Let’s talk about money
Early in our marriage, my wife and I met with a financial advisor. The opportunity to consult with an American Express advisor was presented as a free service to cardholders. We probably understood it was a thinly-veiled attempt to bring new clients in the door, but either way, we assumed it couldn’t be a bad idea to have someone review our finances and give us some suggestions about how to meet our goals — saving for a home while paying off our sizable educational loans.
We were at the beginning of our professional careers. Stephanie was still in her medical residency, and I was working in government. Despite our concerns about debt, we were otherwise relatively optimistic about our financial futures. Within minutes of this meeting with our preppy 20-something advisor, however, it was clear we weren’t the prospects he was hoping for. He cut right to the chase. There really wasn’t much he could do for us (meaning there wasn’t anything that he could, in good conscience, sell to us). He could only advise that we focus on paying down our debt, although he seemed pretty uncertain this was realistic. Sheepishly, we gathered our things, thanked him for his time, and walked out.
We’ve thought about this meeting many times over the past 25 or so years. At the time, we were left wondering, was our situation really so dire? Was he just trying to give us the best advice he could? Or was this brush-off just because he was so green that he couldn’t see the potential in building a relationship with early career professionals like us? Whatever the case, it didn’t make us eager to engage in future discussions about money.
In some ways, Americans are among the worst at talking about money. It’s not really that we don’t talk about money. We actually love to talk about how we hate to talk about money. And everyday conversation is filled with indirect talk about money — we talk about inflation, energy costs, college tuition, and even holiday shopping, vacation plans, and concert tickets. But we tend to sidestep the actual subject, even with the people most important to us. According to Fidelity Investments, 43% of Americans don’t even know how much money their spouse makes. Money is, in fact, often identified as one of the most common topics that couples fight about, behind communication and trust. But if you don’t even discuss your household income, I would suggest that the arguments about money might actually be more about communication.
In the US, these taboos vary across the socioeconomic and cultural spectrum, but may be strongest among the wealthy, where it may be seen as crass or tasteless to talk about money, and there are also feelings of guilt. While the wealthy don’t want to appear boastful or insensitive, there’s also an undercurrent of not wanting to confront the inequality in our country on a personal level.
For the middle class, silence about money may offer a front for their own anxiety and economic fragility. Stoicism projects stability and confidence while the reality might be far from it. Keeping up with the Joneses is real and often requires some sleight of hand. For the working class, the taboo is actually weakest. Talking about money and life’s financial challenges is necessary for survival. Akin to a union solidarity, the working class may have a sense that there’s a collective strength in banding together. They understand that discussing wage rates and employment strategies does, in fact, lift all boats.
The reality in the US, however, is that in order to convey our status or power, we don’t really have to say too much. There are so many other proxies for wealth that’s it’s just not necessary. Where we live, where we vacation, where we went to college (if we went to college), convey all anyone really needs to know about our economic status.
We didn’t talk a lot about money in my house growing up. I remember us arguing about money, and I remember hearing my parents arguing about money, but I don’t remember any of us talking about money. I listened though. And I paid attention. I remember overhearing details of the negotiations about the house my parents bought when I was in middle school. I remember the deal my dad got purchasing his used “company car.” I made note of my parents’ salaries in my college financial aid form. I remember details about the cost of vacations, car repairs, and home upkeep. And I remember the emotional strain that certain expenses seemed to trigger, like the $750 tuition for my summer high school program at Davidson College.
But we rarely, if ever, just talked about money. Not at dinner. Not in the car. Not even in the context of planning for college. It was always an issue that hovered over every decision but was rarely addressed explicitly. Maybe I just took for granted that my parents would figure these things out.
From one study, just 17% of parents with an annual income above $100,000 had discussed how much they earn or their net worth with their children. “Money is not only a difficult topic, but the most difficult topic in many homes,” said Deborah Price, a money therapist. Who knew such a thing existed? “It’s important to talk about money because it creates a feeling of safety in your relationships, whereas not talking about money often leads to fear, secrecy, and a loss of intimacy.”
Many taboo subjects, like sexuality, weight, mental health, and money, are shrouded in secrecy, because they are associated with feelings of guilt, shame, irresponsibility, and a lack of self-control. They can ultimately undermine our self-worth in destructive ways. But money seems to be the toughest. According to a Wells Fargo survey, 44% of Americans see personal finance as the most challenging topic to discuss with others, harder than subjects like death, politics, and religion. Similarly, Time magazine found that 40% of couples don’t discuss money management at all before getting married. The only way to de-stigmatize these subjects and to diminish their power over us is to confront them head on, openly and without guilt.
In our home, we have talked about money for as long as my wife and I have been together — with each other and with our kids. I don’t know that our kids know what we earn or the value of our retirement savings, but they know what things cost and they know what we value. They’ve seen us make financial decisions, and they know the difference between what we can afford to buy and what we think is worth buying. They know that we view international travel as an investment with a real return, while we view first class airline seats as an extravagance with limited value. But those are decisions that reflect our values. Other people, including our kids, need to make those judgments for themselves. So far, I’m extremely proud of the values I see reflected in our kids’ financial decisions.
In his blog (and now book) The Algebra of Wealth, Scott Galloway offers what he deems “practical, game-changing” advice for financial success, based around four basic ideas: Focus, Stoicism, Time, and Diversification.
Focus is about being smart but also about focusing on what’s important. The most significant economic decision you will make, he says, is the selection of a partner. Married people grow their net worth 77% more than single people. “Marry the right person, and then invest in that relationship every day,” he advises.
Stoicism is about being disciplined, but it’s also about “having good character,” and a higher purpose. “The reality, in my experience, is that wealthy people, in general, demonstrate strength, acumen and…kindness.” I’m not sure he’s necessarily right on this, but I like it.
Time and diversification are two of the most fundamental principles in money management, but Galloway puts a metaphysical spin on both. For Galloway, time refers not only to the value of compounding, but also to the idea that time is relative and how you perceive it can change your reality. “Change the timescale of your life, and you change your life.” Similarly, with diversification, we know what it means practically to investors, but from the perspective of a 60-ish-year-old serial entrepreneur, it broadly means, and I paraphrase, You win some, you lose some.
I appreciate Galloway’s take. Although I don’t typically like to sum up life lessons in succinct lists, I appreciate that this list of financial strategies speaks as much about life as it is does about money. And that’s how I’ve always viewed my own approach to money.
Since our discouraging meeting with the American Express advisor, my wife and I have focused on the basics. We paid off our debts. We maximized the tax-advantaged savings available to us for retirement, and then for college, once we had kids. We prioritized our family and our home above all. We never added to our debt for vacations or bar mitzvahs or home improvements. We’ve always cooked at home on weeknights. We commute via the subway and eschew taxis, except on special occasions — or other times when we just prefer to sit in traffic. In sum, we’ve drawn upon our basic values for life and applied them to our finances.
I’ve tried to be disciplined and consistent. I’ve tried to be open and honest, not shying away from difficult conversations. I think I’ve known my limits — using what I know but also acknowledging what I don’t know. Lastly, I’ve tried to remain optimistic, taking a long view while living in the present. This strategy has served me well.
Galloway is reportedly worth $40M. I’m not, but I’ve got more than enough.
