Expert Interview with Ray Advani of Tie the Money Knot on Personal Finance and Relationships
There are plenty of personal finance sites out there that tell us how to save, spend, borrow and invest money, but Ray Advani says there aren’t too many that discuss how these things are impacted by relationships.
That’s why he started Tie the Money Knot back in 2012. He wanted to start a conversation about how people make personal finance decisions with each other.
“Think about it: Relationships matter in every part of life,” Ray says. “Thus, it makes sense that they impact our finances, too.”
Here, Ray shares his insight and tips for couples on making smart financial decisions, especially when it comes to saving for retirement. Read on:
What are the most common ways money and relationships intersect?
Money and relationships intersect in many ways. The one that jumps out is marriage. The choice of whom a person marries, and how the two people can work together, compromise, or disagree can really impact finances.
Parents impact finances, too. Each family has its own unique dynamic, and this could range from parents offering constant help, to parents who require to be supported on their own. The flipside is kids impact the financial situation of parents, too.
Additionally, siblings, friends, neighbors, and of course employers can impact finances. So as we can see, money and relationships do intersect on many levels.
At what point in the relationships should couples start discussing finances?
Couples should discuss finances when seriously dating, prior to getting engaged. It never ceases to amaze me how some folks get married without ever discussing finances, but focus on putting forth a lavish wedding instead. While the relationship itself, of course, is about much, more than money, it should be discussed openly early on.
What should they talk about?
Couples should talk about things such as:
- Long-term life goals and how they plan to reach those
- Spending vs. saving
- Career goals
- Potential interest in having one spouse be a stay-at-home parent
- Premarital assets
- Obligations to others – such as parents or children (from prior marriage)
What are the biggest causes of financial conflict for couples?
Big causes of financial conflict often revolve around spending. Sometimes it could be different overall habits with spending versus saving. Other times it could be a case of people simply wanting to spend on different things.
Additionally, sometimes people like to claim marital money as “mine and yours” instead of “ours,” which leads to division. Other issues might include financial infidelity, different life goals, not enough income, in-law pressure and a wide range of situations.
How can couples who look at spending or saving money differently find middle ground?
It’s important to think in terms of “we” rather than “me.” In doing so, also make open communication and compromise key priorities. Taken together, this mindset of valuing the other person and being able to talk about things can help couples reach a middle ground they can each live with and collectively move forward with.
What conversations should couples have regarding retirement? When should they start having them?
This might seem unconventional, but I think the earlier in a relationship people can talk about retirement, the better. As in, even when seriously dating. After all, if one person is thinking about retirement and is willing to make sacrifices to do it early, and the other is not interested in the topic, wouldn’t that be good to know early on? But if that’s too early, then I’d say just as soon as possible in marriage is a good time to get moving on the conversations.
In terms of what to talk about, it’s vital to talk about these factors:
- When a couple wants to retire
- What lifestyle they envision in retirement
- How much money they anticipate needing in order to meet the retirement goal
- How they plan to make, save, and invest the money to make it all happen
How can couples go about establishing retirement goals?
A common theme you’ll hear me talk about is communication and compromise. This should be an underlying aspect to establishing such goals.
Couples should really think about what they want out of their lives, including what their retirement lifestyle would look like, and work backwards to plan for it. While we can’t really say exactly what our lives will be well into the future, we can start early to plan for what we envision.
What do you think are the biggest mistakes couples make when it comes to their retirement savings?
Couples often underestimate two things:
1. Their own longevity
2. Actual costs in retirement
In terms of longevity, there is the risk of outliving your money. Not that anyone wants to live a shortened life, but it’s a reality that people need to take into account that life can be longer than anticipated.
Also, the cost of living in retirement can be greater than people might anticipate. Nobody wants to live a much more frugal life in retirement after maintaining a more prosperous lifestyle earlier in life. The desire to live an active, fulfilling retirement can lead to spending more than what was planned for. Also, perhaps more importantly, there can be significant health care expenses later in life. I’ve seen plenty of seemingly healthy adults develop significant issues when older, and I’m guessing none of them truly expected that such things would happen.
What are your favorite types of retirement investments? What do you steer clear of?
This really depends on where you are in life, in terms of your age, time until retirement, and other specific personal factors. Given that I have some years ahead of me before I can retire, I’m focused on a mix of investments that includes stocks as a key driver. That being said, I prefer index funds over actively managed funds or individual stocks.
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