Rainbows v landmines: Sometimes it is best to have a third party involved in your finances

THE relationship one person has with money and the relationship their partner has with money could be at the opposite end of a spectrum and when that happens it can cause problems.
If one person has a positive mindset about money and they believe that everything will be alright and it will all work out in the end, but their partner has an anxiety that things won’t work out and their need to be worried is going to cause problems for both of them.
And that is exactly what I encountered with a couple last year.
She described herself as having a sunshine and rainbow disposition when it came to money, i.e. all will be good. She said her husband’s mindset was different, it was filled with landmines. His thinking was that if they’re not careful everything is going to blow up.
And these attitudes came to light when I met both of them to talk about retirement.

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They’re both aged 58 and she thinks they can retire now because their mortgage is paid off and their kids are off the payroll, and she wants to retire now because work is tough and they’re always feeling stressed about it.
But he feels they both need another four or five years before they can. He thinks they need to save more and spend less, but she thinks they have saved enough, and they don’t have to spend less.
The good news is that with a bit of listening to what each other has to say and how they were feeling, together with me presenting them with factual indisputable evidence based on their numbers, a happy medium was found that satisfied both of them and I’ll present the evidence and how we got to that point in a moment.
And whilst it was important we run the numbers to see what they had accumulated and how much they were saving and what everything was going to translate into etc. they both had to have some consideration of where each other’s thinking was coming from and trying to understand what each other’s attitude to money was and where their anxiety and optimism was coming from.
Because someone who has that landmine mentality is never going to not have it, we just want to reduce the number of landmines they can see, that’s all. And the same with the sunshine and rainbow attitude, we just need to temper it a little especially if their expectations aren’t grounded in cold hard data.
And how we each interpret the state of our finances can be a challenge. No matter what I say and no matter how clearly I say it, that bubble above his head might continue to show landmines everywhere and them running out of money and them sitting in a cold house wearing layers of clothes is all that he sees and thinks. And for her, that bubble shows her on holidays drinking cocktails and they’re acting like a pair of honeymooners while everyone else is at work.
And sometimes you have to be careful, particularly with the sunshine and rainbow attitude because no matter how much you believe something to be true i.e. our finances are great and all will be fine, doesn’t make it true either. It’s just their unique view, that’s all. Which means it’s important that people like me work with them in a very factual manner i.e. this is how much you have, this is how much you’ll spend, this is how much it will pay you each month, this is how much it will last for and so on.
What you want to eliminate is a sense of over optimism or over pessimism and uncertainty and working off factual, cold hard numbers can help take the emotion out of how each are feeling. And it can confirm that they are right to be worried or right to be delighted.
Where his frustration about all this talk about retiring was coming from, was his wife not knowing how much they’ll need, and she hadn’t run the numbers to see if they could retire now or not. And maybe he doesn’t want to retire and wants to continue working so the emotion he was feeling was anger and frustration which resulted in him doubling down and refusing to even talk to her about it. He’s written it off and they both have to work until they are 65, end of story.
But he hadn’t run the numbers either and just like his wife he had no evidence to support his claims so it was up to me to do a bit of detective work to find out whether they can retire now or whether they have to continue working.
Before I tell you whether they have to or not, let me quickly tell you what the big reason behind his fear of retiring too early was and it came from when he was 10 years of age.

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You see his parents never had any money and his father passed away in his late 50’s and left his wife and kids with next to nothing and that had an awful impact on him. He didn’t want the same thing to happen to his family. So, he thought working and earning an income and being able to provide for his family and having things like a death in service benefit paid by his employer if anything happened to him were the two safety blankets he could wrap around his family.
And if he retired, they’d be gone and that was really where his anxiety was coming from.
When trying to shift someone’s attitude particularly from negative to positive, you’ve got to ask the question, where’s your evidence for feeling this way coming from? You say there’s no way you can retire, and you need to save more and spend less, but what evidence can you give me to say that?
Can you show me a bank statement that shows you are overdrawn each month? Which would confirm your statement that you are spending too much.
Can you tell me the amount that you both should have right now in your pension funds based on your income and age? Do you know what this number should be? If you knew this number, then we can compare it against what you have, and it would confirm what you are saying about having to save more.
But if you don’t have any of this then it’s just a point of view and a hunch, isn’t it? You have no evidence to back up your claims.
But facts are facts, right? There’s no arguing with facts.
And when you are presented with evidence, not just someone’s opinion, it will make you look at things differently, i.e. we’re fine or we do need to save more, or we need to watch our spending, or our spending is fine.
Okay, this was the evidence I presented to both of them.
1. Based on their current spending and using it as a benchmark, to maintain the lifestyle they wanted and currently had, they would need an income of €3,050 per month.
2. Based on their current fund values and what they and their employer were contributing each month, if they retired right now, their two pension funds would pay them €2,546 per month.
3. If they retired right now, they would also be in receipt of €120,600 in tax free cash from their pension funds which could be used to supplement their income, if they wanted to.
4. If they delayed retiring for two years i.e. until they were 60, their monthly income would increase to €2,921 and their tax-free lump cash would become €138,451.
5. The difference between working two more years and retiring at 60 instead of 58 was (a) their monthly income would increase by €375, and their tax-free cash would increase by €17,851.
These were, and let me say it again, their factual and indisputable numbers, no one else’s. And neither of them had a clue about any of them until I put them in front of them and very few people do to be honest.
So, if they retired now, they were a little short of what they needed but if they worked for another two years, they’d be fine. And I also told him that based on their annual pension returns and the amount they draw down each year, he’d have to live until he was 108 before they’d run out of money.
When I went through the numbers with them it was a lot to take in, so I suggested they digest it for a few weeks and let’s pick up the conversation when they were ready to. And we did only about a week afterwards. They contacted me and wanted to have that follow-up call. And they had some questions but not very many and I think I could physically see the relief in both of them at this meeting.
They both said it was like a weight had been lifted from them which was great to hear.
And the plan was to work for another two years, then she’d retire full stop, and he’d semi retire.
They’d activate both of their pensions, which was enough to fund their lifestyle, but he was going to get a part-time job as well, just to have a little bit more than they need (he still had a few landmines going on in his head) and because he wanted to do something and remain active.
My takeaways from working with this couple are:
Communication is vital. You need to tell each other what’s important to you, and why. And being open and honest is really important but you to have be mindful of what you say as well.
When he said things like ‘we’re overspending’ it made her feel awful because it felt like she was the one overspending and she wasn’t, and on the other hand, when she said things like, ‘we’re fine and ‘what are you worried about’ belittled his anxiety, and the fear he had of running out of money. And he said he knew that was probably never going to happen, but he still felt that way, he couldn’t help it.
So what am I saying, I’m saying we need to be open and honest with each other and it's okay to voice how we are feeling but we need to do it in a way that won’t make the other person feel judged.
You might want to save more for retirement than your partner does. They may want to spend more on things right now than you do, because it gives them more pleasure than saving for something they can’t connect with because it's so far away.
You both need to understand how each other feels and when you do, you both need to accommodate each other by making compromises and try to find that happy medium that works for both of you.
And I think sometimes having a third party involved, which could be your financial adviser, can help. I know from my interactions with couples over the past three decades, I’m part financial adviser and part therapist and that’s fine with me.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie