I confess: I live with a chronic case of avoidance behavior. It flares up around tax filing time, doctor’s appointments, viewing my 401(k) statement in a bear market or taking the garbage out. In short, whenever I have to confront an unpleasant activity of any sort, I’d just, well, rather not.
So I understand when people tell me they would rather not talk about their finances right now, since money is tight. But if not now, when? Over the years, I have made great progress in managing my tendency to avoid and I have learned a few things. Like: The best time to buy stocks is when they’re down, and the best time to talk about money is when you don’t have much.
Each of these activities – when acted on – will set you up for future wealth accumulation. Now is an excellent time to develop a spending and saving-to-invest plan – even if you can’t act on it just yet.
In the literary classic “A Tree Grows in Brooklyn,” Francie Nolan’s dirt-poor, immigrant grandmother (who reminds me of my own grandmother) provides a lesson in saving that we could all stand to learn. The grandmother counseled to save whatever could be managed – even pennies each day: “The money will grow.” Soon, “there will be a small fortune.”
Old-fashioned advice from another time? I think not.
Last August, I wrote a column about two people of humble means who saved to invest and died with millions of dollars.
More important than the size of their portfolios when they left this earth was the way they achieved their wealth. Ronald Read, for example, worked as a janitor at J.C. Penney and as a gas station attendant for most of his adult life. When he died in 2014 at age 92, he had amassed an $8 million fortune. Stock price performance was certainly part of Mr. Read’s success, but he had to save the money before he could invest it. And he did so on a meager salary.
If we are unwilling to discuss our financial situation, it is almost impossible to improve it. UBS published a study last year titled, “Own your worth.”
The “aha” moment for me was discovering millennial women are deferring financial decisions to their male partners at a greater rate than Baby Boomer women. That means that fewer couples are discussing finances on a good day. I imagine that interaction has deteriorated further in 2020.
Here are three ideas to kick start your investment discussions.
- Create a budget. As a serial avoider, I hate this must-do. But you simply need to know what you are spending to determine how much you can save. And to identify how much spending, you need to cut to save. You may not be able to achieve your spending and saving goals immediately. Still, setting the objective is half the battle.
- Appoint a family CFO. Early in my marriage, my husband and I decided I would pay the bills after he wrote a check for $300 and entered $30 in the check register by mistake. The penalty for overdrafting our account grabbed our attention. With one person overseeing the family financial data, we had a clearer vision of where we were spending too much.
- Establish monthly budget meetings. Reviewing your plan each month allows you to readjust in real-time. If your income, for example, unexpectedly declines or your expenses rise, regular reviews of your plan again puts you in a better position to make the needed change to spending or saving. Think of your budget as a flight plan that can and must be adjusted from time to time to mitigate the effects of turbulence.
And whatever you do, don’t beat yourself up, don’t give up. If you are unable to meet your spending and saving objectives one month, regroup, and start afresh the next month. Financial growth and planning is a process and by definition should be monitored and adjusted. Especially now.
