How to Talk About Family Finances

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Oct 27, 2020, 08:10 ET

NEW YORK, Oct. 27, 2020 /PRNewswire/ -- Family finances are a topic often avoided at the dinner table. Understandably so, discussing money with family can get uncomfortable and put everyone on edge. While the discomfort may seem unavoidable, there are three actionable steps one can take to navigate conversations about family finances.

What are "Family Finances?"

Family finances include sources of income, such as wages, rental income, dividends and bond coupons. On the opposite side of the ledger, expenses include rent, utilities, insurance, taxes, car payments, mortgage, credit card payments among many other family-related cash outflows. Managing family finances become messy when more than one person's income, assets, and expenses are thrown into the mix.

1. Set Realistic Expectations

Often, the root cause of challenging conversations are unclear or unmet expectations. Fortunately, that can be resolved through strong communication. Research shows that 94% of Americans who say they have a great marriage discuss their financial dreams with their spouse. Almost 9 out of 10 say they work together to set long-term financial goals!

Establishing effective methods for communication will go a long way with family when it comes to having these conversations. For example, with a partner, it is important to understand their relationship with money and how their financial goals align.

The complexity and inter-related nature of competing financial goals and priorities is tough to navigate, even for those who look like they have everything together. Frankly, even those who feel comfortable managing their money may want a sounding board for working through their concerns or thinking about whether they're optimizing their finances and taxes. A financial advisor can especially come in handy when navigating the conversation around how to set financial expectations, as they can provide an expert point of view.

2. Budget as a Family

Problems can arise when the family doesn't work as a team or when one person disregards the family finances. The value of talking about family finances lies in the opportunity to discuss both personal and collective expenses.

By making it a family activity, everyone will gain access to the same financial information. Thus, they will be able to see both the income sources and the expenses side by side. The key to establishing a budget as a family is digging deeper into ways lifestyle might be negatively affecting future goals and whether potential money decisions match the family's values.

Keep in mind that making a thoughtful budget takes time and expertise. Having a trusted financial advisor by one's side can help guide conversations about family finances and set goals. Above all, clarity on how values, financial goals and lifestyle align before while building a joint budget will help.

3. Discuss Salary Differences

Talking about salary is a critical aspect of discussing family finances. Yet, about 1 in 5 Americans don't tell their family about their finances. In fact, only 60% of women and 52% of men share their salaries with their significant others.

Regardless of how much income each individual receives, it is unusual for both parts to be making the same exact amount. Unhealthy dynamics can result from a marked disbalance of transparency and communication. By discussing salary openly, one can ensure that both people feel they are contributing in a way that feels comfortable for everyone.

A good option is for each partner to contribute the same percentage of wages so the impact is the same on all parties. For example, everyone contributes 60 percent to family expenses, 20 percent to retirement contributions, and 20 percent to savings. Just make sure the final budget balances out with the total amount of money left over post-contributions.

How A Financial Advisor Can Help Your Family Finances

Setting realistic financial expectations, budgeting as a family, and managing salary differences are all important aspects of learning to discuss finances with family. The right fiduciary advisor can facilitate navigating tough financial conversations and provide meaningful tools for diving deeper into each individual's unique goals and needs. Zoe Financial knows how valuable a fiduciary financial advisor can be for a family's finances. For instance, a financial advisor can offer impartial advice and keep everyone on top of it all.

About Zoe Financial

Zoe Financial's award-winning algorithm enables individuals to discover and connect with highly vetted, top fiduciary advisors in their area. All financial advisors in the Zoe Network are vetted and verified fiduciaries, along with having top credentials, education, and experience. Zoe's service provides support from start to finish during an individual's financial advisor search. All consultation calls and interviews with Zoe's network of advisors are completely free and are offered via video chat or traditional phone call depending on an individual's preference.

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SOURCE Zoe Financial