Some people get cold feet when saying “I love you” to each other for the first time. Imagine how it can feel making a commitment to long-term investing for the first time!
Whether you are newly living together or have already combined bank accounts, it is important to know what to look for, how to work together, and how to set and stick to investment guidelines when you are ready to say “I do” to investing with your significant other.
Discuss why you are investing
Even if you grew up in a home where discussing finances was taboo, it is time to take the stigma away from money talk. If you care about and trust someone enough to share your lives, you can safely discuss money issues with them.
Discuss your money philosophies. Share any past missteps, lessons you’ve learned along the way, and reasons for investing. You shouldn’t invest just because everyone else is. You should set specific goals for your investments, and let those goals help you define your investment strategy.
Common reasons for saving and investing include retirement, payment for a child’s college education, and other long-term goals. If you invest without a goal in mind, you may find yourself in investments that are too risky or too conservative for your specific needs.
Agree on a general strategy
Once you have agreed on your goals, it’s time to create an investment strategy. Your strategy should be a general set of guidelines you use to direct your investment dollars. Your strategy could be to invest heavily in index funds. It may be a focus on U.S. stocks while avoiding investing abroad. Or it may be something completely different.
Agreeing on a strategy is important because it gives you guidelines to follow down the road when you are looking for specific investments. You can change your strategy later on, as long as you both agree on the change. Individuals should go through this step when investing as well, but for couples it is important to agree on the strategy together rather than just choosing one on your own as an individual.
Make specific agreements on buying and selling conditions
Depending on your strategy, you may not always be in the same room at the time when one of you thinks it is a good idea to, say, buy into an investment. By creating specific agreements and rules about what and when you will buy and sell, you are avoiding future arguments on bad investment decisions. If you are always making decisions together, you share in the responsibility of both good and bad outcomes, and no one can point a finger at the other for being wrong. Remember, don’t compete with each other. Every time one of you is right, you both win!
Generally, there is no reason to buy or sell an investment in a hurry. You have the time to make smart and educated decisions together. Rushing into an investment may be more akin to throwing dice in Las Vegas than investing with good insight and a long-term strategy.
Hold yourself and your partner accountable
Whether you are interested in passive investing or active investing, it is important to check in on occasion to ensure your investments are performing as expected or to reassess your portfolio allocation.
Everyone makes a bad investment occasionally. Even an investment legend like Warren Buffett has made mistakes in his past. If this is the case with your portfolio, respond and react, but don’t rush to place blame. Even if your better half lobbied you on the idea, remember that you win and lose together and you agreed on the investment with high hopes for strong returns.
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Budget and plan together
For long-term personal finance success, it is important to look at your money holistically. Focusing on just your investments is a recipe for disaster. Instead, include your investments in a wider conversation about your finances.
Investments are just one aspect of your finances. Here are some major areas of your finances to focus on together. This is not an all-inclusive list, but feel free to use it as a guide to help you and your significant other prioritize and set goals:
- Monthly budgeting
- Emergency savings
- Retirement savings and investments
- Healthcare cost planning
- Paying for education
- Life, health, auto and home insurance
Remember that everyone’s finances and goals are different, so your financial plan, budget and investments may look very different from others’. That is completely OK, as long as you know why you made each decision along the way.
Work together toward long-term success
With open communication and teamwork, you are destined for shared personal financial success. Your money is too important to ignore, and working on your finances alone may not lead to the same great results. As the saying goes, two heads are better than one.
With a well thought-out plan and clear goals, you can safely invest in stocks, bonds, real estate and elsewhere. Adding a loved one to your investing can make the process more fun, exciting and successful. Now that’s a financial win-win!
Author Bio: Nav Athwal is the Founder and CEO of RealtyShares, a curated online marketplace for real estate investing. His platform connects individual and institutional investors to private U.S. real estate investments, raising $300 million across more than 550 deals in 35 states. Prior to founding RealtyShares, Nav was a real estate and land use attorney in San Francisco, representing developers, fund managers, nonprofits and public and private REIT’s on some of the largest US real estate and renewable energy projects. Nav holds a B.S. in Electrical Engineering from UC Davis and a J.D. from UC Berkeley Law School where he was Class Valedictorian.