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I’ve been hearing this a lot recently:
“I just found out from my husband we are 150,000 in debt.”
“I don’t deal with our financials, but I’m not happy with this long-term savings plan we’ve lost money on.”
“I show my wife my trading performance… when I make a nice profit…”
The outcome of all this is likely to be losses, arguments, tears. So it’s time for some tough love.
The Y in DIY Personal Finance does not stand for Yourself.
It stands for Do It Yourselves. Why? Countless studies have shown that two people make better financial decisions than one, by offsetting each other’s unhelpful biases. Too much risk vs not enough risk. Too much spending vs too much miserable cash hoarding. Too much trust in a financial advisor vs healthy cynicism and reading of the small print.
If you have a partner, do it together. If you’re worried about your parents or older children, try to help them. If you are single, enlist a friend or join a Financial Independence community and post about your plans to get feedback. Or reach out to me as a sounding board.
You absolutely can invest by yourself. Just check in with one other person, even if they might disagree with you. Let’s see how this plays out in practice (and you can skip to the relevant section).
Every professionally-managed fund has an Investment Committee. They agree guidelines in the fund’s Investment Policy and then make decisions on the fund’s investments and activities.
You are both on the Investment Committee. Make sure you claim your seat. It it absolutely not good enough to delegate decision-making responsibility to one person and it can lead to many unsatisfactory scenarios:
– You never talk together about money or investing
– You or your partner never learn more about planning, saving and investing
– You or your partner make terrible financial decisions and hide them until it’s too late
– Your partner passes away or leaves you and you know nothing about surviving/thriving financially
Some couples manage their money separately, which doesn’t make sense either. You are in this together for the long term and your planning needs to account for that. Otherwise pockets of cash sit there earning nothing and fragmented, possibly terrible, investments are made.
So what to do? I love having couples at my Weekend Workshop because they are forced to learn and discuss everything together. Better to have a bit of an argument over money now than a huge blow-up in 10 years’ time, that’s for sure.
Try answering these questions together for starters:
– When do we want to reach Financial Independence (aka retirement)?
– What kind of retirement do we want (also in $$$ terms)?
– How can we boost our income and reduce our expenses?
– Do we have any financials issues that could become problematic?
– What should we invest in to ensure a great and stable retirement?
Everything else is about transparency and communication. Do not hide a ballooning credit card from your other half. Show them your trading dashboard even it looks bad.
If your partner comes to you with bad news, don’t blame them or bite their head off, emphasise that you will get through this together. After all, it might be your turn next time!
My friend’s dad put a huge bet on the oil price and lost so much that my friend had to look after him financially to the end of his days.
Some families feel wary of passing financial advice up and down the generations. Instead they let it happen subconciously, which is much worse. If your parents are under the thrall of an expensive advisor, or sitting on too much cash, or throwing it away, you might want to gently get involved.
Don’t expect this to be easy! There are a lot of egos at stake. Sending a relevant article, gifting a book or a course, or just talking about your new financial confidence – all these things make a difference. If you are supporting them financially anyway, you are entitled to make sure they are not spending too much… or too little!
If things are clearly going wrong, then don’t be afraid to make your getting involved a bit less gentle. You are all in this together. Take action with love… but still take action.
Teaching children how to save and invest responsibilty is truly a gift for life. Schools don’t teach this stuff and many parents don’t want their kids to have to think about money.
Budgeting is a useful lesson children can learn without depriving them or being excessively strict. If they get pocket money, what are they going to spend it on? They can afford anything (eventually) but not everything. And may you will match-fund them if it’s something particularly exciting or worthwhile.
If you are learning to DIY invest, then teach your children also, especially if they are over 14. To make it real, you can create a ‘Start Them Off Right’ fund with a global stock ETF. Show them how they own a piece of Disney and Starbucks. Offer to match any contributions they make from pocket money or summer jobs. If they don’t touch this investment, their fund will be enormous when they reach 60, and your smart investing lessons from their children will mean they probably reached Financial Independence long before that.
Get started with my free guide:
3 Steps to Expat Financial Independence
15-minute read. Discover the simple process for taking control of your finances so you never have to stress about money again.
All by yourself
When you’re single, there’s nothing worse than having to wade through a bunch of advice that doesn’t apply to you. If anything, your situation is simpler and easy to manage. But I think my orignal recommendation on Doing It Yourself still holds.
The echo chamber of your mind is not always the best place to make financial decisions, especially if locked down at home alone during the pandemic. Go out of your way to find someone like-minded and run your financial plans past them. Even better, agree to be accountability partners. Be tough on each other!
If you’re struggling to find any friends, colleagues or family members who are enlightened or interested in the ways of passive index investing for Financial Independence, then SimplyFI, ChooseFI or any other of the many groups out there can help. Start reading, posting questions and commenting – you will soon get some clarity on whether your plans are sensible or not. We’ve got your back.
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