By Kornel Szrejber
After interviewing dozens of the top financial experts on my show and conference, it’s become clear that women are in a unique position when it comes to investing and managing the household’s finances.
Over the years of interviews, I’ve noticed patterns and best practices recommended by the women I’ve interviewed that can not only help other women gain confidence when it comes to taking control of their money, but also improve their household’s financial well being as a whole.
In this article, I’d like to share some of these lessons learned from some of the extremely knowledgeable and accomplished women that I’ve had the pleasure of interviewing over the years. See the end of the article for the complete list along with links to their sites.
Lesson 1: Don’t Let Lack Of Confidence or Knowledge Be Your Barrier
One of the more fascinating lessons learned, is that while on average men tend to be more confident with money, that confidence doesn’t necessarily translate into making the correct financial decisions. (Source: stnce)
In other words, confidence does not always equate to correctness.
For an example, I’m sure we’ve all heard of someone we respect confidently proclaim about some particular investment (typically a stock of a company) that is surely going to drastically increase in value and beat the market.
Yet, when we look at the statistics, 97.14% of professional active managers failed to beat the market1. If professional teams of investment analysts that do this for a living full-time have a 97.14% failure rate, what are the chances that your confident partner is right when they only do this type of investing “on-the-side”?
This is a key reason why it’s critical for both partners in the relationship to be involved in the investing and financial decisions of the household (to catch each other’s blind spots). Maybe you’ve read about low-cost index investing and can talk some sense into your partner, instead of deferring the investment decisions to them, where they may be subject to this kind of behaviour.
Is your partner betting both of your retirements and/or the kid’s education savings on some hot stock tips or other speculative investments? How do you know if you never have that conversation because you’ve fully outsourced all that thinking and decision making to them?
This leads us to our next key lesson which is:
Lesson 2: Don’t Fully Delegate Your Investments and Finances to Your Partner
As a couple, it often makes sense to split the work of the household, based on the strengths, weaknesses, and interests of each person.
For example, if your partner is a great cook and you are not, why not let them do the cooking while you take on a different responsibility that is your strength?
Yet, when it comes to personal finances and investments, while it’s likely that one person is more interested in (and potentially more skilled) than the other, this is one area where it really shouldn’t be delegated to just one person.
Specifically, in the case for women, 90% will have to be a sole financial decision-maker at some point in their lives so it’s critical for both parties to know key information such as:
- The location, usernames and passwords of all the accounts
- Where all investments are located, and in what are you both currently investing in
- Are the investments sufficiently diversified by the number of holdings, asset classes, geography and sector?
- Are the investments low-cost (i.e. a low MER, no hidden commissions or deferred sales charges paid to financial advisors)
- Are your investments beating, matching, or underperforming the market over the long term? If they are underperforming, could it be because of the high fees you’re paying on the investments and/or because you’re using some active investing strategies that aren’t working?
- If one of you were to pass away, what would happen to your household financially? Do you have enough life insurance to cover the ongoing loss in household income? Will you have enough to pay the mortgage and help the kids with schooling if needed?
Lesson 3: Renegotiate The Household Obligations
While it is relatively easy to make the case that both partners should be involved in the household’s finances (as per the examples above), the implementation of this can actually be fairly difficult if you currently only have one partner managing all the finances.
The main reason for this is that at some point, you as a couple have already decided who does what in the household. If you are not currently managing the household’s finances, then chances are that you took on some other responsibilities to make up for that.
Therefore, while it’s easy for me to say that you should get involved, you are likely already at capacity in terms of how busy you are, and so it is not realistic for you to continue doing all that you are already responsible for, and now add the intimidating and potentially overwhelming task of learning about the best practices when it comes to financial management and investments.
Hence, one of the best pieces of advice that I’ve received when it comes to this, is that you and your partner need to have a sit-down and re-distribute the household tasks accordingly.
In other words, after you inform your partner that you want to be more involved in the household finances and investments, ask them what can they take on to allow you to have more time to co-manage the finances with them? Maybe to start, they can take one of your responsibilities once a week so that you can get caught up on and help more with the financial tasks?
If that is too difficult because maybe your partner is also already at capacity (a common occurrence if you have kids), then one option that my wife and I have employed is to set a portion of our weekly date to discuss the household’s finances.
Instead of discussing some show for twenty minutes, what if you instead went over your finances together over that time? Maybe tackling a specific segment of your finances like what are we invested in? Is there a way that we can save more for our retirement and the children’s education? What fees are we paying on our investments? (the fees are never $0 so if that’s the answer you get, you need to dig into this).
I found that by having that conversation at the beginning of the date, it’s very productive since you are both motivated to cover these important topics efficiently so you can enjoy the rest of your date guilt-free, all-the-while knowing that you did accomplish something worthwhile that is sure to enhance both of your financial well-being for many years to come.
Ready to further enhance your financial literacy? Here are some more great resources from stnce to get you started:
- Investing 101 Checklist
- Finance, defined (explanations of some of the most common and important financial terms that you need to know about)
- stnce Recommendations
- Financially planning with your sweetheart
As mentioned in the beginning, here are some of the extremely knowledgeable and accomplished women that I’ve had the pleasure of interviewing over the years:
- Mahima Poddar from EQ Bank, powered by Equitable Bank
- Sarah Zandbergen from stnce
- Kristy Shen from millennial-revolution.com
- Lana Sanichar from Canadian MoneySaver Magazine
- Ellen Roseman from ellenroseman.com
- Jessica Moorhouse from jessicamoorhouse.com
- Maria Smith from handfulofthoughts.com
- Meghan Chomut from meghanchomut.com
Kornel Szrejber is the host of the Build Wealth Canada Show, and has been featured for paying off his mortgage in only 6 years while still in his 20s, and becoming one of Canada’s youngest retirees at the age of 32. He now runs a top personal finance and investing podcast created specifically for Canadians, as well as Canada’s largest personal finance and investing conference. There he interviews the top personal finance experts to share their best practices, tips and tactics when it comes to investing and financial planning in Canada.
The views and opinions expressed in this column are those of the contributor and do not necessarily reflect those of Equitable Bank. Any information provided is for information purposes only and Equitable Bank makes no representations as to the validity, accuracy, completeness or suitability of any content. You should seek the advice of a qualified professional or undertake your own research before making financial decisions. Equitable Bank is Canada’s Challenger BankTM and has become Canada’s ninth largest Schedule 1 Canadian Bank.
1 Source: SPIVA, percentage of Canadian equity funds that underperformed the S&P/TSX composite, data as of June 30, 2020.