Part 2 Module 4 Chapters 1-5

Part 2 Module 4 Chapters 1-5

Money Conflicts and Relationships

It is not uncommon for money issues to complicate relationships
Dating, Marriage, Engaged, Business Partners, Siblings, Death (family)
Dating, Fiancé
How does one feel when the other wants to spend extravagantly on a wedding?
How does the person feel when they learn of an unknown debt load carried by their future spouse?
Do you know their spending habits, how does this align with your own?
Differences in personality
Spender vs. Saver
Planner vs. Spur of the Moment
Live for today vs. Plan for tomorrow
Thrift vs. Generosity
Security Oriented vs. Optimistic
Business Partners
How have they managed money in the past, what is the condition of past business dealings?
Who will oversee the $ transactions, will both individuals review the books together? Who, How, When will decisions be made that involve high $ of cash?
Does one partner have the ability to sign off on checks alone, is that okay?
At what level of risk should both parties be involved before a decision is made?

Business situation that recently happened:
One purchased his daughter a new Jeep with business income, she works for the Co.
Other business partner felt like that should have come out of his personal money, not the business fund
Co-workers see how this spending alters the father/daughter relationship, and how it affects the business partner relationship. Conflict is bad for business at that company.

Discussions about money and spending are very personal, or even private. Because of this, the conversation can become emotionally charged.
How do these differences carry over into the way we teach children?
Do they “shop for answers” between the parents?
Do you say (in front of kids especially) It is just a little bit, let them have it or does one person buy stuff for the kids and say “it will be our little secret?”
Use your own experiences, both from your life and other people you have worked with to show them they are not alone, and that the solution can be positive.

Divided Families

Divorce – If they are having money difficulties now, it may only get worse
Separation = higher expenses.
Double the housing, utility, + legal costs, Child support, court fees, child care (if one individual needs to go back to work)…
I often ask if money is the core issue. Is it $, or is this a symptom of the problem?
If I am able to resolve the money issues and help you come up with a plan, would this alleviate the problem and help bring peace to the relationship, or does the pair need additional help?
In other words, should I be helping them keep things together, or separate the finances?
If Separating – Don’t wait for the judge to divide debt
Close joint accounts and move balances to individual accounts whenever possible.
Begin building your own credit history even before the split is final.
The divorce paperwork says who should pay, but if your name is still on it the account will continue to report on your credit. Legally liable as well.
Close and monitor accounts that cannot be completely paid or transferred
Monitor Credit reports (unfortunately an x spouse could still list you on accounts)
Examine Retirement accounts – Your current savings rate may no longer be sufficient
Wills and Estate Plans (I hadn’t thought of this in a long time, good reminder). Make sure to update beneficiaries and insurance to list the correct people. Many individuals have had an accident only to have assets transferred to past spouses, very unfortunate.
Children bear a lot of stress during this process as well.
They may “shop” their parents to see who gives them better benefits to alleviate their emotions. Find deeper ways to connect, not just by purchasing things for them. Have open discussion with X about major purchases for the kids (get permission).
A new significant other, when purchasing gifts for the kids, may also cause attention. Be aware of potential issues, and try to keep your communication open with the X.
Combining kids from relationships under one roof. Careful with gifts, you don’t want to create jealousy.

Variable Income, Self Employed

Financial Counseling takes a sharp turn when it comes to variable incomes
Many self-employed individuals are masters of their trade, but are not business oriented.
They may not understand how to keep the financial books, only how to create their product or service.
They MUST invest time to learn, or money to pay for the assistance they need if they cannot do their own taxes, manage their own financial accounts, pay their bills on time, etc.
Upfront cost now may save in the long run. They can focus on business instead of spinning their wheels dealing with the tax man.
Irregular income requires people to build savings, or rely on credit to float the slow times.
Unpaid Taxes, Large local problem – small business owners fail to pay their taxes when having financial difficulties.
This can generate more problems and lost time dealing with tax issues
Self employed often have high health care costs. Many locally have one spouse working primarily for benefits.
Opportunity costs: Time with family, Vacations, Sick days, stress levels, Less personal time for hobbies, must learn many functions of the business
Commission based income:
Huge fluctuations in income. Live lean and save. In recent years, RE agents and LO’s have suffered as they were living off of the high life income. When things slowed, they were unable to meet their obligations.
Budgeting must become a well-developed skill for these households.
Seasonal based workers can have the same difficulties, and must budget for the slow times.
Many teachers choose (I don’t know why) to take their salary over 9 months. When they do this, they often spend like the income will continue in the summer. They also qualify for loans using income statements during the school year. False representation of income to self and lender
Forced budgeting – teachers can switch to a 12 month salary payment
All others must learn to budget, then pull their own “Paycheck” from savings each month when income ceases.

Recognizing Addiction

Compulsive purchases or substance use can consume large quantities of household budgets.
Addiction often leads to secrecy and lying, which can deteriorate relationships
Addiction can get bad enough to affect one’s family life and workplace.
Story about individual –intoxicated after break, first day in training

Illegal substances – drugs are addicting, and can destroy a family’s finances
Son that owed 100k, threatened with life. Parents consumed equity to protect him, revolving issue that drugs are.
Gambling – elusive big win will come soon. Money that is needed for other things can disappear quickly. This also leads to rapid buildup of credit card debt.
Eating Disorders and Exercise – While I see these points as valid, I haven’t ever encountered them and don’t have the expertise to address them. Maybe I just haven’t looked for them.
Sexual Practices and Pornography – This can cause money problems and relationship problems, resulting in financial consequence.
Tobacco – Other than in a brief sentence, this is not mentioned in this chapter. It is however, the addiction that most clients wish they could chop to free up money each month.
Shopping – Very destructive, yet socially acceptable. Many clients are actually willing to admit they have a problem spending. They are recreational spenders, and often have 20+ credit cards, many of them store cards. Unlike other additcions, they can’t give up shopping completely. I advise that they take a shopping chaperone, not someone who also spends.

I admit, we all have our guilty pleasures – I like to Jeep and wakeboard. At what point do we consider this recreation a form of addiction? Any one of us could go overboard, we must each be careful to set a good example so that we can be a good financial counselor.

Be willing to ask about addictions, especially when you see holes in the budget.
You can lead into the conversation by asking about large cash transactions, recently maxed out accounts, recent attempts to open more credit.
Don’t be judgmental, they will have an even more difficult time reaching milestones and accomplishing goals you set.
They are often willing/relieved to open up about it. This may be the key to resolving financial troubles in their household. Refer them to professional help. They may also get upset, or blame problems on others.
Do not give guilt trips, create boundaries.
Remain Calm, do not agree with their irrational thinking, be human
Spouse may need to protect him/herself just as if they were going through a separation (possible problems with finances and credit)
If you discover addition issues, take steps to protect the credit union. Recommend that the member close certain credit lines to avoid temptation to consume additional money.
More lending is rarely a solution to the problem.
If there is a co-borrower or spouse on loans, ask to speak with that person before additional funds are given or considered.

SEEK HELP

If you are willing to spend $ to get into debt, be willing to spend money to get counseling to resolve life’s issues (relationship, addiction, personal)
If you run a business, be willing to have professionals help. Focus on growing the business, not learning how to do the books.
IF you have an addiction problem, seek assistance now before it gets any more difficult.
If they or others are in danger due to their actions, make appropriate referrals.