Financial Conversations: Tough Talk

Speaking about finances is a topic that strikes fear and apprehensiveness in many people – whether they are business partners, personal relationship partners, employees, or friends – because noone wants to have these discussions when they are doing well (in case someone wants to borrow money) and especially not when they are doing poorly (in case they want to borrow money!)

Wells Fargo’s “Talking Money,” discusses how to start a financial conversation with a partner.  They reported that “money can be a leading stressor in relationships, but you can lessen this strain by starting to discuss finances early with your partner.”

What are some of the signals you might receive that tell you it will be a tough financial conversation?

• The conversation starts with “we need to talk right now.”
• You told him that you wanted to talk and the time and place, but he did not show up because “he didn’t have the time.”
• Everyone is scrambling to make up a budget because they didn’t have one!

Here are three tips to start the conversation:

1. Discuss your values around money. Everyone has a different money mindset based on their upbringing. Once you know if there are shared values, you can proceed.

 For example, if you grew up with parents who were always worried about money and you didn’t have enough, your mindset might be ensuring your financial security.  If your partner grew up with parents who were able to afford and give you the things they needed, you might not have a healthy respect for money because you never had to earn it.

2. Share truthful information about each person’s finances. Be honest, truthful, and non-judgmental about where you are in your financial journey, and encourage the other person to be honest with you.  Are there any major debts that need to be paid off, and when?

If you have a business partner, you will be “wedded” in business, and your personal financial relationship becomes intertwined. Discuss your credit scores in case the company needs a loan.  Discuss a savings plan to ensure the business can make payroll or pay off debts. You will also need to discuss taxes if the company’s earnings will trickle down to your personal taxes with a Schedule K-1, etc.

3. Create a plan. Ask these questions of your partner. If you do not have a partner, then answer them for yourself.
4. Where do you/he want to be in five years? How much money will it take to get there? Is it a reachable, time-bound goal? What is the budget you need to continue in your current lifestyle?
5. Agree that before making larger purchases, they will be discussed to see if it fits into the budget.
6. What are your retirement plans? Will you stay in the same state or retire to a less cumbersome state or out of the country? Write a pros/cons list.
7. Do you want to have children? Or employees? How will you save for college funds?

 

Why is this conversation so difficult?

This conversation is difficult because most people are afraid to know exactly where they stand with their finances, moreover, to share that information with others.  If you are married, typically one person manages the finances and financial standing is not a part of the discussion.

But, regardless of being uncomfortable, this is a critical conversation to have with yourself or a business partner.  Listen to a few podcasts regarding financial planning.

Now, you know better, go do better!