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Strategies to help couples settle financial disputes

Consumer ReportsYonkers, NY – Unfortunately, a great marriage can go south when financial problems arise. Whether or not to buy an annuity, how much to invest in bonds, and where to find the money for home repairs doesn’t exactly sound like sweetheart talk. But on the other hand, reaching common ground on family money matters can improve matrimonial happiness and stability.

The experts at Consumer Reports Money Adviser identified three common disputes between couples and offer tips on how resolve these battles. 

       

Big spenders vs. mattress stuffers

A good way to start resolving spending differences is to talk about the money messages you learned while you were growing up. For instance, your parents may have made lots of money but never spent anything, or your family might have lived paycheck to paycheck. That way you can appreciate the other’s perspective. A compromise should include some short- and long-term financial goals, and setting up a budget that will help you achieve them.

CRMA has looked at free online budgeting programs that can assist, including Mint (www.mint.com) and Yodlee MoneyCenter (www.yodlee.com).  If you use these services, your financial information, user name, and password are housed on the company’s servers, not on your computer. If you’re not comfortable with that, you might want to purchase budgeting software such as Quicken.

Couples with different spending habits might be able to reduce disputes by setting up both joint and individual accounts. For example, you can use joint accounts to pay your household bills and to save for mutual goals, like vacations and car purchases. Then you can each set up individual accounts with the remaining funds that can be used to buy whatever you like.

Risk takers vs. safety seekers

Financial planners see couples with different risk tolerances daily, including ones where one partner likes to put nearly all his or her money in stocks while the other would prefer keeping the family funds in CDs. Setting up a well-balanced portfolio, as a result, is a challenge. However, most couples’ retirement investments are in individual accounts anyway, which allows each spouse to invest in a way that’s comfortable. You just have to make sure that the accounts strike the right balance overall. A financial planner can help couples get more in touch with their own risk tolerance.

Couples who want to work out their own allocations can get a better handle on their risk tolerance by using free online questionnaires. One developed by personal finance professors at Virginia Tech and Kansas State University can be found at http://njaes.rutgers.edu/money/riskquiz/.Another, based on the North American Securities Administrators Association’s Uniform Investment Advisor Exam, is at www.isi-su.com/new/risktol2.htm. In the end, if one spouse invests aggressively while the other is more moderate or conservative, that’s OK. You just have to look at your entire portfolio to make sure it’s allocated for your long term goals.

Retiring types vs. the career-minded

Couples are often not on the same page  when it comes to retirement. A Fidelity Investments survey of 502 married couples ages 45 to 72 found that 60 percent of the respondents did not agree on when to retire; 44 percent were not in agreement on whether they would work in retirement; and 42 percent had different ideas regarding their expected retirement lifestyles.

If, let’s say, your husband wants to retire before you would like him to, run the numbers to see if it’s economically feasible. The first thing you want to do is project your annual retirement spending. You can base it on what you spend now, subtracting the expenses you expect to go away when your husband stops working, and adding any new ones. Then you and your husband should see if you’ll have saved enough by the date he would like to call it quits.

The conventional wisdom in financial-planning circles has been that retirees can safely spend about 4 percent of their wealth each year with little risk of exhausting it. For example, if you total up your expected annual sources of retirement income, including Social Security, investments, and any pensions, then add 4 percent of your invested assets, you’ll at least have some idea of whether he will be able to retire early or had better tough it out in the workforce a while longer.

Couples who can’t agree on whom to retire might want to consider a compromise. Perhaps the husband can work a little longer than he planned, and the wife can stop working sooner than she anticipated. He, of course, will find lots of benefits to staying in the workforce longer. For one, his Social Security benefits will probably be greater. The retirement estimator at www.ssa.gov shows how much a worker would gain or lose by electing to start taking benefits at different ages.

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