in-laws, siblings, extended family, and friends will play in your life. Consider the following:
What lessons have you learned about money from your family or friends?
Do you agree or disagree with the way your family or friends manage their money?
How do you feel about teaching your own children about money? If you have children, what will you tell them?
Do your family or friends expect financial support from you today or in the future?
When money mixes with family and friends there can be strange outcomes. Establish clear financial boundaries first with your partner, then with those closest to you.
Charitable Giving
Sir John Templeton was arguably one of the most successful investors of all time. He was born in Tennessee in 1912 and graduated from Yale in 1934. In 1954, he established the Templeton Growth Fund. The fund was incredibly successful. A $100,000 investment in that mutual fund in 1954 would have grown to over $60 million today through the power of compounded interest and reinvested returns. Templeton was worth billions, but what is most interesting about his story is his community involvement. Even when he was making less than $50 a week a few years out of school, Templeton invested his time, talent, and money in worthy causes. In 2007 Templeton was named one of Time magazine’s “Power Givers” because of his philanthropy. Through the John Templeton Foundation, tens of millions of dollars have been invested yearly in cutting-edge scientific, spiritual, and educational research.
Charitable giving has become an essential piece of any sound financial plan. In fact, through my research and work, I’ve concluded that philanthropy is one of the top four characteristics that wealthy people share (the others are spending wisely, multiple income streams, and investing for the future). Whatever motivation a philanthropist has, whether recognition, or altruism, there is a return on investment (ROI) for giving back. Typically, ROI is received through direct dollars paid to an investor as a reward for the risks he or she takes investing their money. However, if we revisit the traditional definition of the term, ROI includes expanded networks (people or businesses you are involved with), increased sales, promotions, job offers, publicity, and so on. When you give back, people pay attention, and you become a hero and a leader in giving.
Your views on charitable giving are important to discuss with your partner. Some people prefer to donate time. Others money. Still others don’t believe in philanthropy at all. Iron out any discrepancies, as your views on charitable giving represent much more than just a simple donation. Here are some conversation starters for you and your partner:
Do you believe in philanthropy? Why or why not?
What philanthropic initiatives have you been involved in?
How do you like to give (time or money)?
What skills or dollars do you think you could offer a charity?
I’ll Have to Go Through It
Do you remember the children’s song called “We’re Going on a Bear Hunt”? The lyrics are about kids going on a bear hunt and encountering obstacles, such as tall grass, a tree, and a river, along the way. At every obstacle, they chant, “We can’t go over it, we can’t go under it,” and then they select the appropriate action such as “We gotta go through it.”
When challenging financial conversations pop up between you and your partner, keep these lyrics in mind, which essentially say that you need to work toward an appropriate solution rather that trying to avoid the obstacle. As the song and real life would suggest, avoidance doesn’t get you anywhere closer to your goals.
Team Approach
To begin planning a great financial future, you need to start on the same page and work toward your goals as a team. There’s simply no room in any relationship for unilateral decision-making, especially with your money.
1 A financial adviser is different from a money coach in that financial advisers can manage your investments and provide investment advice. A money coach, on the other hand, cannot manage your investments, nor provide specific investment advice. Rather, they focus on growing your knowledge on savvy investing strategies.
CHAPTER 2
The Drivers of Net Worth
Couples that make it, and are happy, have what I like to call “sticky glue” between them. It’s the bond that keeps them together even when times are tough. What strengthens that bond is building toward common goals that make the couple’s life better — things like family, travel, or a new career path.
Some of the strongest sticky glue between partners is financial security because that’s what funds the future you and your partner want to create. When you don’t have financial security, or are building your own versions of it independently of each other, you’ll grow apart.
Couples become financially secure by building real net worth.
Rolling your eyes while reading this? Seriously, stop. I get that money matters can’t dominate the core tenets of your relationship; love, respect, trust, and intimacy do. But you need to respect the power money has in your relationship. It’s what rips people apart or pulls them together, and that’s fact, not fiction.
Couples become financially secure by building real net worth. Net worth is the amount of money left over when you subtract your liabilities (what you owe) from your assets (what you own). If you own a home worth $250,000 and have investments worth $25,000, you have assets that total $275,000. But let’s also point out that you owe $175,000 on your mortgage and have an outstanding consumer loan of $20,000. Your liabilities total $195,000. If you take your assets — $275,000 — and subtract your liabilities of $195,000, you have a net worth of $80,000.
Your net worth is what you’ll live off in retirement. It’s what supports your dreams of travelling, getting your master’s degree, or putting your kids through university. The greater your net worth, the more financial security you have.
Building net worth has absolutely nothing to do with how much money you make; it’s about protecting and keeping the money you’ve worked so hard to earn. There are thousands of six-figure-income earning households that, in fact, have negative net worth because they’ve spent every dollar they have. Meanwhile, some of our clients at MeVest earn modest five-figure incomes and still manage to grow their net worth by thousands each year.
A good lot of people spin a web around their life to make it appear as though they have a high net worth. For example, one of our clients came to us driving a brand new Denali, having newly renovated her home, and wearing a huge two-carat rock on her ring finger. Shortly after she arrived for her appointment, her husband rolled up in a Mercedes-Benz and Hugo Boss suit. By all accounts, Gretta and Tom looked rich. But their MeVest money coach quickly discovered the wealth they were showcasing for their friends, family, and colleagues was financed entirely by credit cards and lines of credit. All tallied up, their net worth was negative $235,000, and they were ready to wring each other’s necks.
In contrast, my savvy aunt and business mentor, a Toronto-based multi-millionaire interior designer, doesn’t necessarily look the part by driving a flashy car and living in a mansion. She drives a practical used Audi station wagon,
