44 – The Blueprint for Financial Success in Marriage

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Episode Overview:

Now that we’ve discussed foundation and materials, its time to map out this metaphorical house using our blueprint. You marriage needs a common vision and goals or else where are you going? A financial plan is the key to success. Ken rattles off the numerous reasons why and addresses your fears. It’s easier to plan ahead rather than catch up; if you don’t have a plan, you’re just improvising. Finally, Ken outlines the components of your plan allowing you to get started.

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 44, “The Blueprint for Financial Success in Marriage.” Now, the last several episodes I’ve been laying the groundwork for the key four items that need to exist in order to successfully build a marriage that can succeed with finances. Now, initially, the foundation of this needs to be having alignment between spouses, which I talked about in the last episode. Today, we’re gonna talk about the blueprint, which, ultimately, is a comprehensive financial plan. The building materials, which is something I talked about two episodes ago, is having financial literacy in your marriage, and an understanding of key financial principles and tools that exist in order to help you succeed financially.

And then the last episode in this series, which I will do next week, is the labor component… And I forgot to mention at the beginning of this, I made this analogy, if you’ll recall, of building a house. So the foundation of the house, and then the blueprint for the house, the building materials for the house, you know, these three things I just talked about and then the labor that puts all these materials together, follows the blueprint, you know, builds up the foundation, all that. The labor is actually making a commitment to working together and to being aligned to building that financial plan and applying all the financial principles, and then sticking with your plan and then iterating as needed. That is the structure, if you will, for how to succeed with money in marriage. And, today, we’re gonna jump again deeper into the blueprint, which is this concept of developing a plan that both partners buy into, that they completely agree with.

Now, I wanna start with a verse out of the Bible, the old testament, in the book of Proverbs 29:18 it says this, “Where there is no vision the people shall perish.” Let me do a paraphrase, “Where there is no vision in a marriage, then the marriage is setting itself up for failure or at least a lot of mundane, routine just non-focus to how you’re moving forward and what you want to try to accomplish together.” You need to start by having a common vision and common goals. And it’s something you’ve got to be passionate about. In fact, you’ve got to be so passionate about it that when you’re in the grind of having to make difficult money decisions or perhaps forego something that you really, really want in exchange for what you need to do in order to move your plan forward, you’ve got to have this passion, and this excitement, and this willingness to let some of those other things go.

Now, another way to think of it is, if you don’t have a goal then where are you going? What are you going to accomplish?

I’m reminded of “Alice in Wonderland” where the phrase was said, “Look, if you don’t know where you’re going or what your objective is, then you’re probably never gonna get there.” And why does it matter where you go, or why does it matter in what direction you go? You’ve got to pick your goal, your plan, and then find the direction to get there and make it happen. Now, the main problem, as my son Daniel did all of this research around these topics about how to succeed with money in marriage, the main challenge here that he came up with over and over again in the interviews he did with people that were married, some were newly married, some were 30, 40, plus years of marriage.

So, he got a nice sampling of different people in different stages of life. The main problem that we’re looking at that keeps people from jumping into this planning process is that planning is hard. It takes a lot of time and effort. Most people don’t know how to jump into it and get started. And it’s easier to just kind of keep going with the flow rather than step back and make this financial plan. And so, we’ve got to change our paradigm, we’ve got to change our thought process to get into building a plan together.

There’s tremendous value that comes from financial planning. Every single couple that my son Daniel interviewed said it would have made a significant difference in their financial success. And everything else said that the way to succeed in life financially is with a financial plan, and, especially, in a marriage because it’s what gets alignment between the two partners in that marriage. So, some of you might actually be thinking to yourself, “You know what? I’ve always thought about having a financial plan, I’ve just never gotten around to it.” Well, now’s the time, there’s no better time than the present.

One other thing, there is this fear of sitting down and planning and, “What am I gonna find?” Or, “What if it’s gonna be depressing news if I find out I can’t do everything that I wanted to do or if I have to give up something today in order to do it?” Here’s my invitation to you, just jump in and start. Get something down on the blank sheet of paper. In the organization that I work in right now, whoever is the first one to write a draft of a document or put an initial PowerPoint together, they are heralded in our organization. And then everybody proceeds to go forward and rip it apart and make suggestions and comments, “You should do this. You should do that.” But it’s always under the premise of we are so thankful for the first person who’s willing just to get something down on paper and then that gave everybody else the momentum to start thinking about what they really needed and what they really wanted.

Understand that whatever you put down first is not gonna be right, it’s going to change, and there’s gonna be feedback back and forth. But be willing to be the first one to put it down on paper. And then huge value will come because that will stir ideas in your partner, and then your partner…and then you’ll have ideas, and it will build itself into the goals that you’re looking forward to and then, ultimately, you know, the outcomes of life that you want, and then backtracking that into now what is the plan that helps us get there and accomplish it.

So, how do we understand the value of this financial plan? There are several quotes that I wanna share straight from the qualitative interviews that my son Daniel did. I’m not gonna state who said these things, but I think it’s so prevalent that the existence of the financial plan and the value that it can create within the marriage is tremendous. Here’s the first one, “It’s much easier to get ahead of the game than to do catch up work. If we had had a financial plan we’d be so much further along right now.”

Next one, “If you don’t have a plan or a map, well then, you’re just improvising.” “What the financial plan does is it increases the control that you have over your life.” Love that one, that’s a relatively new married couple by the way. They’re gonna win. When they have that understanding, I can tell you right now, they’re gonna figure it out and they’re gonna learn how to win with money in their marriage, and get to their goals, and accomplish the things that are important to them. Another person said that having done planning earlier in the marriage would have helped the couple understand the power of compounding interest. The power of the earlier you start setting money aside and saving, the more it has time to grow and become worth more to help you achieve the goals that are ahead of you.

Another comment from a married person was this, “Everybody,” with a high emphasis, “Everybody needs a financial plan.” Another one from a gentleman that’s been married for quite a while said this, “If I had had a financial plan, I would have known to start putting my money away for retirement 40 years ago.” So, he knew where he wanted to go, he had this goal that he wanted to retire and he probably had things that he wanted to accomplish once he retired. But he’s way, way behind on that process.

So, another quote, “I spend a lot of time floundering around and living in a way that didn’t make the impact that I needed.” That’s high impact when you get that plan in place. And then the last quote that I pulled out of the items in the interviews that my son Daniel, did, “You can achieve financial freedom earlier.” So, getting to that goal of financial freedom comes earlier in the process. So, hopefully, that’s helped you start to get your head around some of the value that can come from having the financial plan in place.

The next thing that it does is it can help you gain a common vision of what you need to be doing now in order to get what you want in the future. I talked a lot in my last episode about getting alignment around these things. And the financial plan, what it does is it really forces this alignment. Because you have to decide together what are you gonna do? How are you gonna spend your money? And what are you shooting for and saving for? And what are you trying to accomplish in the future?

Another reason why this financial plan helps so much in marriage is for this reason, and this is a favorite quote of mine from Benjamin Franklin, I’ve quoted it on this podcast before. It is, “If you fail to plan, you are planning to fail.” And by that, it means that we’re getting out there and we’re starting to intentionally make decisions with our future in mind. We’re being proactive rather than just reacting to life and, “I got this bill, I guess I better pay it.” We’re way out ahead of that and we know it’s coming, we know how much it’s gonna be, and we plan to be able to not just handle those short-term immediate obligations, but we plan for all the things in the long-term and down the road.

Another interesting thing that comes from financial planning is the ability to optimize investments between risk tolerance and aversion to risk. And what this means is, if you know you have a goal down the road, let’s say 20 years, and you have so much money that you can allocate and save toward that goal. Well, by stopping, and thinking, and understanding that and how important that goal is, and let’s say that you’ve got…the money that you’re gonna save and set aside that it’s gonna be nowhere near enough for you to accomplish your goal, starts to encourage you to think, “Oh, well, how can I invest this money? How can I earn an interest rate that will help this money grow so that in 20 years when I need it, it will be enough and I’ll be able to accomplish what I want to accomplish given inflation and rates of return and everything that goes with that?”

Well, this is what one individual in the surveys said, “It would have helped us assess our opportunity for growth and wealth if we had had a financial plan.” And this person then was somewhat remise for not having taking more risk earlier in their lives and in their marriage with their investments so that they could have reaped the reward of having done that at the stage that they’re in now and looking forward into the future.

So, this ability to optimize how we invest between how much risk are we willing to tolerate versus how much are we averse to or we can’t tolerate, it helps us set that in the right balance. I listened to somebody who’d been a financial planner for almost their whole career talking, I think it was a few weeks ago, and he had said that every time that he would sit down with somebody and help them plan out their finances and plan out how to invest and save for the future, he always wanted to understand the risk tolerance. Which, basically, means if the market were to crash and go down, at what percentage of it going down would you freak out and sell and say, “I just can’t handle this volitivity, and I need to walk away.”?

His number one objective was to understand the risk tolerance of the people who were in front of him. Then he would look at what their goals were, what they wanted to try to save for, and figure out how much, you know, they’re gonna be able to put away and save and, ultimately, figure out how much risk do they need to be exposed to, to generate the return because…I’ve talked about this before, but there’s a positive correlation between the amount of risk you’re willing to take and the potential return that you can gain for taking that risk. Meaning, the more risk you expose yourself to, depending on the investments you pick, the higher potential return you can possibly get.

And so, understanding that for this financial advisor was the number one component to them being able to come back and say, “All right,” after going through a planning process and saying, “Here is exactly how we can project that all this is gonna go.” Now, it’s all based on assumptions and there’s no promises or guarantees around it, but it gave them the ability to plan within an environment of risk tolerance as well as showing them if they could hit their goal. And if he came back and said, “Look, with the amount of risk you’re willing to take, I don’t see a path for you to get to your goal.” Then it allows for some thinking, and some processing, and maybe even some willingness to try to be exposed to more risk.

All right, enough on that. Another part of this is it helps get alignment in the marriage about where every dollar goes. One of the main areas of focus with the You Need a Budget company and their budgeting software and all the content they create is that you need to give every dollar a job. This is their number one saying, “Give every dollar a job.” Well, getting your financial plan tells you where to put those dollars and what jobs each of those dollars should be given. And a financial plan also helps you be much more disciplined because now it’s organized and you have a path and a pattern to follow. It also is gonna help you re-center or get back on track if you fall off the bandwagon. Meaning, if all over a sudden you get off track with your plan and you start doing things that your plan didn’t call for or that are gonna hurt the plan that you’d set in place, well, if you’ve started it once, it’s gonna be easier to get back on this horse and get it pointed in the right direction and get going again.

The other thing that I love about financial planning is it allows you to make your decision and then keep them made. If you just follow that plan and then if new things come up that you didn’t anticipate, then you certainly want to iterate as you go. But this is, again, a quote from one of the interviews that my son did. “Suddenly, years go by and you wonder what the heck happened. Having a concrete plan that we were committed to would have made a big difference because the decisions would have already been made. It’s much better than making decisions in the moment.” Because what happens when we make decisions in the moment? They tend to be emotionally driven, not driven by the long-term planning. Remember, where there is no vision the people will perish or where there is no vision the marriage struggles significantly financially. And so, getting that vision out there and that plan or the blueprint in this financial plan.

Now, what are some of the key components that you need to be thinking about for your financial plan? First one, you got to make sure you build up that emergency fund. I’m not a big fan of the concept of emergency fund how it’s talked about in financial circles mostly. Because I think the greatest emergency fund that you can have is to get off your credit card float and start living on last month’s income. Get to a place where the income you make this month is the income you live on the next month and have dollars set aside as you spend money on your credit card so that when the credit card bill comes due or you wanna pay it off at any moment, the cash is sitting there ready to go. Those are the two most important things that start to help you build up that emergency fund.

Also, you wanna outline what are the major life events that you have for yourself, your kids, and your grandkids that you wanna fund and that you’re worried about? Retirement is probably one of the biggest ones, if not the biggest one, but what else is out there? And outline that and put some thought into when those funds might be needed. You wanna make sure you have a plan to minimize taxes. You wanna make sure you have a plan to implement insurance to protect your assets where needed. No reason to buy a house then not pay $1,000 or $2,000, depending on the size of your house and the value of it and everything, but to pay about that premium a year in order to protect it if it should be in a fire or if something should destroy it that you wouldn’t lose that asset. So, using insurance properly, life insurance, all of those things.

Also, you got to pick if you’re gonna be a do it yourselfer or if you’re gonna use an advisor. If you’re gonna be a do it yourselfer, tons of great content, I’m trying to provide some of that content here in these different podcast episodes, but there’s lots of great books, I’ve recommended them in prior episodes. You got to learn it and keep up with changes in tax laws and changes in insurance and those different things, but it can be done.

If you choose to not do it yourself, then I’d recommend you find an advisor. In fact, many episodes…I did an episode based on some feedback I was getting from listeners about, “Hey, how do I pick a financial advisor?” I did a podcast episode back a while ago and I’d refer you back to that to give you some feedback and some thought about how to find a good advisor to help you build your plan.

Also, having a system that organizes all your financial matters. So, figure out how to do it. Sometimes one spouse does it and the other spouse doesn’t do it, and that creates enough clarity that, “Hey, if there’s a bill I’m not wondering if my spouse already paid it.” But having a process that handles all those financial matters and keeps you organized in your system. Got to have that in place.

You also need to create and maintain a budget that complies with your plan. And this is actually where the rubber meets the road, to make sure that the dollars are being allocated in the right places. Or if you think…again, my analogy I’ve used many times, the waterfall. It comes over that cliff of a cascading waterfall and it fills up that first priority first and then if there’s still water flowing over or if there’s still money left, then it flows over to the second priority and the third and so on. It makes this beautiful waterfall of making sure that your top priorities are getting funded ahead of any other emotional decision, you know, that may come up as they so often do from time to time.

And then the last point I wanted to make here is setting up a regular reporting interval that allows you to observe your progress against your plan. So, if you said, “Hey, I’m gonna save $6,000 this year and put it into my IRA.” And in my plan, we said that I would invest it in a way that it would grow, let’s say, 6% a year. And at the end of the year, you can say, “Did I put the $6,000 in and what kind of growth happened?” And you can track your progress and understand, “Okay. Are we on-plan? Are we off-plan? Are we ahead of plan?” And then that gives you the ability to iterate and make changes all along the way. So, it’s super important that you have those regular intervals in place.

I have done some episodes in the past as well about how to create a financial plan and some of the key elements that go into a financial plan, so I’d reference you back to that if you wanna be that do it yourselfer, or otherwise, hiring a credible advisor and I’d recommend it be a fiduciary financial advisor. That’s gonna make a big difference for you. You can pay an hourly rate, or sometimes they do flat fee, or sometimes you can even do a subscription-based that allows you to keep contact with that advisor so that quarterly, or annually, or whatever intervals you set up you can sit down and they can update your plan, and make sure that things are on track, and help you with the iteration process along the way.

So, that’s it. This is the blueprint to being successful in marriage with money. I wanna thank you for listening in. The next episode, we’re gonna jump into how to reach commitment and the emotional fortitude and the grit to execute on your plan as well as the tools that you need to be able to iterate the plan as life happens and as things change, and as you need to adapt just like we do with everything in life. The power of planning isn’t that you know the future, the power of planning is that you figure out…or you don’t know what’s gonna happen, it’s figuring out what you want in the future and then having that translated into what can you do today to make sure that that becomes a reality? Many, many thanks to you for joining today. This is a wrap for episode 44. 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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