Did your parents carry a lot of debt?
Have you carried a credit card balance for more than 60 days in the past 12 months?
Do you wonder where your money disappears to after payday?
Do you feel like you are living paycheque to paycheque even though you earn a healthy income?
Does debt cause stress?
What’s worth going into debt for?
What debt-reduction techniques have worked for you in the past?
From a legal perspective, you are not responsible for your partner’s debts prior to your union. But debt taken on during the union is legally your responsibility. So if your partner defaults on a loan that was signed for while the two of you were in a legal union, you are responsible.
Investing
Lindsay invests 15 percent of her annual income by contributing to her RRSP and TFSA (Tax-Free Savings Account). She’s very career-focused and wants to retire at age 45 with $2 or $3 million in investments. Currently, Lindsay is 25 years old and has $30,000 invested.
Financial experts suggest that today’s 30- to 50-something couple will need approximately $2 million to support an average retirement income of $8,000 per month until the end of their lives. That may seem like a lot of money — $96,000 a year, in fact — but powerful forces of inflation are working against you. Assuming you are 40 years old right now, in today’s dollars that’s more like $50,000 a year. As a general rule of thumb, to allow for $1,000 per month retirement income, you need to have $250,000 in retirement savings to generate it.
Sure, there are programs like Old Age Security (OAS) and the Canada and Quebec Pension Plans (CPP and QPP, respectively) that you’ll receive money from in your golden years, but that money will compose only a mere 20 percent of your income needs, so they can’t be relied on as the sole source of your retirement income. Old Age Security is a modest income benefit paid out (or clawed back if you’ve earned above the threshold during your working years) to Canadians over 65 regardless of their employment history. Most Canadians who have worked throughout their lifetime also contribute to the Canada Pension Plan or Quebec Pension Plan. These funds are paid out in retirement as early as age 60, but there are limits to the amount of money paid out through both. Service Canada (servicecanada.gc.ca) has information on OAS, CPP, and QPP rates.
Successful investing is vital to your retirement saving, and you simply can’t rely upon government support, a possible windfall inheritance, or the lottery to get you there.
Discuss the following questions with your partner:
On a scale of 1 to 5 (1 being low knowledge and experience and 5 being high knowledge and experience), how confident an investor are you?
Are you a low- or high-risk investor?
How much do you invest each month?
Do you invest with a particular strategy in mind?
Do you have a financial adviser? If so, do you like having an adviser? Why?
There are many different views on investing. Some people like to take risks, others are more conservative. People have different timelines in mind when they think of retirement. A money coach or financial adviser can help navigate any investing challenges and questions you and your partner might have.1 We’ll dive into this subject in a big way later on in The Modern Couple’s Money Guide (see chapters 7 to 10).
Family and Friends
Colin spends a great deal of time with his family and close friends. His partner, Angela, enjoys this time as well. Every so often, though, it gets in the way of their time together and their shared values. Angela feels that Colin is heavily influenced by his friends’ and family’s views on money, career, and lifestyle, which doesn’t allow him to think independently. Colin, on the other hand, really appreciates having the support and advice of those closest to him.
Establish clear financial boundaries first with your partner, then with those closest to you.
According to a 2013 BMO Bank of Montreal survey, most Canadian couples wish they’d talked more openly and received professional financial advice prior to forming a permanent household. The majority of people received financial advice from their parents and friends. Unfortunately, as in my own case growing up, rarely are these sources of information qualified to offer financial advice. So, as you and your partner create a financial plan for your future, try to understand what financial role parents, in-laws, siblings, extended family, and friends will play in your life. Consider the following:
What lessons have you learned about money from your family or friends?
Do you agree or disagree with the way your family or friends manage their money?
How do you feel about teaching your own children about money? If you have children, what will you tell them?
Do your family or friends expect financial support from you today or in the future?
When money mixes with family and friends there can be strange outcomes. Establish clear financial boundaries first with your partner, then with those closest to you.
Charitable Giving
Sir John Templeton was arguably one of the most successful investors of all time. He was born in Tennessee in 1912 and graduated from Yale in 1934. In 1954, he established the Templeton Growth Fund. The fund was incredibly successful. A $100,000 investment in that mutual fund in 1954 would have grown to over $60 million today through the power of compounded interest and reinvested returns. Templeton was worth billions, but what is most interesting about his story is his community involvement. Even when he was making less than $50 a week a few years out of school, Templeton invested his time, talent, and money in worthy causes. In 2007 Templeton was named one of Time magazine’s “Power Givers” because of his philanthropy. Through the John Templeton Foundation, tens of millions of dollars have been invested yearly in cutting-edge scientific, spiritual, and educational research.
Charitable giving has become an essential piece of any sound financial plan. In fact, through my research and work, I’ve concluded that philanthropy is one of the top four characteristics that wealthy people share (the others are spending wisely, multiple income streams, and investing for the future). Whatever motivation a philanthropist has, whether recognition, or altruism, there is a return on investment (ROI) for giving back. Typically, ROI is received through direct dollars paid to an investor as a reward for the risks he or she takes investing their money. However, if we revisit the traditional definition of the term, ROI includes expanded networks (people or businesses you are involved with), increased sales, promotions, job offers, publicity, and so on. When you give back, people pay attention, and you become a hero and a leader in giving.
Your views on charitable giving are important to discuss with your partner. Some people prefer to donate time. Others money. Still others don’t believe in philanthropy at all. Iron out any discrepancies, as your views on charitable giving represent much more than just a simple donation. Here are some conversation starters for you and your partner:
Do you believe in philanthropy? Why or why not?
What philanthropic initiatives have you been involved in?
How do you like to give (time or money)?
What skills or dollars do you think you could offer a charity?
I’ll Have to Go Through It
Do you remember the children’s song called “We’re Going on a Bear Hunt”? The lyrics are about kids going on a bear hunt and encountering obstacles, such as tall grass, a tree, and a river, along the way. At every obstacle, they chant, “We can’t