If you want to retire someday, you and your partner need to be on the same page about money.
Even if you think your partner is great with money, you still need your own working knowledge.
I’ve observed over my 30 years as a financial planner, some people just “check out” when it comes to finances. They think finance is too complex, difficult to understand or uninteresting.
Most of the time, I hate to say it, but I’ve observed it’s mainly women who think their partners know finance in-and-out so they let the guys take charge of the finances. If you want to retire early (or at all), there are a few things you need to know.
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The truth is, many times the people we rely on don’t have a depth of knowledge about money.
For example, years ago when my husband and I were first married. He ran around telling everyone I was a “computer expert.” While I was proficient at using computer programs, I knew nothing about the inner workings of computers. With one in-depth question, my lack of knowledge was quickly revealed.
Since my husband was a complete novice at the time, the gap between our computer knowledge was wide. Once he became more acquainted with computers and accessed the internet for research, he had a better idea of my scope of knowledge. He stopped touting my expertise!
I’ve seen many women make a similar mistake with financial knowledge and their partners.
Your partner may have interest in buying and selling stocks or following the market, but their knowledge of finance and how to apply it to reach your goals may stop there. While investing in an up and coming company may be interesting and even exciting, there is much more to finance.
To put it bluntly, he may not know as much as you think he knows.
Here is an example, a former client of mine, I’ll call her Mary, relied on a co-worker who knew “a lot about money” to help her choose her 401(k) asset allocation. During a bull market, Mary thought she was fine because she saw her balance growing. She didn’t understand the risky investments she held.
Mary was in her 60’s and yet her 401(k) was 100% in equities — stocks — with a high percentage in technology stocks which were doing great at the time. Unknown to Mary, her portfolio was especially vulnerable to a downturn in the stock market with her high percentage of equities and high concentration in volatile tech stocks.
With some guidance, Mary learned Investing 101. She reallocated her 401(k) to something more diversified and reduced her concentration in tech stocks. Rather than just shooting for high returns, we determined what rate of return she needed to achieve on average over time to meet her goals.
When the market had a downturn a year later, due to the changes she’d made in her portfolio, she weathered the storm just fine. She’s long retired and is traveling the world with the money she invested in her 401(k).
The lesson: Never put your financial future squarely in the hands of someone else.
Learn at least the basics of personal finance and good news, it’s not that hard. What do you need to know? Here are a few topics and resources (affiliate links):
Budgeting and Savings –
Personal Income Taxes 101 – J.K. Lasser’s Your Income Tax 2019: For Preparing Your 2018 Tax Return
Credit and Your Credit Score 101 – Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future (5th Edition) (Liz Pulliam Weston)
Basic Insurance – Life, Disability, and Property – LifeHappens.org
Frankly, learning about finance isn’t difficult if you take it a bit at a time.
Take a class at your local community college or university
Many colleges have adult learning classes such as the University of Utah’s Lifelong Learning Classes. Along with classes in Thai cooking, where I learned to make a mean basil chicken and coconut rice, there are classes in finance.
Check out your local university or community college.
Use your weekly Money Meeting to improve your financial education
Good news, you don’t need to be an expert Malcolm Gladwell suggests in his book Outliers: The Story of Success (affiliate link) by putting in 10,000 hours. A working knowledge is all you need so you may need, say, 20 hours of study.
Keep track of your subjects during your weekly Money Meeting. Read some solid books on personal finance and talk with your financial advisor about the concepts!
No matter how brilliant your partner, friend, your mother and even your financial advisor appears to be, you and only you are in charge of your own financial future.