How to try avoid money conflicts for couples - Limerick financial adviser

WE are a two-income family, but we live as if we have only one income, was a comment made to me recently.

And the spouse who said it was frustrated because from a financial perspective she believed they were in a good place and she was right, they were.

She wanted them, him more like it, to loosen the purse strings because she could see friends and neighbours and siblings enjoying life and spending money on nice things like cars and home improvements and holidays or going to concerts whilst still saving money.

But all they were doing was saving money and if they did happen to go on holiday, it wasn’t for very long and the accommodation was only alright (her words).

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A sister of hers told her that their monthly savings rate was 10% of their income which is very good, but this woman and her husband were saving 50%. And of course it’s nice having a big balance in their account, but they really had nothing to show for it other than numbers on paper. She said they didn’t have any fond memories she could recall from spending money on themselves other than seeing a nice big number in their savings account.

She also said that whenever she brought up the idea of going on a nice holiday or buying something for the house, immediately it created tension between them and she could see the anxiety it gave him and she didn’t want that happening either, so she’d back off.

But she doesn’t want to constantly be doing that either, so she reached out for some advice.

And before I agreed to meet her, I had one condition and that was that her husband was to be there as well.

Which she agreed to, and more importantly so did he although he thought the reason we were meeting was to have a general chat about their finances and primarily it was, but she also wanted to bring up about how she was feeling about their lack of spending.

In advance of the meeting I asked them to complete some forms for me which would give me an overview of their finances i.e. what level of debt they had, how much they had in savings and investments, the value of their pension funds, mortgage amounts, a monthly budgeting breakdown i.e. income and outgoings and so on.

Having that information to hand allowed me to review everything in advance of our meeting so when we met, we’d hit the ground running.

Anyway, I reviewed what they sent on, and their finances were in excellent shape. They had a mortgage with a very good rate, and they had a relatively small balance outstanding, and it only had about 14 years left to run. And they both had very healthy pension pots and their savings and investment balances were excellent as well, so all good.

And I told them so and I’m hoping that was good for them to hear.

My only observation was, and I don’t say this often, and it probably came as a surprise to him when I said I thought they were over saving.

And it’s fine saving a tonne of money if you are going to do something with the money, but they weren’t, they were just stock piling it.

And I’m not sure what for, so I asked him.

And his first comment which came out of his mouth really quickly was that they’d need it if he was ever made redundant.

And that was a fair comment, but when we looked at the cold hard numbers I could work out with reasonable accuracy what his redundancy payment would amount to and what money they’d have in total when it was combined with their existing savings.

I was then able to work out what deficit would exist if he did lose his job and when you divide this deficit into their savings they had a runway of about 104 months. So, I told him that if he lost his job in the morning, they’d be fine until February 2035.

When I said this out loud, I could see two reactions from them, hers was an, I told you so and his was one of surprise because he never thought about it that way before. By converting a cash amount into how long it would last in terms of months and years can, I believe, change someone’s outlook and their mindset.

His redundancy thought bias was to catastrophes things i.e. our house will be taken off us, we’ll be destitute, it will break our family apart, I’ll be a failure to my family etc. and it was these thoughts that were preventing him from spending money. But when I presented him with the cold hard facts, I was able to give him indisputable data that they would be fine even in his worst-case scenario, and he could now stop those thoughts if they occurred again.

The purpose of running these numbers was to both eliminate a sense of over optimism or over pessimism by working off factual, indisputable data because it takes the emotion out of how someone is feeling. And the numbers can confirm that they are right to be worried, or they are right to be relaxed and happy.

So, where did his catastrophizing thinking come from?

It was deeply rooted in his life experiences, which started at an early age and continued on when he became an adult and parent himself. His past experiences shaped his behavior when it came to how he dealt with and felt about money.

And we have all flash points that we can recall when we were younger when it comes to money and they could be hearing our parents worrying about money, or seeing a parent worrying about losing their job, or not being able to go on holiday when all our friends were, or your parents driving a banger of a car when everyone else in the neighbor drove nice ones, or presents we wanted at Christmas time but they never came.

And we may think back and think that they didn’t bother us then and they don’t bother us now, but I think they do and they are planted somewhere in the back of our mind and can come out when we become adults.

The gentleman I met recalled how his father went on strike along with everyone else in the factory he worked in, twice in the 1980s, and soon after the second strike, the factory closed down and he lost his job and didn’t get another one for years afterwards.

He saw this big man slowly become smaller over time and he was racked with anxiety and depression and things got so bad that his wife had to get a job to pay their bills and council mortgage. He felt a failure and he said his parents didn’t speak to one another for two years.

So, that’s why he didn’t spend money. He didn’t want what happened to his parents to happen to him. His wife didn’t know this, and it became much clearer to her why he acted the way he did when it came to money.

And nothing like that ever happened to her. Her parents weren’t wealthy by any means, but money was never something that she had an anxious or poor memory of.

Money stories and past experiences we or people close to us have can shape our attitude and relationship with money. Our current behavior or fear or optimism whether we know it or not is often established at a young age.

And having two different experiences of money can create tension between two people as we can see but with this couple we had made a breakthrough.

It started off with her not understanding why he wanted to save every cent they earned and spend none of it, and he couldn’t understand why she wanted this need to spend money. They were poles apart with their thinking which created tension and frustration between them.

But there was no communication between them and neither knew how the other was feeling.

And the solution to this impasse was relatively simple.

They need to speak with each other because neither of them felt understood and rather than just trying to defend their position, they needed to take a step back and try and see the others perspective and it’s easier to understand that perspective when she realized his attitude to money came from him not wanting to end of like his parents did. She now knew he was frightened of becoming broke and all he wanted to do was to protect his family. He understood that she wanted to reward themselves for their hard work and spending money on nicer holidays and things for their house and having a meal out once every month or two was just a way of actually bringing them even closer together.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey