Free photo 110174348 © creativecommonsstockphotos – Dreamstime.com
Some activities are meant to be solitary, like reading a book. Others are more fun when you have company, like going to a movie or a restaurant, while others − playing golf or tennis for example −are meant to test your skills against someone else’s. Navigating your money life is one of those activities that fits into the “do with others” category. It might seem like it’s your own business and your own financial statements, but trying to figure it all out alone can be somewhere between difficult and impossible.
Just this month the American Psychological Association came out with a study finding that people are most satisfied with their lives when they have a sense of “oneness” – which, simply put, is a strong connection to others. It made me think of how interdependent you really have to be when you’re managing your personal financial life. Your decisions affect your partner/spouse/family/stakeholders, so the people who are part of your financial life should be part of an ongoing conversation about values, concerns, and what your money is doing.
I find myself constantly telling couples and families, too, that they don’t have to go through these family discussions without an expert facilitator to keep things from detouring into arguments and frustration. Find a financial planner who will help you and your partner and family members sort out your financial goals. You may not always agree, but you can compromise with an interdependent plan. Maybe you take a very special family vacation every two years and on alternating years boost your contributions to your retirement plan, for example.
Every financial decision requires asking questions. Think about it; even though you’re making “set it and forget it” 401(k) contributions at work, you should be sitting down with your life partner and your financial planner at least once a year and talking over a variety of questions. For example, do you need to rebalance the allocation yourself or can you have it automatically rebalance? Do you increase your contributions with your pay increases and inflation? What do you do when new fund choices are introduced? How do you know how much risk you should take and can you even understand the amount of risk in each offering? Just because it says: Conservative or Balanced or Growth, what does that really mean to you? How much do you need in retirement and are you channeling your dollars in the right places?
Then you move into the deeper interdependent questions. What are you going to do in retirement? Will you stop working cold-turkey or transition out? Do you have hobbies or interests that will keep you engaged and interested and if so, what’s the cost? If not, how are you going to find something that will make your life meaningful after your work life has ended? What will it cost you to live the way you desire?
If all you want to do in retirement is borrow books from the library, watch TV and eat takeout Chinese food, your costs might not be onerous, but chances are you’ll find retirement a lot more satisfying if you make it a time for new experiences with the people who are most important to you. The more complex your life is, typically, the more costly. You will need to address questions such as: When to take social security? What happens when health issues arise? Do you have a financial responsibility for others beyond your lifetime? How much return on your portfolio is necessary in order for you to not run out of money? What happens if you are incapacitated?
Consider the other aspects of your financial life; insurance policies, cash flow, other investments, college planning, Estate planning, tax planning, elder care planning, social security. Each topic is complicated and interdependent.
The way I see it is each area of your financial life touches many other parts. It’s all connected, not just to your financial fitness, but to your life pursuits and your personal relationships.
Here’s to living a rich interdependent life!