[Editor’s Note: Deadline alert! Today is the last day you can sign up for the Physician Wellness and Financial Literacy Conference (WCICON23) and be guaranteed to receive our famed swag bag (which includes books, a limited edition WCI shirt, and so much more). Aside from getting to hear engaging keynote speakers like Christine Benz, Stacy Taniguchi, and Dr. Jim Dahle, we created WCICON so you can enjoy a relaxing, resort-like environment while learning the know-how for how to create lasting wealth. Make sure to register for WCICON23 today to get that sweet, sweet swag bag and take the next step toward financial freedom!]
By Dr. Margaret Curtis, WCI Columnist
My husband and I recently celebrated our 20th wedding anniversary (although, now that I think about it, we didn’t celebrate the occasion with anything other than a “good job, baby”). We have to learn to live a little). Twenty years, two medical careers, three kids, six dogs and many, many conversations about money later, we don’t just have common financial goals: we’ve learned to think about money the same way.
I agree with the standard advice that you should talk about finances early in a relationship, but I don’t necessarily agree that it will set you up for success later on. Since you don’t know what curves life throws at you, you might not even know what questions to ask. It wouldn’t have occurred to me to ask my husband how much money he would throw at a hockey rink in his backyard, when his answer would have been, “How much does a Zamboni cost?” And no, we don’t have Zamboni. We have a hot water pipe and one of these.
You can certainly see some red flags early in a relationship – for example, someone who is comfortable with credit card debt – but the bigger intangibles are harder to identify. My husband and I ticked just about every box about financial compatibility when we met: neither of us had any credit card debt, we maxed out our retirement accounts every year, and we felt comfortable talking about money (refusing to talk about money would have been a huge red flag for me). We had similar stingy hippie/New England lifestyles. But we still had a lot to learn about money, as I will explain.
Here are some of the misconceptions we had about money and how our thinking has evolved. You don’t have to agree with our or your spouse’s views on money. There is room in a healthy relationship for different approaches. You may find that examining your attitudes toward money brings to light other conflicts you and your partner have. Or you can use these topics as a conversation starter on a date and watch them fade away.
Since marriage is a collaboration, not a competition, and I hope to do so for another 20 years, I will not identify which of us introduced these incorrect concepts into marriage. We all have room to learn.
Save on the little things so you can spend on the big things
It is also called “a wise penny, a crazy pound”. Some people swear by saving small everyday things and, at the same time, big extravagances. We no longer take this approach because:
- It does not work. Yes, small amounts add up, but on the scale of a doctor’s salary, not that much. You can’t save enough on your cable bill to send your kids to college. You also have to keep an eye out for the big stuff.
- Everyone has their own definition of “big” and “small”. It’s easy to justify your own expenses and criticize those of others.
- It’s a good way to drive everyone around you crazy. I know someone whose mother used to tell the kids they couldn’t afford to stop for ice cream on their way home from the beach. This person (who is not my husband) now has . . . questions around money.
Now we still save on (some) little things, because we like to do it. But our financial plan is focused on the big picture.
More information here:
We are (finally) broke! Why being worthless is amazing
Saving is just a matter of discipline
I admit that this was me. My husband has always believed in the importance of putting money aside in accounts that are hard to see and access, like retirement accounts. I thought I was too smart to need to do that. Then I went to a talk by the excellent Sarah Catherine Guttierez, CFP, at WCICON22 on “the fiscally efficient waterfall”, and she said there are real studies that show most people can’t resist spending money that is just left in their checking account. (That’s why I’m going to WCICON23, and I hope you are too. It’s fun and you learn things.)
I am now a convert. We keep enough in our checking account to cover day-to-day expenses, but any excess is quickly transferred to the brokerage account which we don’t check as often.
Tax refunds are awesome and tax deductions are free money
Many people knowingly overpay their taxes because they want a refund. A refund looks like a windfall, when in reality it’s your own money that you loaned the government interest-free for 16 months. Now, we’re aiming for the most accurate deductions possible, with the goal of a small refund.
Tax deductions lower your taxes, but they don’t actually put money in your pocket. If you spend $100,000 to start a business in the 30% tax bracket, you will lower your taxes by $30,000 but you will still have spent $70,000. The same goes for charitable donations, mortgage interest, and anything else you can deduct from your taxes: they’re not free, they’re just discounted. We take advantage of all the tax deductions we are entitled to, but we are not too happy about it.
The only major exception that I know of is Real Estate Depreciation for Real Estate Professionals (REPS). It’s a “paper deduction” that lowers your taxable income without costing you money, and it’s one of the reasons real estate investing is so popular among high-income professionals.
More information here:
How We Became Accidental Owners
You need to allocate your money to different “compartments”
Some finance gurus recommend that you think of your savings in “buckets” – or that you actually put money in different envelopes, each assigned to a different task: rent, groceries, gas, etc. We found that this didn’t work well for us because
- You have to be very diligent in remembering which dollar bills have which job. And if you keep money in multiple accounts, that’s way too much record keeping.
- You don’t have a lot of flexibility. You have to brew money to meet needs.
Now we just treat money as fungible, which it is. Everything goes in and out of a big jar.
You need a “money guy”
We used to have two different kinds of money. One worked on commission (nice guy, but we stopped using him soon enough). One was a banker in a big institution with a very nice office. It was harder to give up, because this nice desk gave a real sense of security.
But as we learned more about personal finance, we realized that we were spending a ton of fees just to protect our money (the second guy was geared towards capital preservation, not growth fit for life). age). We also realized that we could manage our investments ourselves, which we do now.
More information here:
How to Become a Self-Directed Investor
Is it worth it?
We used to review purchases based on their value, as in “airfare was expensive but totally worth it!” The problem with this mindset is that very expensive things are usually very nice. Flying first class, luxury cars and luxury resorts: all of these are lovely and make you feel like you’re getting what you pay for, but they don’t fit into most budgets. It’s easy to justify all sorts of big expenses as “totally worth it.”
Now, when we consider a big purchase, the first questions we ask ourselves are: Can we afford it? Is this part of the plan? Does it correspond to our priorities? Only if the answer to these questions is “yes” do we ask if the price matches the value to us.
We are not yet perfectly aligned in our attitudes towards money. One of us always gets really excited when we return deposit bottles and get a refund.
One of the most important lessons: not all spending has to be utilitarian or virtuous. Some of the things we’re glad we’ve splurged on over the past 20 years:
- Each of the six dogs.
- Overnight summer camp for children. A luxury for sure, but I would pay twice for this kind of glorious, confidence-building experience.
- An old VW motorhome. Hours of adventures and hours of tinkering.
Speaking of which: if anyone hears of a cheap Zamboni for sale, let me know. Our 21st anniversary is approaching.
What do you think? Have you and a significant other ever had completely different concepts of finances? Did you fight for it? How did you solve the problems? Comments below!
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