by David Bach
Oh, here’s a bill for the cleaning lady. I guess that could go in our “we” pile. But what about this American Express bill with all the honeymoon expenses on it? Well, the card’s in my name and I guess it’s pretty much the guy’s job to pay for the honeymoon, so that should probably go in the “David” pile. Dry cleaning? Well, even though we now get our dry cleaning done at the same place, the account is in my name, so I guess I can pay it. Let’s see—how much does this cost? No way…this can’t be right! How could my dry-cleaning bill have tripled in a month?
Michelle was in the bedroom organizing her closet. “Honey,” I yelled to her, “do you know they charge $7 to dry-clean one of your sweaters? How can it cost so much to dry-clean women’s clothing? And do you know you had them dry-clean seven sweaters this month? This is insane. We’re going to have to get two dry-cleaning accounts, because I’m not paying these ridiculous prices for you.”
Michelle stopped what she was doing and came into the kitchen. “Of course I know it costs $7 to dry-clean a sweater,” she said. She looked down at my nice, neat piles of bills. “Hey, what’s with all this?” she asked.
I grinned up at her. “Oh,” I said, “I’m getting things organized. I’m separating our bills to see who pays what.”
Michelle looked at me a little strangely. “Honey, you don’t need to waste your time doing that. This is going to be easy. We are going to put all of our money in a joint checking account and pay everything together.”
“We are?”
“Of course we are. We’re married now, we love each other, and from now on everything we have is one and everything we do as one.”
“Well, actually,” I said, “that’s not exactly what I had in mind.” Sensing a little tension, I quickly added, “In the beginning at least, I think it might be easier if we sort of split this stuff up.”
“But, David,” Michelle replied, “you make more and spend more than I do. You can’t expect us to just split all these bills down the middle.”
“Well, no, of course not,” I said. “I thought I’d sort of split them up in a way that’s fair.”
“Well, what’s fair?”
Good point, I thought. “Well, I need to think that through.”
Michelle shook her head. “No, you don’t. I’ll tell you what’s fair. What’s fair is that we put all our money in one account and pay all the bills out of this account.”
SOMETHING’S NOT WORKING
Fast-forward a few months. Michelle and I still hadn’t totally agreed on who was responsible for paying what. Unfortunately, the bills kept arriving, just like clockwork, every 30 days. Only now they were starting to get paid late (and, as a result, we were getting hit with late fees).
Upset about all the money we were wasting on late fees, I began freaking out and blaming Michelle for the problem. In turn, she was telling me it was all the fault of my stupid “pile system.” Needless to say, what we were doing wasn’t working. And rather than sorting itself out, the problem was only getting worse. Instead of sitting down and discussing how we might reconcile our clearly different attitudes about handling money into one simple system that worked for both of us, we were running on “assumptions.” I was assuming Michelle knew how I wanted our money to be managed, and she was assuming I knew what she wanted to do. We were each assuming the other was paying certain bills. We weren’t on the same page—and the consequences were that this “money stuff” was creating more stress than it should.
THE GOOD NEWS…
Eventually, Michelle and I did come up with a system to manage our finances together. As a result, I’m happy to report that things are much, much better for us on the money front. We now work together on our finances, and instead of making assumptions about how the other one feels, we put our heads together and bounce ideas off each other. In short, we’ve learned to make a priority of discussing our finances and planning our financial goals and dreams together. Doing this changes everything: it ends the fights and it focuses the energy of a relationship on the positive instead of the problems.
Looking back, it’s not surprising that as newlyweds Michelle and I had a hard time figuring out how to handle our finances. Even though we both had financial backgrounds, we had never taken a class or gotten any coaching about how to manage money as a couple. As a result, neither of us had ever thought about how different things become when you go from being two single people managing your money separately as individuals to a couple managing your money together.
Needless to say, what Michelle and I went through was hardly unique. Most couples have never been taught how to plan their financial future together. As a result, most couples rarely talk about money…unless they are fighting about it. My goal with this book is to change that. Having taught so many couples both as a financial advisor and now through this book and the seminar it is based on, I’m happy to report that it’s both possible and fun to become a Smart Couple Who Finishes Rich. The key to being able to “win financially” is learning how to take the right actions in the right order. It’s really not difficult at all—especially when you do it together as a couple.
In this book, we’re going to work on how the two of you, as a couple, can both talk about and handle your money in a smart way. Whether you’re just starting out or are well into midlife, whether this is your first marriage or your fourth, this book will show you how to get your financial goals and your personal values in synch so they—and the two of you—can work together to make your dreams a reality! What’s more, if you have financial fears—and most people do—you will learn how to address and overcome them as a couple.
YOUR ROAD MAP TO LIVING—AND FINISHING—RICH
My goal in this book is to provide an action-oriented road map that will enable the two of you to take control of your finances as a couple. In the chapters that follow, you will learn everything you need to do as a couple to both live and finish rich. Specifically, you will learn:
How to learn to earn…together (without fighting!)
How to look at your values and put what matters most in your life first
How to use what I call the “Couples’ Latte Factor” to transform any income into a million-dollar nest egg
How to protect your family with a “security basket,” provide for your future with a “retirement basket,” and fund your dreams with a “dream basket”
And finally, how to grow your income as a couple by 10 percent over the next nine weeks.
In the past, many of you may have read investment books that put you to sleep. I promise you, this one won’t. The reality is that investing is a blast when you know exactly what to do and how to do it. The problem with most investment books—and most financial advisors—is that they talk over our heads. You won’t find that here. That’s because my approach to living and finishing rich involves some incredibly simple techniques that can be life-changing when you put them into action.
IF MY GRANDPARENTS COULD DO IT, SO CAN YOU
I learned how to invest from my grandmother, Rose Bach. It was Grandma Rose who helped me make my first stock purchase. I was just seven years old, and the stock was a share in the company that owned my favorite restaurant in the whole world…McDonald’s.
Where did my grandmother learn to invest? That’s an amazing story.
My grandparents had no money and no college education. During the Great Depression, they lived in Milwaukee, Wisconsin, and like many Americans of their time, they struggled to keep their heads above water. As my grandfather used to say, “You gotta watch the pennies because they add up to a dollar.” Fortunately for my grandfather—and, ultimately, for me and my whole family—shortly after her thirtieth birthday my grandmother made a decision that transformed all our lives.
One day, tired of the never-ending struggle to make ends meet, she decided that someday she was going to be rich. It was a remarkable decision, for at the time she was earning only $10 a week. And my grandfather was earning even less…just $5 a week.
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bsp; The first step, she decided, was to build up a small nest egg. So, together, she and my grandfather began putting aside 10 percent of their paychecks each week, keeping the money in a coffee can in their kitchen.
After a month of saving, my grandmother took the money they had accumulated and went to a local brokerage office to open an account. She was not exactly welcomed with open arms. Scandalized that a married woman had come to see them on her own, the men running the brokerage told her to leave—and not come back without her husband!
Someone else might have been intimidated. But not my grandmother. She was a strong and feisty woman. “Gentlemen,” she said, “if you don’t want my money, I’ll go next door and open an account with your competitor.”
My grandmother got her account and she began to invest what she and my grandfather managed to save each week. To make a long story short, her investments eventually made her a millionaire. (Her investments also inspired a family tradition: her son—my father, Marty—became a financial advisor, as did both of her grandchildren, my sister Emily and me.)
Of course, things didn’t always go smoothly. A few years ago, I asked my grandmother how she did that first year. “I know how it turned out, Grandma,” I said, “but how did it start?”
My question made her laugh. “David,” she said, “I bought four stocks…and they all went to zero in less than a year!”
I was stunned. “Zero?” I repeated. “What did Grandpa say?”
Grandma laughed some more, her eyes sparkling. “I didn’t tell him!” she replied.
“But what kept you going?” I asked her. “How did you keep investing after you lost all of your money after a full year of saving?”
She looked me straight in the eye. “David,” she said, “I told you—I wanted to be rich, not poor.” She went on to explain that she had quickly realized the problem was not the stock market or the stockbroker or even the particular stocks she had chosen. “The problem was me,” she said. “I didn’t know the first thing about investing. I had never taken a class on investing. Your grandfather didn’t know anything about money. It was the blind leading the blind.”
But then, she said, she realized something that then and there changed her life. “If we were going to get rich, I was going to have to learn how to get rich! I needed to take classes, read books, study the stock market, and make friends with rich people.” This revelation of my grandmother’s led to a lesson that has stayed with me ever since.
There are many things my Grandma Bach taught me about money, but none was more important than this:
IF YOU WANT TO GET RICH, YOU HAVE TO LEARN TO EARN
The fact is, anyone can become an investor. Indeed, today with the Internet, it’s never been easier to get started. But becoming an investor and becoming wealthy are not the same thing. Had my grandmother not realized that she needed to get smart about money, she and my grandfather would more than likely have ended up like 90 percent of all Americans—struggling to survive during retirement.
My grandmother’s story illustrates another lesson that’s worth mentioning here—namely…
YOU DON’T HAVE TO BE RICH TO BE AN INVESTOR
My grandparents started out with nothing, able to save only a few dollars a week. Yet over time they were able to build a million-dollar portfolio. How? By planning together, saving together, and investing together. Had they decided that because they were poor and didn’t have college degrees, they would always be poor, that’s just what would have happened. But that’s not what they did. Instead, they decided to change their lives. They decided to be a Smart Couple Who Finishes Rich.
Okay, that was my grandparents and it was a long time ago. What about you today?
Can a book like this one really change the way you and your partner think about money and enable you to realize your financial dreams?
The answer is an unequivocal yes.
Can the process of working on your finances as a couple really be fun?
Absolutely. In fact, there are very few things in a relationship that can do more to solidify your bond and make you stronger as a couple than planning your financial future together. Think about it. Most couples decide to spend their lives together because they sincerely love each other and want to build a life together. I’ve never met a couple who said, “Wouldn’t it be great to be together so we can fight on a regular basis about our finances!” But even though no one wants to fight about money, the fact is that most couples do. Either that or they flat-out avoid the subject.
According to the experts, the number-one cause of divorce in this country isn’t sex or religion or problems with the in-laws. It’s fighting over money. Having advised hundreds of couples individually in my financial-planning practice, I can tell you from firsthand experience that working on your money together significantly improves the chances not only of your succeeding financially but of your staying together happily as a couple. The key is to take the journey together—not separately.
This book is meant for couples who want to do that. If you are looking for a book that will explain how to hide assets from your partner or create ways to keep your finances separate, you might as well stop reading now. My goal is to help you be the strongest couple you can be, and the best way I know to do this is to go on the journey together.
TAKING CHARGE TOGETHER: THE SECRET TO YOUR SUCCESS
You may have already noticed that I’ve been referring to your spouse or significant other as your “partner.” I do this deliberately, for in a good relationship that’s exactly what a spouse or significant other should be—a partner.
The vital importance of partners really acting like partners when it comes to money became apparent to me after I published my first book, Smart Women Finish Rich. One of the great things about writing a book is that you often get feedback from readers sharing with you what works and what does not. Within just a few months of the publication of Smart Women Finish Rich, I was getting dozens of e-mails daily from readers recounting the kind of impact the book was having on them.
Most of the messages were incredibly positive, but a few concerned me. For example, one woman wrote, “Your book has changed my life. I’m now totally motivated and taking charge of my own finances. The problem is, I can’t get my husband to change. Without his support, I’m wondering if any of my efforts will be worth it.” In a similar vein, another woman wrote, “Great ideas in theory, but my husband won’t save, spends all of our income on ‘male toys,’ and won’t listen to me about your ideas.”
It wasn’t just women complaining about irresponsible men. Even though Smart Women Finish Rich was meant for women, I got a fair number of e-mails from men who had purchased the book for their wives or girlfriends…only to find they weren’t interested. As one man wrote to me, “I read your book before I gave it to my wife. Honestly, I hoped it would motivate her to become more involved with the family finances. Instead she said, ‘You’re doing a great job with our money and I’m not interested in this stuff.’ ”
Eventually, I got an e-mail that summed up the problem brilliantly. It came from a woman in Omaha, Nebraska, and it really struck a chord with me.
David [the woman wrote], after reading your book I became a super-sonic jet engine on a plane. I’m striving to go forward, to reach my dream destination. Unfortunately, my husband’s jet engine is going full steam in reverse. I know that this plane (our financial plan) is going to crash. You can’t fly with one engine going forward and one engine going in reverse. I don’t know what to do. I’m thinking of bailing out before we crash. Any suggestions?
It was this e-mail that made me realize I needed to write a personal-finance book for couples. As the woman in Omaha said, a couple’s financial plan is a lot like a plane with two engines. If both engines aren’t pointed in the same direction or working at roughly equal power, you are going to have problems. Without teamwork, financial planning for most couples becomes a battle, not a victory. And ignoring the problem will only make it worse, for ev
ery month those bills are going to show up, whether you want them to or not. There’s no getting around it. The bills show up, the monthly stress hits, the arguments start—and next thing you know it’s the next month with the same problems all over again.
IT’S TIME FOR THE TWO OF YOU TO TAKE CHARGE
So that’s our basic premise: all couples should work on their finances together. And when I say all couples, I mean all couples. Age isn’t a factor. Whether you’re a brand-new couple starting out in your early twenties or a retired couple in your seventies, the process of planning your finances together is one you can begin today. All that’s required for you to do this is for you to receive the tools. And that’s what I intend to give you in this book.
Much of what you will learn as you read the nine chapters that follow will seem incredibly simple. You may even find yourself thinking, “I know that. I’ve heard that before.”
Don’t let this make you feel complacent. When it comes to money, just having heard of something isn’t enough; you’ve got to know what it means. And just knowing what something means doesn’t matter if you’re not actually doing it. For example, even though nearly everyone is familiar with the concept of “paying yourself first,” most couples don’t know how much they should pay themselves first, or where the money should actually go. As a result, they don’t do it.