A business coach recommended a great book written by one of her clients, Janice Goldman, entitled, “Let's Talk About Money: The Girlfriends' Guide to Protecting Her Assets.”
This book is different than many personal financial guides because it addresses some of the dynamics in relationships that can affect us financially.
Often, our love and sense of responsibility for loved ones compel us to take actions or make decisions not in our own financial best interests. Compounding the problem is the social taboo around discussing money, especially in the context of these relationships.
Most of us would agree that some of our most important relationships are those we have with our partner, children and parents. With that in mind, here are typical but impactful situations around those relationships from Goldman's book, along with recommendations and advice.
Since money is the No. 1 cause of divorce, it's in your best interest to get “financially naked” with your partner as early as possible in the relationship and before you get married. Many women don't do so, and regret it later.
You need to make sure your future partner is credit-worthy and financially stable before you commit to spending the rest of your life with him or her.
In addition, strong relationships are built on financial compatibility, so make sure you and your partner have similar goals and values when it comes to money. This is one situation in which opposites should not attract.
Here are other tips regarding your partner and money:
PRE-NUP: While the prenuptial agreement gets a bad rap as a sign of lack of confidence in a relationship, it in fact allows a married couple to start life together with a solid foundation. It offers a clear financial picture of both parties before marriage so there aren't any financial surprises once married.
SECOND MARRIAGE: If it's a second marriage for your partner, be sure to get a copy of the divorce decree and/or custody arrangement so you're aware of their financial responsibilities pertaining to the previous marriage.
While you may feel it's your duty as a parent to do so, continuing to financially support your adult children can delay or compromise the quality of your retirement.
You don't want to risk having too little money for retirement. Your kids likely have a lifetime of employment ahead of them, but there's no financial aid in retirement. You should also remember that love is not money, and money is not love.
Instead of giving money to your adult children, teach them how to be financially independent. For example, help them set up a budget and encourage them to save from each paycheck, even if just a little bit at first.
A couple other considerations regarding adult children:
MOVING BACK HOME: If your adult child needs to move back home, consider having him sign an agreement outlining your expectations around his financial contributions, length of stay, household responsibilities and your house rules.
IT'S A LOAN: Consider any money requested by your adult child to be a loan. Draw up a loan agreement with interest rates comparable to what banks charge, complete with a repayment schedule and late fees.
Contrary to what many of us think or feel, it is not greedy to talk with your parents about their estate plan. Initiating that conversation shows that you're responsible and want to assure your parents' end-of-life wishes are followed.
Planning ahead makes it easier for everyone. If you don't, you may be scrambling to get your parents' affairs in order at a time when you're grieving.
Encourage your parents to have all of the basic but important estate planning documents in place – wills, durable powers of attorney for financial and health care decisions and advanced medical directives (living wills).
They should also ensure that the beneficiary designations on insurance and retirement accounts are up-to-date and reflect their current wishes. Make sure you have access to copies of all of these documents.
Lisa Strohm is founder and CEO of The Athena Network, a financial and life management firm based in Upper Saucon Township, providing investment advice and financial planning offered through Good Life Advisors LLC, a registered investment adviser. (The Athena Network and Good Life Advisors are separate entities.) She provides fee-based financial planning and investment management for women, their spouses and extended families. She can be reached at 484-224-3439 or email@example.com.