Your Financial Health Can Be Destroyed By

Relationship Difficulties

Relationships do not exist separate from financial decisions. Some people may think they do but, just as with emotions, relationships and money are deeply intertwined.

This includes all relationships. Lover, spouse, parent, child, sibling, boss, and friend. All of them can have some degree of financial entanglement.

The reason is that money ultimately represents power.

The power to help out, buy things, reward, punish, acquire experiences, and a lot more.

Power and relationships are deeply intertwined and therefore so is money.

With the power to do so many things, money can be used for both good and bad ends in every relationship we have.

Romantic relationships, especially living together or marriage, are probably the most affected by finances.

Research shows disagreement over finances is the top source of relationship strife. It’s also the number one reason for divorce. That’s how powerful the money and relationship link is.

Planning for retirement with a significant other is therefore complex.

Not only does it include money as the foundation, but retirement plans involve realizing the dreams we have for the final phase of our life.

What are the chances that two people completely agree on how to spend their golden years AND what sacrifices they’ll make to fund it?

The answer is few.

Given that relationship turmoil affects finances, finding common ground, negotiating differences, and then developing a plan both partners adhere to is foundational to retirement planning success.

In my aunt and uncle’s case, despite their differences, they remarkably came together and did a phenomenal job preparing for and funding their retirement.

Ahead of their big day, they both embraced the powerful tactics of seizing every opportunity for tax advantaged savings, working extra hours, and aggressively controlling expenses outside of their key priority areas.

This preparation, despite a middle class income, put them in the top 10% of all retirees of their late 1980s era. And they retired at an enviable 55 and 48 years old, respectively.

As a close observer, knowing they were two very different personalities, it was encouraging to see how they worked together to reach such an impressive achievement.

In my younger years, I assumed they had it nailed for life. How wrong I was.

It was after retirement that unresolved relationship turmoil began to crest, undermining their secure retirement.

Although I knew them well, I’ll never truly know the trigger, or even if there was one.

It did seem that the extra time together in retirement may have caused new frictions.

Maybe it was my aunt’s cumulative resentment for boating. Maybe my uncle got tired of her controlling every single financial decision, even as little as $1.

Certainly the stress of her life-transforming illness, and her completely dependency on him, had a role.

Whatever the causes, adherence to their plan slowly started to come unglued, which can destroy even the best planned retirement.

The first major blow was their shift from conservative to incredibly high risk investments, resulting in the loss of half of their original liquid assets. Although they made the decision together, driven by greed and ignorance, they forever blamed each other.

Losing half of your liquid assets is an extraordinarily painful event, so the blame game was not surprising.

But the relationship turmoil from the loss carried forward into their frantic search for a recovery plan. They couldn’t agree on the next steps for their remaining assets so they went looking for free advice.

It didn’t turn out well.

They eventually took the stance of zero principal risk. They swung from one extreme to the other, and neither is good.

And they ended up with most of their cash in a worst-of-the-worst annuity.

The deeper they got into retirement, the more relationship turmoil crept in to their finances.

The second major event was my aunt’s health crisis when she became a paraplegic. The implications of such a health situation are many.

Reduced mobility. Increased unreimbursed medical expenses. Lifestyle accommodation and adjustment costs, like a spike in dining out and home maintenance spending because you can’t do certain things yourself any longer.

When mobility and energy are impacted, even the use and enjoyment of expensive assets like homes, cars, boats, cottages, RVs, and other expensive items can be affected.

My aunt’s situation impacted their ability access their winter home and use their cabin cruiser.

Yet there was disagreement on if, when, and how to dispose of those assets.

It was partially based on denial of their new reality. Partially on hedging bets for the future, as my uncle would move south if my aunt passed first.

And finally, he was reluctant to admit that his boating days were over.

All understandable human reactions. But the delay and denial was horrifically expensive, burning dollars they could ill afford to lose, given the reduced assets from their investing disaster.

It all caused tremendous turmoil in their relationship. At one point they went to outside family members, seeking validation for one side versus the other in their argument on which residence to sell.

The house situation was never resolved as they held it for 10 years longer than they should have, with all the associated carrying costs, upkeep, and the downturn of the Great Recession that left it permanently well below the peak when they should have sold it. It would only be disposed of when my aunt survived my uncle.

Theirs is one example. There are many other situations where relationship turmoil destroys a couple’s finances.

These include disagreements over: how much to spend on kids’ clothes, activities, or schooling; where to live and how big of a home to purchase; how much to spend on cars and how frequently they should be replaced; where and how often to travel; frequency and quality of dining out; what to do yourself around the home versus paying for help.

The list goes on.

So the real opportunity is how to solve, or at least neutralize, relationship turmoil’s impact on your financial future.

The answer has just a few simple actions:

1. Attempt to reach agreement on a detailed retirement plan you can both embrace by ensuring it does a good job of rewarding both partners.

2. Build your pre-retirement budget so that each person has at least some discretionary spending power where they don’t have to check in.

3. Reach the understanding that you’re both in the same financial life boat. Bad financial behavior by either partner can sink both of you.

4. Where possible, seek resolution to relationship turmoil, at least to the degree that money isn’t used as a weapon or a fix.

Also, check in regularly with a fee-only financial planner, as answering to someone outside the relationship can sometimes help with accountability.

These steps will not solve all of your financial problems caused by relationship turmoil, but they will neutralize the majority.

Just remember that undermining your secure retirement is too high of a price to pay for using money as a weapon against your significant other. After all, it’s your financial future at stake.

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