Do you work with a lot of couples in your independent financial advisor business? Depending on the types of clients you work with best and what age range they are in, it’s likely that a good portion of your clients will be married couples. One of your jobs as a fiduciary is to help them see eye to eye on finances and come up with mutually agreed upon spending and saving plans to avoid arguments and achieve retirement goals.
One of the areas where I see a lot of disagreement between couples is spending discretion. In many cases, your couple clients will have very different beliefs about money and what should be done with excess funds. One may want to work to pay off the mortgage early, for example, while the other thinks it’s more important to take vacations together to maintain a close relationship. If you don’t take their different personalities into consideration and help them learn how to understand each other, you could be looking at a lot of defensiveness or even a couple that is headed for a divorce.
Here are some ways to help your couple clients come together on a plan for spending:
Agree on a Monthly Budget
Do your clients have a set budget they adhere to every month? Did they work together to come up with this budget and do they both stick to it? I’ve found that the answer to these questions is often no, which leads to plenty of disagreement and bitterness throughout the month. Every couple should determine a job for every dollar that comes into the household each month. How much goes toward bills? Toward entertainment? Investing? How much is left over after all of these are accounted for? To effectively set a budget, they may need some tools such as the YNAB (You Need a Budget) app. Suggest they use an app like this that connects to both their checking accounts and can be used on the go as a first step toward getting on the same budget page.
Have an Agreement in Place
Staying flexible can be beneficial for couples when it comes to spending—or it can cause tons of problems. You don’t want your clients to feel like they can’t buy anything that’s not in the budget, but you still want them to stick to it as closely as possible. I’ve found it’s useful to have my couple clients develop an agreement about what they can and cannot spend without first discussing it with their spouse. For example, if they see something that’s under $50, they can go ahead and buy it without checking with their spouse first. Some people may choose a higher amount, such as $100 or $200, but the key is that both members of the couple agree on it ahead of time.
Use the 24-Hour Rule
Another great suggestion you can make to your clients is using the 24-hour rule when it comes to off-budget spending. What this boils down to is they have to wait a full day to buy something that catches their eye. This removes the temptation of impulse buying and, more importantly, gives them a chance to discuss the purchase with their significant other. If, after 24 hours, they still want to make the purchase, they can go ahead and do so. This balance of flexibility and discretion has worked very well for a majority of my clients—especially the ones who tend to hit the ‘buy’ button before they really think things through.
When you help your couple clients develop ways to live harmoniously with their finances, you deepen your mentorship relationship with them and act as a true fiduciary. Assisting them with spending discretion decisions is just one way to keep financial disagreements to a minimum and help them achieve their goals. Want to talk more about counseling your couple clients about money? Please shoot me an email so we can talk more.