Let’s talk about money. In fact, let’s talk about money with a lot of different people.
These are the 5 conversations you should be having about your money:
1. Talk to your partner. Or, if you’re single, talk to yourself.
This is a conversation focused on the big picture. What are your goals for your money?
This is another way of asking, “What do you want your life to look like? What experiences are important to you?”
Sure, one day you want to retire. But what do you want to achieve between now and then? Buying a home? Children? Starting a business or changing careers? Early financial independence?
This is not a conversation yet about what your plan is to achieve these objectives. This is about being clear in your own head, and with each other if there’s another person, about what you’re working towards.
The second part of this conversation is about flexibility and risk.
First, when you think about each of your objectives, how negotiable are they?
How much time do you have to achieve a particular goal?
The ability to retire eventually is probably not up for negotiation, but you may have a lot of time to get there. On the other hand, if the goal is buying a home, your time frame is likely much shorter. How would you feel if you did not achieve this goal on schedule?
The other side of the risk conversation is about your personality.
Are you fundamentally someone who likes to take risks?
If you have a partner, do you have the same risk “style,” or are your approaches to risk-taking at odds?
If they are, this will likely be a source of tension and as you move through other money conversations.
When you get to actually planning for your goals, you’ll need to navigate this divide. For now, you just need to verbalize it.
2. Talk to your friends.
Some of your friends will be very interested in talking about money, and some of them will not. You know who’s who.
It’s not necessary to bare your soul and your bank balance to have a meaningful conversation about money. Center the talk around sharing tips they employ in their own lives for saving, investing, or spending.
What are the money topics they follow in the media? Who are their money gurus?
3. Talk to your employer.
If you’re not self-employed, your financial health is tied to your employment, and not just through your salary.
Have a conversation with your human resources department to make sure you’re taking advantage of each and every benefit that’s available to you and that you understand the limits of your benefits.
- You may have signed up for your 401(k) plan when you were first hired; have you looked at your investment choices since then to see if what you selected is still (or ever was) appropriate?
- How well do you understand your disability insurance benefit? According to the Social Security Agency, 25% of 20-year-olds today will experience a disability sometime during their working years. Will your insurance be enough to carry you through a protracted loss of income?
- Are you fully utilizing your health insurance benefits? If you have access to a Health Savings Account (HSA), a Flexible Spending Account (FSA), or “wellness” benefits, are you leaving cash on the table?
4. Talk to your team of financial pros.
There’s a pretty good chance you have at least one financial pro in your corner who can add expertise and independent judgment to a conversation.
The essential discussions here harken back to the initial talk about your goals and specifically about how much risk you’re willing to bear to achieve them.
If you invest through your 401(k), discuss with the plan administrator whether your investment choices align with conversation #1.
If you have a financial planner, the conversation will broaden to include your non-retirement investments, again using that first financial talk about goals, flexibility, and risk as the jumping-off point. (You can find a fee-based Certified Financial Planner at XY Planning Network.)
But there are likely other financial pros on your team:
- If you pay someone to prepare your taxes, talk to them now, outside of tax season, about what you can do immediately to lessen your tax burden next year or in years to come.
- If you have questions about whether your family is adequately covered against the risk of you dying early, having a conversation with an independent life insurance agent about your options costs you nothing.
- If you’ve not yet had a conversation with an attorney to discuss your estate plan, now’s the time.
- Even talking to your bank or credit card company about whether the type of account you have is best suited for your needs is a conversation worth having if, for example, you find yourself paying extra fees.
5. Talk to your parents.
Of all the conversations, this may be the trickiest. But it could also be the most rewarding.
Depending on your circumstances, parents’ ages, and the kind of relationship you have, there are many different contours to this conversation.
One discussion may be similar to the “friend conversation”: What insights have they gleaned over the years about money?
To be clear, you may not have the same money values as your parents; that doesn’t mean that you cannot learn from them (even if what you learn is what not to do).
If your parents are older, it’s critical you talk with them to help you understand what your responsibilities to them may be as they age.
This isn’t just one conversation…it is something that will build over some time, perhaps even years. But the earlier you can begin to understand how their financial life intersects with your own, the better you can plan accordingly.
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