The One Financial Risk You Might Not Be Ready For

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There are all kinds of risks that can come along and disrupt even the best laid financial plans. While we can’t always control what life throws our way, we can be proactive and take steps to mitigate certain risks. For example, you may periodically rebalance your portfolio to protect against investment losses, or renew your life insurance policy to ensure that your family is taken care of if the unthinkable were to happen.

Risks related to cybersecurity, business and travel tend to get equal attention. But as a financial planner with over three decades of experience, I’ve noticed one glaring risk that many folks simply overlook—and it’s something that can turn your financial life on its head. I’m talking about relationship risk. I’ve yet to work with a couple who hasn’t encountered issues with their relationship. Some have pulled through and are happier for it. Others “stuck it out” while staying bitter, and some have found divorce to be their best option. Going your separate ways is sometimes the best thing, even though it can be a blow to your finances.

It seems that relationship risk never gets the attention it deserves from a financial planning perspective. If left unchecked, negative relationship patterns can wreak havoc on your long-term goals. Let’s take a closer look at these risks, along with ways to remedy them.

Divorce

Getting a divorce, especially later in life, is one of biggest risks to your finances. Unfortunately, it’s all too common. From 1990 to 2015, the divorce rate for people over 50 almost doubled, according to the Pew Research Center. Divorce at any age can be expensive, particularly if it goes to litigation. It’s something that often has a direct impact on retirement savings; even more so if retirement accounts are considered joint marital assets.

Beyond that, divorcing often triggers a lifestyle shift going forward. You may now be responsible for paying alimony or child support, for instance. Downsizing to a smaller home and making other lifestyle changes may be necessary to rebuild your savings and get back on track with your financial goals.

Staying Together, But Living Separate Lives

One common refrain we hear from people living in unhappy marriages is that it’s easier to just stick it out—especially if there are children involved. The prospect of getting divorced and untangling your finances might feel so overwhelming that you resign yourself to stay in an unfulfilling relationship. There are a few problems with this approach. For one, life is short, and we all deserve to be in loving relationships that make us feel respected and happy. Also, doing nothing can be just as risky to your finances as getting divorced.

Over the years, I’ve worked with lots of couples who’ve been stuck in this kind of situation. They had simply grown apart, and the love and respect they once felt for one another had disintegrated. More often than not, these folks grow more resentful and bitter as they age. Instead of using their wealth as a tool to live a satisfying life that’s aligned with their values, they are disjointed—and their financial goals never line up.

5 Ways to Invest in Your Relationship

Now for some encouraging news. There are things you can do today to help strengthen your relationship and mitigate these risks. It’s natural for long-term relationships to ebb and flow, but being intentional about working on things can help shore up your bond. As the saying goes, “If you change the way you look at things, the things you look at change.”

Here are five ways to open up your heart and invest in your relationship:

  1. Schedule time together: It sounds simple enough, but making time for one another can go a long way in improving your connection. Whether it’s a date night, signing up for a class, or snuggling up on the couch to watch a show together, define what meaningful time looks like—then get it on the calendar. Renowned sex educator Emily Nagoski even suggests scheduling intimacy. It might not sound very romantic, but it can help couples clear their busy calendars and prioritize physical connection.
  2. Explore couples counseling: Getting the perspective of a neutral third party can help simmer down negative feelings—especially when that person is a trained professional. Couples counseling aims to improve communication, iron out resentments, and strengthen your relationship. The research is encouraging. Experts say that emotionally-focused therapy (EFT) is about 75% effective. As a wealth manager, I can tell you this percentage is a good return on investment. The financial risk is much less than going through a divorce. Couples counseling isn’t inexpensive, but divorce is much costlier. In that context, what is that therapy worth?
  3. Address financial incompatibility: Money can be a real source of tension in a relationship. One-third of married couples admit to arguing about money at least once a month, according to a TD Bank survey. When these lines of communication aren’t open, it could lead to financial infidelity—like hidden spending and secret debt. The best remedy can be connecting with an experienced financial advisor who isn’t going to judge you. Instead, the idea is to get on the same page so that you can work together toward shared financial goals.
  4. Strengthen your sense of self: As the famous researcher Brené Brown has said, “We can only love others as much as we love ourselves.” Showing up for your relationship is extremely important, but so is showing up for yourself. What do you do regularly to nourish yourself and recharge? Maybe it’s a weekly round of golf with friends or a yoga class you look forward to. When you fill your own cup, you’re better able to be an equal, loving partner to someone else.
  5. When you disagree, make it constructive: Fighting doesn’t have to be a bad thing. In fact, swallowing your words and keeping things inside might actually breed more resentment and hostility. Is it possible to put down your defenses and make a real effort to listen to where your partner is coming from? Approaching the conversation with a sense of empathy can help cool things down so you can work together toward a resolution.

A little education can also help improve your relationship and bring that warmth and love back. Books like Intimacy & Desire, Passionate Marriage, and Getting the Love You Want might be great jumping-off points.

At the end of the day, I’m not a relationship expert—but I’ve been working closely with couples long enough to see how relationship conflict can directly impact financial health. At JJ Burns & Company, you can expect a nonjudgmental financial advisor who’s there to help you and your partner thrive together. Connect with us today to schedule a conversation.

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