is Ken Kaufman and I am thrilled you’re here for episode number 42, “The building materials of financial success in marriage.” Now, I’m going to create this analogy around building a house or building a building, to follow up from the last episode where we talked about these four key challenges that keep us from succeeding in marriage with our money, and from achieving financial independence as a unified couple in marriage.

So, this analogy is really gonna take these four items and it’s gonna show how, by building this structure and layering the right things in, it will allow us to overcome these four challenges. And the first challenge, as you recall, was listed as lack of financial literacy. Just not understanding financial planning principles. We’re gonna take some time in this episode to dive into that, but really I see financial literacy and key financial principles as the building materials for this home that we’re gonna build.

The foundation of the home is having alignment between spouses, not being aligned is one of the four things that keep us from succeeding in marriage with money. Having a really clear blueprint of exactly what we’re going to construct. That is actually having a comprehensive financial plan that we work together with our spouse to create. We could have help from advisors or other professionals as well, but as spouses we are the primary sources of generating, creating this plan and the ideas and the goals and the vision behind the plan and this blueprint represents the comprehensive plan to build this building or to build our financial life if I were to make that comparison.

And then, finally, in the fourth challenge that we identified from the research that my son, Daniel, had done, was having…or there being a lack of commitment and emotional fortitude and grit to push through and do the hard things, stick to the plan, be patient because it’s a long play and it’s a long game that we’re in, and then iterate the plan when needed, just as life happens and as things change in life.

And certainly, those of us that have been married for a period of time, my wife and I have been married 21 years. It’ll be 22 years in June of this year. Just in marriage alone, the changes, and the perspectives, and the jobs, and the opportunities, and the losses on all levels, not just financially, but family members, and losses of dreams, or other things. There’s just so much in life, it’s so critical that we’re able to iterate. And I view…in building a house you have this foundation, you have the blueprint, you have the building materials, but the actual labor that goes into putting all this together and building it, that is this commitment, this emotional fortitude, the execution and the grit to push through and make it happen through all the challenges and then iterating all along the way.

So, again, the four challenges. We now are building a house with the four building blocks to overcome these hindrances or these things that keep us from succeeding with money in marriage. And I’ll start from the beginning again. The blueprint is the comprehensive financial plan. The foundation is having alignment between spouses on that plan and on the direction and the goals and the things that the spouses want to accomplish together. The financial literacy and key financial principles are the building materials to implement this plan and make it go and make it work. And think of it as even, in the financial world it’s things like insurance policies, and bank accounts, and investment accounts, and retirement accounts, and 401Ks, and budgeting software. There’s all these different building blocks that go with it, or building materials. And then the actual labor that comes in and reads the blueprint and puts all the materials together in a way that makes this beautiful home when it’s all said and done. That is this commitment, emotional fortitude or grit to stick to the plan, iterate when needed.

So, I wanna take just a few minutes here and focus on what we’re doing with the building materials or this concept of financial literacy. Now, the challenge that this brings up is, if you have one or two people coming together and getting married and trying to build a life together including a financial life, not having any literacy around key financial principles that will help you be successful with money is dangerous. As I thought about it, I thought about it, it would be as if you were asked to be the starting quarterback on a football team and you showed up for the first game and you hadn’t gone to any practices, you hadn’t read any playbooks, you hadn’t studied any film, you had no knowledge and no idea of how to play the game and how to execute on what was in front of you. That would be impossible to succeed at.

Or if you were going to go and perform a surgery and you didn’t go to medical school, and you didn’t know anything about surgery. Again, a big problem. Or you could insert any other analogy of someone who can perform something and be successful at it once they’ve gained the appropriate life experience, education and everything that goes with it. Now, I’m not trying to make anyone feel bad. If you don’t know a lot about financial matters and if you don’t feel like your financial literacy is high, I’m not trying to make you feel bad. In fact, this episode is to give you, hopefully, some material and some thoughts around how you can start to obtain that and start to go to work on it. If you’re still single, there’s lots of things you should be doing right now and you can be doing right now to improve your financial literacy. And if you’re already married, then there are things that you can do individually and as a couple to work together on improving your financial literacy. Now, I wanna touch base on what some of the main key principles are that comprise being financially literate. The very first one on the top of my list is learning to live within your means. Again, if you’re still single, then learning to do that while you’re single is gonna make it a lot easier when you get married. Or if you’re married, the two of you coming together and deciding how to live within your means or how to not spend more than you are bringing in.

Another key element here is learning to make the most of each dollar. Some people like to economize, and shop, and clip coupons, or they like to make things rather than buy them, or, anyways, there’s a whole long list of things to do here to stretch that dollar and to make the dollars that are coming in go as far as possible. Again, all with this concept of living within our means.

The next place where financial principles really kinda hit the ground and there’s a skillset here that you can learn that will help you become very financially literate and it is learning to manage a budget. Now, I have found that those who haven’t budgeted before, the biggest barrier to them doing this is that they actually don’t know where to start. And so they can’t get started and they can get no momentum. Well, this is a big deal. There is lots of tools, and I actually have some recommendations at the end of the podcast that will highlight places you can go to start to learn how to budget. There are budgeting templates that you can download off of the internet, there’s budgeting software, there are videos. In fact, Do You Need a Budget website is fantastic and they’ve got all kinds of great materials on how to budget, how to think about budgeting. It’s something that my wife and I use. We’ve been using now for close to a decade and it’s…the software helps us in our budgeting but I love that the company’s invested a great deal in creating really powerful content to help people learn how to budget.

Another reason why budgeting’s so critical is because it helps you take whatever your long term plan is and convert it into what are you gonna do with the dollars that you actually have today, and convert your actions. So what am I gonna do with my dollars today that are gonna help me to accomplish my long term plan? And in fact, I think I need to be really clear on this one thing. Budgeting is not a bad word. It gets a bad rap. This is not a bad word. This is not about somebody coming in and telling you what you can or can’t spend money on. If you replace the word budgeting with prioritizing, what you’re doing is you’re merely stating what is the most important to you and you make sure that those most important things are getting funded before other things that maybe don’t matter so much. And there’s lots of examples about this, but for example, if somebody wanted to be an Iron Man, to compete in that event, in that sport. Well, that sport’s expensive. You have to have a bike. You have to have great running shoes. And the bike needs to be in pretty decent condition because you’re gonna be riding a really long distance. You’re gonna need to do training, access to a pool to train. There’s all these things you do. Swim, bike, and run.

Well, if you don’t have enough money to do that, and as you look at where you’ve spent your money, it’s all gone to places that have nothing to do with preparing for a triathlon and things that when you stop and think about it you don’t care about that much. That’s what I’m talking about budgeting and what it can do and the power of it. It helps you get your money put toward the things that you care about the most and no longer can money be an excuse for you not achieving that next goal, or vision, or whatever it is you wanna do with your life and however you wanna spend your money. There’s a great power that comes from the clarity of budgeting, and tracking your expenses, and seeing where your money goes, and all of a sudden that helps you, again, start to figure out how to economize and how to prioritize and get your money going toward what matters the most.

Also, learning how to budget, it just creates a lot of value I guess. I’ll stop there, I won’t go too much further into that. According to Miriam Caldwell, this is an article from The Balance entitled “Newlywed financial mistakes.” She said, “It does not matter how much you make if you do not have a plan that helps you with spending it.” That’s the budgeting and prioritizing concept. If you are not willing to sit down and create a budget together, you will not be successful financially. I like how clear she is and how direct. If you can’t sit down and create that budget together as spouses, you’re really gonna struggle and she says, “You’re just not gonna be successful.”

Now, after budgeting, the next place to really get your arms around from financial literacy is, to save money. This is so simple. Just don’t spend everything that comes in and start to save money and put it aside. This can include building an emergency fund, it can include saving for other short term things, long term things. It’s just getting in the habit of learning to spend less than you make so that you can start to save.

Again, it helps you prepare for emergencies, or what we…what you could term as the unanticipated budget busters. Without a budget, you’re likely not gonna have an emergency fund, you’re not gonna be focused on saving and figuring out how much you can save each month and it will blow that budget all the way to smithereens.

So, learning to save money is a very important habit, very important skill. If you’re single, I implore you to start this and start learning the habit of this. If you are married, I also strongly encourage you to talk to your spouse and get alignment around setting money aside as savings.

And then you can start to figure out over time what you’re saving it for if you don’t know exactly what it is. Just get this habit of not spending all the money that comes in.

The next key financial principle is, it’s basically this concept of, avoid debt as much as possible. So use it only when necessary and pay it off as quick as you can if you have to use it. Otherwise, just avoid it. And the key principle here is interest either works for you or against you. It never sleeps, and it will make you very wealthy or you will become a slave to it. The more you learn about debt and how it works, the more you’ll start to abhor the use of debt other than in very specific circumstances.

Also, connected to that is the concept of credit cards. You have to master…there’s really two extremes when it comes to credit cards. You either need to master the credit card game or you need to avoid it completely. And by mastering it, it means, you need to know when your statement cycle begins and when it ends, when your payment’s due. You need to be very carefully setting money aside as you’re spending on your credit card so that that money is there waiting when the credit card bill comes due or when you wanna make a payment on the credit card so that you’re not living off of what’s called the credit card float. The credit cards have…the issuers are masterful at masking what’s really going on and helping you feel like you’re ahead financially but you’re actually living on this credit card float which means you’re actually living on debt. Even if you’ve never “paid any interest” or “never had a late payment penalty.” Those things are irrelevant when it comes to winning at the credit card game. Again, either learn it, understand it and master that game or avoid it completely.

And then some people go one step further where they’re earning travel points, earning cash back, and they’ve got an elaborate plan, and for those of you that wanna do that, go for it. It’s not where I wanna spend my time, but some people really get into it and they’ve been able to add tremendous value to their life. It’s a game. And the issuers will beat you unless you know the game and you know how to play the game.

So, again, careful with the credit card component of debt. Next is you need to learn how to invest and where to invest, and all of the basic fundamentals around investing. Again, a few of the books that I recommend at the end is gonna help you start to get some knowledge and some literacy around this. And I’m not suggesting you become an expert. Most people will hire experts to help them figure out how to invest their money and there’s nothing wrong with that. The key is to understand the core building blocks of what goes into investing and how it works so that you can become an educated investor. Even if you, again, are hiring somebody, a professional to help you go down that road. And I did a podcast episode. It was I think a few months ago now where I talk about how to find a financial advisor and what are the key attributes of finding and hiring a financial advisor.

Two final things here. Minimize or work on a tax plan. Understand taxes and make sure that what you are doing is going to minimize how much tax you owe. I’m not saying try to illegally avoid taxes, but, there are strategies that can be deployed like how you put money away for retirement, how you manage, say, a side hustle or some type of self-employment business, how you do these types of things to minimize the taxes owed. So, understanding some of the basics around tax is also really important to gaining financial literacy.

And then the last piece here is understanding insurance and how it can help protect you, your financial plan, your savings, your investments, and all of your assets as you’re working to build net worth. And ultimately, these are all key elements of teaching us so that we can learn how to build net worth and how we can be successful in that regard.

Now, a couple of great books that will help you increase your financial literacy. My favorite, and I wouldn’t say that it’s the best or the most perfect. It’s just a favorite of mine. I read it when I was young. I loved it. My kids all have to read it before they turn eight, before they get a debit card, before they get a bank account. And, anyways, I’ve got a whole bunch of content we’ll get into on kids and how to teach them to use money, but this is a staple in our household and something that’s talked about regularly. It’s called “The Richest Man in Babylon” and it is by George Clason. The next book that I listened to on Audible about six months ago. It’s called “The Simple Path to Wealth” by JL Collins. Really good content in there. And I like how he simplified some of the concepts around investing and helping you understand what you’re investing in when you buy mutual funds and those kinds of things, and he’s got some really great advice. In fact, the whole premise was, he wrote this book as a way to help his daughter win financially and win with money and I guess it was when she was younger or going away to college and, anyways, it’s a fun little story that motivated him to write the book and he just did a great job of creating some content there.

The next one is a book called “You Need a Budget” by Jesse Mecham. He’s the founder, CEO of the You Need A Budget Company that publishes the software called You Need a Budget. I know, real original, right? They’re using the same name all the way through the system there. But this book’s got some great tools and some great things to learn to help you increase your financial literacy. I will teach you to be rith, I’m sorry, “I Will Teach You To Be Rich” by Ramit Sethi. This is an interesting guy. He’s got some interesting strategies. Again, with all these books, I’d say each one of them, there’s a few things that I’ll disagree with or I don’t like as much as others, but generally speaking, it’s good content. It gets you thinking and gets you to understand how the world of finance works and just to increase that literacy.

And then, two last books that are focused on investing. The first one is “The First Time Investor” by Paul Merriman. I’m a big fan of his. That book is free. You can go to his website at paulmerriman.com and download that book and go to town. And then the last book is by John Bogle. He’s the founder of Vanguard Investments. I’m a big fan of Vanguard, and it’s called “The Little Book of Common Sense Investing.” So there it is. We’ve talked about the materials that go into building a house or that go into building a successful marriage, and it is this concept of financial literacy, understanding the key financial principles and rules that will help us be successful with money. And the more we can understand those things before we get married, the more prepared we’ll be to merge finances and succeed in marriage. And if we’re married and say we don’t feel like we’ve got great financial literacy. It’s okay. You can always pick up a book. You and your spouse can get together and it actually can be a very unifying and engaging event. You could go to a Financial Peace University that Dave Ramsey puts on. I know the Church of Jesus Christ of Latter Day Saints has a self-reliance course around personal finance. My wife and I took that course together just a few years ago and we found great value in it and learned some things. And I work in finance all day long. It’s what I do when I wake up and all the way until I go to bed, it feels like.

And so it’s fun to do these things and to learn some of these principles and work on these things as a couple. So I’d highly encourage that.

Again, we’re gonna go through the other challenges to being successful with money in marriage that are within the framework or this context of building a house. The foundation, which is alignment between spouses, the blueprint, which is the comprehensive financial plan. We just talked about the materials, which are the financial principles and the financial literacy of how to succeed with money. And then the final one we’ll talk about the labor that goes into it, which is the commitment you and your spouse have and the emotional fortitude to stick to the plan and the grit to push through and make it happen.

So, there it is. We’ve covered number one of four. So the next three episodes will cover two, three and four of how to overcome the challenges that keep us from being successful with money in marriage. And so make sure to tune in to those episodes or subscribe to the podcast so that you don’t miss that content. Many, many thanks to you for joining today. This is a wrap for episode 42. Happy day.

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About the Podcast

Join Chief Financial Officer Ken Kaufman as he helps you track and hack your net worth. For those seeking financial independence, your net worth is one of the most significant measurements of success. Using his two decades of financial experience, Ken Kaufman helps you overcome your financial obstacles and look onward towards a better, brighter financial future.

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