How My Wife & I Got On The Same Page About Money
Our 10 Year Plan for Financial Independence
“The most important thing we do is constantly talk about money and the future.”
wife and I have very different approaches when it comes to money.
She has a very low-risk tolerance when it comes to money. She does not trust the idea of investing in the stock market. Despite the fact that she reads all of my writings about finance, in her gut she still feels like someone is going to “steal her money” if she invested in the stock market. I tell her all of the amazing benefits of long-term index fund investing through my Vanguard account, and her reply is “but can we trust the people at Vanguard aren’t going to steal our money? Who are these people anyway?”
The first thing out of her mouth when we discuss buying rental properties is “What if we get awful tenants?”
If it were up to her, we would liquidate all of our assets and stick it under the mattress (an actual discussion we have had).
I have a very high-risk tolerance (for our long-term money at least). I would remortgage our house and invest it all in my portfolio of Index funds If I could. On paper, I argue that is the correct move, if we consider the cost of a 3% mortgage versus the historical 9%-10% return of the S&P 500, over time we would likely come out pretty far ahead with that strategy.
She says “what if the market crashes and we lose all of our money?” I reply “It will bounce back and we only lose our money if we sell after the crash”. I show her a spreadsheet showing how much more money we would have today if we invested the day before the 2008 market crash, she is unconvinced.
I would also sell our house and move us into a 3–4 unit multi-family property as well. needless to say, we couldn’t have more opposite starting approaches when it comes to money and financial planning, so how the hell did we get on the same page with a financial plan?
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We Talk About Money, a LOT
The most important thing we do is constantly talk about money and the future. We have no issue having long, I mean like hours long, “discussions” (heated debated) about money. We are not afraid to really dig into the details. We recently had a 90-minute back-and-forth discussion where I was showing her the last 100 years of historical returns from the S&P 500, including inflation-adjusted returns and the compounding effect of reinvesting dividends.
We discuss what we need to do to retire at the same time, and retire early (even though we are only in our early 30's).
We’ve already financially planned for our first kid, including each of us putting extra money aside each paycheque to top up her maternity leave.
We talk constantly about where we want to go on our next vacation, and more importantly how we are going to have it paid for in advance. We discuss different travel hacking strategies and put aside a bit of money each paycheque into a “Travel Fund”.
We talk about how we will split our joint expenses if one of us begins to make significantly more money than the other in the future.
We track our spendings down in a joint spreadsheet and go through our credit card statements to find out where we are getting lazy with our budgeting.
We talk about how we can match up our benefits at work to make sure we are never going out of pocket for health and dental costs.
We talk about how we can minimize our taxes when we have our first kid, and when we are withdrawing from our retirement funds down the line.
We know exactly how much we would get in Child Care benefits if we had a kid right now.
I could go on, but I think you get the point
Playing To Our Strengths: Offence VS Defence
So out of all that talking, we have come up with a pretty simple plan that plays to both our strengths. This is pretty easy for us because we make roughly the same in “take-home pay” (what’s left of your pay cheque after deducting taxes, retirement contributions and other expenses).
I play “offense”. I focus on creating new wealth for us by throwing every extra penny I have into low-cost index funds through my Tax-Free Savings and Registered Retirement Savings Accounts. I reinvest any dividends to acquire more units of these index funds. barring some true financial catastrophe, I will not sell one single unit of these funds until we pull the trigger on retirement, or we agree on another investment opportunity like a rental property. This is a true “buy and hold” strategy for long-term gains.
She plays “defense”. For every dollar I throw into the index fund portfolio, she matches that investment with additional payments on our mortgage. She is more than happy to do this because it has a “guaranteed return”. Every dollar of additional principal we pay down is another dollar we are not paying interest on our next payment.
This also protects us from “interest rate risk”. We locked our mortgage at rock bottom mortgage rates. When our mortgage renews in 3 years, we will almost certainly be paying a higher interest rate at that time. The more principal we can pay down in the next 3 years, the less interest we will have to pay when our mortgage rate eventually increases.
Our 10-year goal of this “offense-defense” plan: have our mortgage paid off, and enough investments built up to be true “financially independent”
Do you and your spouse have regular talks about money? What kind of Financial game plan have you come up with?
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions