Guest Article by Zoe Certified Advisor, Dina Megretskaia, EA, CFP
Would you rather talk about your sex life than your salary? Would you rather stuff yourself with five Thanksgiving meals, while discussing politics with your most vocal and opinionated family members, than discuss how you, or they, are doing financially? Would you… ok, I’ll stop this terrifying exercise! The holiday season is upon us, which for many of us means time with family and potentially some interesting discussions. Perhaps you’re crossing your fingers and toes that money doesn’t come up in conversation, or mentally preparing yourself for what could be some painful minutes.
You’re not alone! A 2014 Wells Fargo study found that personal finance is the most challenging topic to talk about, tougher even than discussing death, politics, religion, or personal health. Our society often (and completely incorrectly) equates an individual’s wealth or earning potential with their value, so it’s no surprise that any foray into financial topics can be perceived as prideful or shaming.
As I’ve seen time and time again as a financial advisor, the complexity and inter-related nature of competing financial goals and priorities is tough to navigate, even for rocket scientists, brain surgeons, and smart people 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.
Are You Assuming?
Our families are often the first microcosm in which we learned about money. As we learned how to interact with the world, we likely internalized some powerful assumptions about what money means. Linda Babcock, James M. Walton Professor of Economics at Carnegie Mellon University and a world-renowned expert on negotiation, uses a powerful anecdote to explain this concept. While shopping with her daughter, she observed that her daughter wanted a toy. When Babcock suggested they purchase it, her daughter was puzzled.
The girl hadn’t seen her mother pay in a retail setting before, as Babcock’s husband had apparently been the one to take out his credit card for payments in the past. Despite the family’s shared value of equality (and shared finances), their daughter had mistakenly assumed that only one of her parents had money to pay for toys. It’s a simple example, and one the parents rectified once they became aware of it, but a clear illustration of how assumptions around money can form.
For better or for worse, we all have many years on Babcock’s daughter, who was eyeing a toy. Our goals and desires, along with their associated costs, are larger. Plus, our relationship with money isn’t grounded in assumptions and things left unsaid, right? Unfortunately, while many of us are hungry to talk about money, about salaries, about managing competing priorities – fear of judgement often stops conversations in their tracks.
If Money Comes Up….
When I first meet with a prospective client, I’ll ask what the purpose of their money is. Basically, what’s it for and what about money matters to them? This purposefully broad and vague question often takes the conversation in interesting and unexpected directions, as folks talk about money (sometimes for the first time) with someone who is there to listen, ask questions, and ultimately, to offer guidance and counsel once we begin working together as advisor and client.
If money comes up during your Thanksgiving meal or family holiday celebration, channel your inner anthropologist. Think of yourself as uncovering the interesting and sometimes odd ways we think about and interact with money, and ask questions. Asking questions can bridge the gap between our varied assumptions and biases about money.
We often use heuristics, mental shortcuts for making decisions, to get through life. We use them often when it comes to handling money. Some examples: “if you can’t pay your credit card off in full every month, you can’t afford to buy something”, or “I can always grow my income to meet any increasing costs”, or “if I save 20% of my income, I’m doing well”. Heuristics help us make decisions, rather than getting caught up in paralysis because the best path forward isn’t clear. Heuristics are helpful (since mental bandwidth is limited) but can lead to cognitive bias because new information is ignored in favor of making a quick decision. And, when someone’s actions don’t fit with our heuristics, it’s easy to judge and assume the worst. By coming from a place of curiosity, you can “bypass” some of those uncomfortable moments.
Bravery & Timing
This year’s holiday season will usher out the decade of the 2010s. As Daniel Pink shared in his book, “When: The Scientific Secrets of Perfect Timing”, we are most likely to do something extreme, like decide it’s finally time to run a marathon, in the final year of each decade, so at ages 39, 49, or perhaps even 79. Are you feeling brave enough to have that financial conversation you’ve been putting off, whether with an advisor or a friend?