10 Ways Budgeting Saved My Marriage

Eleven years ago, my wife and I sat across the table from an experienced married couple squirming in their seats uncomfortably as though they feared we were about to deliver some terrible news.  But the source of their discomfort was the bomb they were about to drop on us.

You see, we were not yet married, but engaged, and the couple across the table was our mentor couple in our pre-marital class.  Upon review of our personality profiles and piles of personal baggage, they felt it their duty to discourage us from further pursuing the sacred vows of matrimony.  They’d never seen a hopeful couple more innately disparate, more inevitably destined for failure. 

We are indeed vastly different, but one thing my wife, Andrea, and I share in common is a penchant for resisting authority.  So with the blessing and support of family and friends, I’m thrilled to report we’ll be celebrating our eleventh anniversary this April with our two wonderful boys, Kieran and Connor, ages six and eight.

We have never forgotten, however, the well-intended admonishment of our mentor couple; indeed, we see much of life from vastly different perspectives, foremost among them our view of things financial.  And apparently, we’re not alone. Over 50% of marriages end in divorce.  Over 50% of those splits cite financial disputes as the primary reason for the break-up.

100% of marriages deal with money as a daily necessity.


This thought occurred several times when preparing my recent posts on budgeting on Forbes.com (How To Spend $1 Million At Starbucks) and TimMaurer.com (A Burdensome Yoke…Or A Path To Peace?).  It struck me that budgeting ranked right up there with prayer and counseling as a precious few factors that have helped keep us together.  Here are the top 10 ways budgeting has saved, and continues to save, our marriage:

10)  Budgeting forces us to collaborate.  It seems that as parents of young children, the level of commitments between work, school, church, sports and the arts leaves us functioning more as independent business partners than spouses.  We’re almost always in short supply of adult conversation and genuine collaboration, and (strange as it may seem) budgeting gives us the context for both.

9)     It offers healthy accountability.  Ronald Reagan famously said, “Trust, but verify,” and while 100% verification of trust in our marriage would be stifling, we’ve found periodic accountability to be a healthy way to build faith and trust in each other.  Our joint budgeting effort means all of our expenditures are accessible to the other.  Scrutinizing every penny spent would be unfair (a-hem, note to self), but knowing everything is visible is likely to encourage us each to spend more responsibly.

8)     It humbles us.  I’ve not found a more helpful tool in the pursuit of a successful marriage than humility, and since the use of money is so pervasive in our lives, small mistakes are the norm, not the exception.  Rarely a weekly cycle goes by in which we don’t each humbly acknowledge that we erred in some capacity, humbly submitting our mistake to the other.  And of course, a good budget is designed to withstand these small mistakes.

7)     It provides an opportunity for reconciliation.  The prevalence of small errors in our budgeting, however, provides fertile ground for a destructive tendency: that we’d develop a scorecard, real or implied, and shame the more regular offender (because there normally is one in most households).  So for us it’s very important that a humility ground-rule is established: Any time an offending spouse submits in humility to an irreversible mistake, forgiveness and reconciliation is the only way forward.

6)     It gives us reason to celebrate.  For each mistake, there are several successes in each budget cycle.  The long-term success of our marriage is often built on a series of small victories, and we should never withhold an affirmation for completing a project under budget or enjoying the security of a buffer when an emergency arises.

5)     It cuts down on surprises.  So many aspects of our life are subject to variability and volatility.  We can’t necessarily reduce the number of those surprises, but we can certainly reduce their negative impact by being financial prepared for them.  Financial strain, and especially shock, pushes many marriages to (and over) the brink.

4)     It makes us better parents.  All of us parents could probably agree that it’s possible to spend too little OR too much on our children, right?  We’re responsible to determine what the right levels of spending are for our children, and budgeting allows us to deliberately set aside appropriate levels of funding for education, clothing, sports, music and fun.

3)     It shows our dependence on each other.  Andrea and I do think very differently, and this inevitably leads to divisive thoughts like these: “You know, I think I could do this better on my own!”  But this decries the very essence of marriage as an institution in which each partner’s primary objective is to serve the other.  The process of budgeting puts our (literal and emotional) dependence on each other on full display.  That makes us vulnerable, but it’s good.

2)     It preserves a healthy level of independence.  The income production in most households is almost never perfectly equitable.  Andrea sacrificed a successful career in the financial industry when she chose to stay home with our young children.  This has been an incredible blessing in our family, but it’s also a breeding ground for insecurity and manipulation as I might have a tendency to overestimate my contribution to the family’s finances and underestimate Andrea’s.  It is imperative, then, that part of our budget is the preservation of a certain amount of financial independence for each spouse.  To offset this income inequity, we’ve established “His and Hers” accounts with unilateral privileges.  Many shun budgeting as too restrictive, but properly implemented, it actually gives us room to breathe financially, and we all need room to breathe.

1)     It preserves date night!  One of the interactions I’ve enjoyed most throughout my career was with a client who is a generation or two my senior.  He and his wife have five kids(!) and appear to be more in love today than they’ve ever been.  So at the close of one meeting, I got up the nerve to ask this gentleman what his secret to marriage and parenting was.  His answer?  They never fail to set aside time—and money—for each other as a couple.  He made a convincing case that we are better parents when we deliberately setting aside time to be together, away from the kids, and not just for date nights, but also long-weekends and even week-long vacations to remind ourselves that before we were parents we were lovers.  This proved especially difficult for Andrea and me because by the time we got to the end of most months, we’d already spent our discretionary cash on the rest of life and felt like we were taking funding away from other things to line-up a babysitter and enjoy a night or weekend out.  So now, much as we have preserved His and Hers accounts, we also have an Ours account.

Budgeting is not the slightest bit romantic, but it has the ability to promote and preserve the romance in our marriages and keep us on the right side of that daunting 50% divorce statistic.  There are as many good ways to manage this process as there are couples, and I’d love to hear some of the ways budgeting has helped preserve YOUR marriage also, so please share your story in the comments section!

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The Economic Bias of Commissioned Financial Advisors

What do a used car, an old television with rabbit ears and an annuity policy have in common?  You’ll have to see in this new 90 Second Finance video in which I discuss the Economic Bias of the commission-only financial advisor.

Last week, I introduced the topic of Economic Bias in the financial advisory realm.  I discussed each of the three primary compensation models for financial advisors, and this week we take a closer look at the Economic Bias of those who earn their compensation solely from commissions.

I’d love to hear your feedback and any experience you may have had to support OR contradict my thoughts.

What the #@$% is going on?

Unless you live under a rock (check out this Geico commercial referencing under-rock living if you haven’t seen it), you have picked up the message that volatile markets and bumbling economies have again captured the global consciousness.  If you looked at the headlines any of the last several days, you may very well have concluded that the sky is falling and the financial crisis of 2008 is returning.  A great article in the Wall Street Journal explained “Why This Crisis Differs From the 2008 Version,” but that still leaves us with the nagging question, “What the #@$% IS going on?”  (I’m not promoting profanity, only acknowledging that times like these have a tendency to inspire it.)

Strangely, the majority of the talking heads on television render their contrary opinions on what’s going to happen in the future—tomorrow, next week or next month—spending very little time educating us on what the underlying reasons are for our current crisis.  In the spirit of the Freakonomics team, who, in a recent podcast demonstrated “Why we are so bad at predicting the future,” I’ll avoid attempts at prognostication and seek instead to explain what IS and what ISN’T going on in the global economy at present, followed by a couple suggested action steps:

Debt ceiling?  S&P downgrade?

The big news of the last few weeks has been debate over the debt ceiling and the seemingly corresponding S&P downgrade of the United States government.  The market has been expecting this downgrade, regardless of what happened with the debt ceiling, for quite some time now—it wasn’t a surprise.  Besides, S&P’s ineptitude regarding the accuracy of their ratings, most notably demonstrated by their maintenance of top ratings on the junk that helped cause our financial collapse in 2008, has justifiably rendered their guidance nearly impotent.  It was suggested that if the debt ceiling was not raised, the U.S. would not be able to pay its bills for the first time in history and that could lead to a financial collapse.  Well, the debt ceiling WAS lifted, but the market responded by crashing.  How do we explain that?  The problem we’re experiencing now has little to do with the debt ceiling, but a lot to do with debt, in general.

So what is happening?

The U.S. certainly has its own debt problems to contend with, but while the U.S. media got narcissistically wrapped up in our own debt ceiling and S&P downgrade, it obscured the more imminent problem—major European countries threatening default.  We’ve all heard about the financial troubles of Greece, Ireland and Iceland—each of which required financial assistance to stay afloat—but following those three countries are Italy and Spain.  They’re much bigger economies, and their failure may not be sustained by the European Union (EU) and the International Monetary Fund (IMF).  And just within the last couple days, one of the stronger European countries’ banks, France, is sending warning signs pointing to another potential crisis there.

Deja vu?  (Not really)

In the Great Depression, we basically allowed the natural free-market system to run its course.  That resulted in the pain of 25% unemployment and a stock market decline of over 90%. The silver lining, however, was that after the economy recovered from its sickness, we got back on the path towards financial health and prosperity.  This time around, the government took unprecedented action to keep us from experiencing Depression-like immediate pain, but many suggest they just deferred the problem and that we’ll be dealing with it for many years into the future.

So the United States and other countries around the world started “printing money” to create growth in their economies, in the hope that increased money supply would pull us out of a recession headed towards depression.  But while it can’t (yet) be said that the U.S. is again dipping back into a recession (the dreaded “double dip”), some major European countries are headed quickly in that direction, and that contagion could spread around the world.  Again.  Governments have already started responded with measures similar to those utilized in the 2008/2009 financial crisis; doing whatever they can to create monetary liquidity they hope will spur growth.  This could result in a boost for economies and markets in the coming weeks and months, but it’s certainly no guarantee.

So, what can you do?

You shouldn’t make wholesale buying or selling decisions in your investments based on what a market does in a day or a week, but this current calamity should prompt you to return to your portfolio and take a long, hard look at what you own and why.  Whether you are a strict buy-and-hold asset allocator or an active investor, your strategy must recognize and contend with the possibility of times like these.  You—and your financial advisor—must be accountable to articulate why you own what you own and how you intend to react depending on further developments in this scary story.  I’m not recommending you buy, sell or “stay the course;” I’m recommending you educate yourself and then act accordingly, not out of impulse.  There is no bliss in ignorance.

*This post will also be featured on TheStreet.com.

Stay the course? Whose course?

In times of economic and market turbulence, the defensive posture taken on by the broader financial services industry falling under the scrutiny of client apprehension could be summed up in three words too often spoken: STAY THE COURSE.  Umm…whose course?

The financial industry has done a better job setting its own course than seeking to understand yours.  A brokerage firm, for example, sets its own course—its goal for customer acquisition and retention that will meet its revenue goals and appease shareholders.  This, then, becomes the course they train into their brokers, who in turn aim to convince their customers (you) that it should also be your course.  It’s not all their fault, but much like politicians, the financial services industry has oft proven its penchant for self-congratulation is eclipsed only by its instinct for self-preservation.

“Selling” your advisor

Of course, if you line-up silently in accordance with the prescribed course, you’re almost implicit in this crime of inattention. My foremost mentor in the realm of personal finance, Drew Tignanelli, taught me that because of rampant economic bias in the financial services realm (and just about everywhere else too), you as the consumer will often be forced to “sell” the practitioner seeking to serve you on your personal belief—your personal course.

The example Drew uses most often is that of a real estate agent: a good real estate agent is priceless, but because they’re compensated only if you buy or sell, it’s very important that you convince them—up-front—where you stand on the matter.  If your realtor is convinced that you’re not willing to budge on paying more than [this much] for a house, the realtor will be less inclined to succumb to the wooing of the selling agent when he or she says, “So, do you think your client is going to budge?  If we could get them up to [here] I think we’ll have a deal.”

Articulating your course is especially important when dealing with a financial planner or investment advisor.  Most financial advisors are “Type-A” folks who don’t shy away from rendering an opinion on a prospective course and laying out the process for implementation.  And, no matter how the advisor is compensated (fee-only, fee-based or commission-only)[i], they’re likely not going to be paid until your course is set (see more on how financial advisors are compensated by clicking HERE).  Thus, they have a tendency to get there in a hurry.

Setting your own course

Of course, you’re unable to properly articulate your course if you have yet to determine it!  Our lives are so busy, we often forget what we’re living for.  I’ve created two exercises to help us stay focused on the most important stuff in life—you’ll find both by clicking HERE (or going to the Timely Apps tab entitled “Timely Apps from Chapters 1 – 4”).  Take a look at the exercises entitled “Personal Money Story” and “Personal Principles and Goals.”

If you’d like to go deeper, I love having discussions about setting a deliberate course in life and would be happy to spend 30 minutes discussing yours. You can reach me individually by email at tmaurer@financialnconsulate.com; or call my office at 410-823-7283 and an associate of mine will set a time for a meeting in person or over the phone. No money talk; just life.[ii]

Then, the next time someone tells you to “Stay the course,” you can respond, “Whose course?”


[i] I’m not implying here that the method of compensation is irrelevant.  To the contrary, it is very important.  I believe the fee-only model, while imperfect, is the compensation model that reduces the conflict-of-interest (always present) to the lowest level.  For more, visit the National Association of Personal Financial Advisors (NAPFA).

[ii] For a big step toward setting a more intentional personal course, check out Michael Hyatt’s blog post on the topic with an invitation to download his e-book, “Creating Your Personal Life Plan.”  Michael is the Chairman of Thomas Nelson, one of the world’s largest publishers and a well-respected authority on living life on purpose.

Life Lessons from a Dead Rich Guy

Have you heard about Jean Paul Getty?  He was named the richest living American by Fortune magazine in 1957, but unless you’re a history buff, his name only rings a bell because you’ve probably purchased gasoline from the company that bears his name, Getty Oil.260px-JP_Getty,1944 

Now, Mr. Getty was not right about everything.  For example, he had five different wives and was quoted once as saying, "A lasting relationship with a woman is only possible if you are a business failure." I’m not exactly sure how he kept getting dates with proclamations like that, but maybe it was because he had a way with words… or because he had a lot of money.  Regardless of Getty’s lack of relational skills, he became the richest man in America due to his keen business sense.  Consider this line that seems incredibly applicable to our current economic environment, “In times of rapid change, experience could be your worst enemy.”150px-As_I_See_It 

Is it possible that your comfort – or your advisor’s comfort – with the notion that the market is always going to take care of you led to the deep losses in your investments in recent years?  Maybe you thought that you survived the dot com bubble from 2000 through 2002, so what could be worse than that?  The answer: 2008.  History is still unfolding in this economic crisis at a pace more rapid than Getty could’ve dreamed.  How much more, then, should we heed his advice? 

Judging Mutual Funds…in 90 Seconds or Less

With over 10,000 mutual funds from which to choose as you invest, the question is begged: HOW THE HECK CAN YOU PICK FROM TEN THOUSAND OPTIONS??

We start by classifying them, and what you’ll learn in this short video can help you narrow the field down to a manageable list. 

IT’S EASIER TO LOSE MONEY THAN IT IS TO MAKE IT!

Over the weekend, I was watching a television program on which a financial advisor made his claim that, “The market has always come back and I think it always will.”  Sadly, this has been the sales pitch of stock brokers for generations and only some of those generations have walked away with a positive rate of return.  For this post, I’d like to share with you the open to the fifteenth chapter of The Financial Crossroads titled “Risk Management Investing."  We call into question the now institutionalized thought in the financial industry of “Buy and Hold,” Asset Allocation and Modern Portfolio Theory to remind all of us of the mathematical truth that IT’S EASIER TO LOSE MONEY THAN IT IS TO MAKE IT! 

From “Risk Management Investing”:

"I am more concerned about the return of my money than the return on my money." (Mark Twain)



Money_in_toilet  
Mark Twain was the first to wittily claim that he was more concerned with capital preservation (the return of my money) than growth (the return on my money), but it is interesting to note that Twain passed away in 1910, prior to the Great Depression.  Oklahoma’s favorite son, Will Rogers (who died in 1935), also later made this a notable quote.  I have another that I’d like you to chew on.  “It is easier to lose money than it is to make it!”  

That’s not a catchy slogan or tagline.  It’s a mathematical fact.  If you have $100 and you lose 10% of it, it will take an 11% rate of return to become whole.  If you lose 20%, you’ll need to make 25% to get your money back.  What if you lose 50%?  What rate of return would you need to make your money back?  The answer is an astonishing 100%!  I’m not being “tricksy” as Tolkein’s character, Gollum, called the Hobbits in the Lord of the Rings trilogy.  See for yourself:

  • $100 x 90% = $90; $90 x (100% + 11%) = $100
  • $100 x 80% = $80; $80 x (100% + 25%) = $100
  • $100 x 50% = $50; $50 x (100% + 100%) = $100

Once you’re down 50% and facing that big 100% hill, it will take you around seven years, if you’re able to make an annualized rate of 10% per year, to get back where you started.  If you’re making closer to 7% each year, you’ll be waiting a full decade to break even.  If you earn 4% on your money, it will take you 18 years to recover from a 50% fall.

But you say, “I always learned that you need to buy and hold.   The market will go up and down, and we can’t time it, so we shouldn’t try!  It’s not timing the market.  It’s time in the market!”  It is true that market timing is a very dangerous business——betting, if you will.  However, if and when you’re able to see the bearish train coming down the tracks, would it not make sense to get out of its way?  The price of staying in can be disastrous.  From the day the market peaked on September 7, 1929, it would have taken until 1954 to break even if you bought, and held.  That is a pretty long time to wait, especially if you were planning to retire in 1932.

And today?  For the last decade, the market is down over 20%.  You will find that the current logic that runs the financial services realm at the institutional level was developed in one of the best stretches the market’s ever seen.  From 1982 until March of 2000, the market ran upwards with little impedance.  Objectively speaking, Buy-and-Hold and strict Asset Allocation concepts, born in that 18-year stretch, worked very well.  But what about the stretch from 1964 up until 1982?  Believe it or not, that span represented yet another 18-year stretch where the buy-and-holder would’ve made nothing——zip, zilch, nada.  And we in the United States have it good!  Japan’s staring at their 20th year of an atrocious run that leaves the Nikkei still 70% south of its peak at 40,000.  So, eight years into a rough losing streak for the U.S. market——and following a colossal financial demise brought on largely by ignorance and greed on the part of the U.S. government, corporations, and citizens——would you rather be buying-and-holding the Dow or the Nikkei?

It’s not my intent to scare you, so let’s go back, and I can try to give you some answers and some hope.  The world’s best investors are not buy-and-holders, asset allocators, or Modern Portfolio theorists.  They’re risk managers.  These are folks like Sir John Templeton, Jean-Marie Eveillard, Jim Rogers and yes, Warren Buffett.  They spend more time worrying about how not to lose money than they do trying to make it.  I’m not talking about leaving all your money in T-Bills and CDs.  I’m talking about resetting your brain to focus first on managing risk in your investments, then, on your return.