Keeping the harMONEY alive: When investment styles collide

When it comes to tying the knot, couples have a number of different requirements. Some insist on living together; others insist on having the families meet. But what happens when you have different ways of handling money?

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print

When it comes to tying the knot, couples have a number of different requirements. Some insist on living together; others insist on having the families meet. Mike Piper of Colorado had a different requirement: a frank talk with his wife-to-be about money and investing.

"If someone I was dating was on a wildly different page, that would be a source of conflict forever," said Piper, a CPA and the author of the personal finance blog ObliviousInvestor.com.

Disagreement over money is one of the chief sources of tension for couples, numerous studies have shown, and an oft cited reason of divorce. The fact is, the topic of money and investing is impossible to avoid as you build a life together and plan and save for retirement.

And while discord can erupt at any time, periods of market turmoil can add an extra layer of stress on couples with diverging investment styles. A risk-averse spouse who gives in to an aggressive partner's wishes might feel fine during a bull market. But acquiescence can easily turn to anger and resentment when the market is tanking.

Fortunately, there are things couples can do to bridge the investment style gap and keep the peace. Here are five tips to help you keep the harmoney in your relationship.

Communicate. Like many other issues in relationships, the key to maintaining harmony is to begin with a conversation. It's important for each partner to understand the other person's tolerance for risk. Couples should also talk about their financial aspirations and how soon they hope to achieve them.

"It's vitally important for couples to communicate and come to an agreement on financial goals and what it takes to get there," said Greg McBride, chief financial analyst at Bankrate.com.

Get educated. Knowledge can give couples the power to resolve financial differences.

Learn the basics of investing. A spouse who favors equities may not have a handle on all the risks involved. While stocks offer the potential for higher returns, there's no guarantee they won't go down in value.

On the flip side, a person who insists on squirreling away money in a savings account might not be fully aware that even this conservative approach comes with its own risks, such as inflation risk. Inflation can erode the purchasing power of cash, meaning your money actually loses value over time.

Both parties should understand the importance of diversification. By diversifying, couples can manage risk by spreading their investments across and within different asset classes.

Suck it up and go conservative. Often, the best thing to do is to go with the investment allocation favored by the less aggressive partner.

"Within reason, it's usually good to let the risk averse person call the shots," Piper said.

This strategy might be better for the relationship in the long run, he added. If a couple does the opposite and defers to the more aggressive partner, there might be a serious conflict ahead should the value of their investments decline.

Divide and conquer. For some couples, a different strategy might work better. Instead of leaning toward the wishes of one person, it might be better to divvy up accounts and responsibilities.

"Have the more conservative partner handle the savings for short-term goals," such as saving for the down payment on a house, where a conservative approach is justified, McBride recommended.

The more aggressive partner, in turn, could possibly "oversee savings for long-term goals," where investments can be more aggressive, McBride said.

Hire a referee. Sometimes couples simply can't figure things out on their own. A financial professional can look beyond the two opposing investment styles and make recommendations based on what's mutually beneficial for the couple.

"This is where the reality check comes into play," McBride said. "You're going to someone who is better equipped to devise a solution."

It might just be worth the cost and effort. After all, managing a relationship is hard enough without having to fight about money.

This article originally appeared at The Alert Investor.

Topics:
  • Financial Planning
  • Investing Strategies
  • Financial Planning
  • Investing Strategies
  • Financial Planning
  • Investing Strategies
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print
This article was written by Phyllis Furman from The Motley Fool and was licensed as an article reprint from March 14, 2016. Article copyright 2016 by The Motley Fool.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917.
756484.1.1
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.

Here's what we suggest you explore next

Keeping the harMONEY alive: When investment styles collide

When it comes to tying the knot, couples have a number of different requirements. Some insist on living together; others insist on having the families meet. But what happens when you have different ways of handling money?

Invest affordably and simply

Professional online money management for less.

You might also like

5 of the biggest investment mistakes to avoid

Investing smart is not easy. This article outlines five of the biggest mistakes you can avoid while investing.

How I became an investor in my thirties

How one woman overcame her money fears, tackled her finances, and became an investor.

Divorcing? How to split up retirement nest eggs

Divorce is not only emotionally stressful, it is also stressful financially. Read here for tips on how you can split your retirement savings during divorce.

Start budgeting: Meet Cinch

Introducing CinchSM from Fidelity, a simple way to track your saving and spending. Just answer a couple of questions to get started.