Modern Financial Decision Making and Rethinking Money

Modern Financial Decision-Making and Rethinking Money

Lauren Welch, Delta Psi and Accredited Financial Counselor (AFC)

Financial responsibility in modern households and other scenarios looks vastly different than in years past. Overall, women are waiting longer than previous generations to get married, live with significant others, and have children. More and more women are making major financial decisions on their own. For women who are married or in committed relationships, it is now more common for women to be the sole breadwinner. There is also a difference in the way money is managed in a household, as women take on more financial responsibility or are solely responsible for the family budget. Because of these changes, as modern women, we need to start rethinking money.

WHAT DOES YOUR BUDGET LOOK LIKE?

Often, financial decision-making is seen as difficult and too complicated, when it doesn’t need to be either. One of the most important financial tools to use (and the one most dreaded!) is the budget. Creating a budget helps set the stage for your goals, both over the short- and long-term. A budget helps you put savings first by putting a name to each dollar you earn. Once you have worked out a preliminary plan, you can work (and rework) it. There are a handful of free budget apps for your phone, as well as templates you can find on the Internet. Setting a realistic budget will allow you to think big picture and create long-term plans around your financial goals – such as paying off debt, or saving and planning for retirement, vacations, and vehicle purchases. In my years of experience helping people with their financial situations, the first question I always ask is, “Do you have a budget?” Almost every time, the answer is no. The lack of a budget is the biggest cause of financial challenges.

WHAT ARE YOUR NEEDS VS. WANTS?

An important concept to keep in mind is needs vs. wants. You need a car to get to and from work, but you want an expensive brand new one. You need to eat, but you want to go out to a fancy restaurant. Your needs might be different than your partner’s, and you might differ in opinion about what constitutes a need rather than a want. It’s important to recognize this before starting a financial conversation.

ARE YOU MANAGING FINANCES WITH ANOTHER PERSON?

Education, empowerment, and encouragement will go a long way toward you and another person making financial decisions together. Money is one of the biggest causes of fights among people who share finances or make major financial decisions together. This most often includes couples, but can also be friends, family, roommates, and others. But what exactly are they fighting about? Often arguments stem from disagreements with a partner’s financial decisions. Assigning dual financial responsibility can be helpful in alleviating many arguments. If you and another person are setting goals and making decisions together, there is more unity, more peace, and usually, more responsible spending! When going down the path of financial togetherness, it is important to put aside issues like who earns more money, and instead discuss how you will set and achieve your shared goals. Focus instead on the idea that once you are married, in a committed life partnership, or mutual financial endeavor, two become one – including your finances. The key idea here is that all the money goes into one pot for your shared goals, especially once you are both on the same page and making decisions together.

This can be easier said than done. The first step to being on the same page is sitting down and talking about what each of you wants financially and setting the goals to get there. It is crucial to set the stage for this conversation, as it could easily cause an argument that prevents you from completing it. Set ground rules and goals for the conversation, knowing that you will exit it working together on the same team. Remember that there will be differences of opinion on how money should be spent. Create an environment where you can respectfully challenge each other and be open to each other’s suggestions.

DO YOU HAVE ALL THE HELP YOU NEED?

There is a lot to understand about personal finances. Rule #1 is not to spend money on things you don’t understand; some examples are life insurance, investments, or timeshares. Fortunately, there are many qualified financial professionals out there who can help.

First, have confidence in your social network. Ask people you trust for referrals to financial professionals. Social media might be a great place to ask for and get these recommendations.

Second, look for a professional who is an expert in the industry of your specific needs. For example, a financial counselor provides advice on debt, budgets, and credit, but does not provide financial products (like retirement investments). A financial advisor will work with investing and retirement plans.

Third, be sure you find someone who will explain everything to you and who is, just as importantly, happy to do so. This person will have the heart of a teacher and will want you to grow financially.