Whether you're an investment junkie or a trepidatious novice, investing needs to be a part of your relationship. So what makes investing so complicated for couples? Let's see...
- One partner is more interested in the topic than the other
- One partner is investing more money than the other
- One or both partners doesn't like the delayed gratification that investing requires
- One partner is skipping work to day trade your home equity loan
Rest assured, there are ways to satisfy the risk-taker and worrywart in your relationship and to set yourselves up for investing success. We have an entire game plan for twosomes in The Motley Fool's Guide To Couples & Cash: How to Handle Money with Your Honey. Here are a few of the high points.
Setting investing goals
Setting investing goals may sound like a waste of time, but, actually, there is no other topic that is as important to your investing future. Don't skip this step.
When we talk about investing, we mean putting your long-term savings to work for you. Around The Motley Fool, we define long-term as, at the very least, five years, or, even better, 10 years or longer. Investing is for major expenses down the road. Perhaps you're investing for your child's future college tuition. Or maybe you'd actually like to retire when you're ready to stop working.
Your goals should have time frames associated with them. From a purely logical standpoint, the more time you have until your goal, the more risk it makes sense to take on. You should also consider some ground rules, including an agreed-to dollar amount for the investment account and an assessment of each partner's risk level.
Market vs. mattress
Next consider how you're going to invest. Are you comfortable putting your money to work in the stock market? What about your sweetie? Would she rather put most of your dough in a CD earning 3% interest?
What if investing partners have substantially different investing styles and levels of risk tolerance? That's an excellent question. Before you can reap the deep and lasting benefits of investing as a couple, you really have to settle on what level of risk you can tolerate as a couple. This may mean being less aggressive than the more investment-savvy partner might like. It might also mean being more aggressive than the more risk-averse partner might like. When you decide to invest as a couple, you're giving up your my-way-or-the-highway rights.
Consider the game plan one couple interviewed for Couples & Cash developed. Shannon, a self-admitted investing geek, and his risk-averse bride Kristin set the following rules for making investment decisions they can both live with:
- Their first-choice investment each year is to max out their 401(k)s and IRAs by putting in the most money Uncle Sam allows them to.
- To the extent that there's money left over after that, the default choice is to invest in an index tracker, except...
- When Shannon can make a compelling case for investing in an individual company, Kristin is open to persuasion.
That last point has been crucial for Shannon. As the more enthusiastic investor, it's important to him to know that when he feels strongly about a company (with "strongly" defined as thinking it can earn more than the S&P's annual average), Kristin can be convinced. For the record, this has happened exactly five times over 10 years of investing as a couple.
For more tips on tackling the dollars and cents side of your relationship, check outCouples & Cash.