A Tale of Teamwork





An essential component of financial success is the need to assemble a team of trusted advisors.  Other than practicing the discipline of saving money, I think it’s the most important component to financial success.  We have learned that money knowledge isn’t gender specific.  Everyone must understand how it works and what role it plays.  However, because women outlive men, it is critical that women develop knowledge and if they don’t, they must develop teamwork with their spouse and learn how to deal with a trusted expert advisor.

This tale teaches us to prioritize your team of advisors.  Simply said, the most important person on your advisory team is your spouse or significant other.  This is a tale of two couples and the way they built their fortunes and their lives.  In one case, it is a wonderful life.  In the other it is, in my opinion, a tragedy.

This tale illustrates the need to communicate with your spouse or significant other on a financial level as well as a personal level.  It teaches us that one’s goals can’t just be financial to the exclusion of life’s little pleasures.  Lastly, you must find the way to make the most out of your life and not just the most out of your money.  Another of my sayings is, “There is a fine line between over-saving and under-living.”

Jane and Mary were childhood friends who were born in the same small Pennsylvania town circa 1915.  Neither one of them came from wealth.  They went to grade school together, played together, graduated high school together and married their high school sweethearts.  Soon after their wedding, Jane and her husband Paul moved to the Washington, DC area.  Mary and Robert soon followed.  When Jane and Paul bought a house in the Maryland suburbs, Mary and Robert soon did the same.  They were young, starting a family and living the American dream.  They didn’t have any money to speak of and they knew there wouldn’t be any family financial windfalls such as inheritances, but they were confident in their abilities and optimistic about the future.

Both Paul and Robert worked for the federal government and earned frequent promotions throughout their careers.  They essentially made the same level of income throughout their careers as well as enjoyed the same level of retirement benefits.  Both Jane and Mary chose to stay at home and raise a family.  Both let their husbands handle the family finances.  Where they differed is that although Jane took an active role on a monthly basis to understand the family finances, Mary did not.

Through the years, they raised their families and tried to give their children the best they could offer.  They each had two children.  Their children attended public schools, and ultimately their four children graduated from college.  Jane and Paul, my clients and friends, purchased a new home in a nicer part of town after many years in their old house and were well regarded and respected in the community.  If someone needed help, one of them was there to lend a hand.  When Paul retired, they maintained their residence, gardened, traveled, visited grandchildren and were active in their church.  Jane and Paul could live comfortably from his pension, but they always took 3–4% a year from their approximately $1,000,000 investment account to enjoy each other’s company and enrich those around them.  Jane and Mary maintained their friendship throughout their lives.

In the meantime, Mary’s husband Robert studied in the evenings and became a lawyer.  It took him many years of night school, but at the age of 40 he passed the bar exam and took a federal government position that was more in line with his legal interests.  But, like Paul, he never left his government job and they both retired at age 55 from their respective government positions.  Unlike Paul, who chose to retire permanently, Robert chose to continue working and joined a private law practice where he worked until physical incapacity at age 72 forced him to retire as well as move to an assisted-living facility with Mary.

Mary and Robert had lived almost 50 years in the same home, and they now found themselves in a new environment.  It was shortly thereafter that Mary’s husband surprised her with her half of what he’d been “saving for their retirement.”  In an envelope was a check for $3,000,000 made out to Mary.  Naturally, having never bothered to understand the family finances, Mary assumed it had to be some type of mistake.  She thought that maybe Robert’s mind was starting to slip.  However, when she deposited the check and it didn’t bounce, she knew it was no joke.  Mary turned to her friend Jane for advice.  Jane called me and asked me to speak with her friend.  A few days later, I visited privately with Mary, and the first words out of her mouth were, “No way did we have this kind of money.”

The sad thing is that Mary’s husband had actually saved $6,000,000 for what he considered their “retirement,” without her participation or input.  She didn’t even know what the goal was.  When reality finally set in, Mary became angry and bitter.  As she told me, “I had no idea.  Do you know everything I’ve missed?  Do you know that I’ve never eaten at a fancy restaurant or taken an exotic vacation?”  She said she had never bought a new dress, instead making her own clothes.  She also said, “We never had a new car, we never enjoyed any of the finer things in life and now when we can no longer enjoy these things, I find out that I’m rich.  This is the cruelest trick life has ever played on me.”

I asked Mary why she never took an active role in understanding the family finances.  I asked her how she let it come to this.  Her answer stunned me, but as I’ve learned from many similar conversations with women of her generation, it’s typical.  She told me she felt it was her husband’s role as head of the household to handle the family finances and that her involvement might appear as a sign of disrespect.  I asked her how she could be friends with Jane for all these years and not mention to her that she wasn’t an active participant in her family’s finances.  Jane was certainly involved in her family’s finances.  She answered, “Money is a private matter” not to be discussed amongst friends.

How does this story end?  Mary set up trusts for her children with most of her “retirement money” but not before she made them pass a financial proficiency test and discuss their family finances openly with their spouses.  She wasn’t going to let her children repeat the same mistake.  I know that she died a few years later happy in the knowledge that at least her children and others would be able to benefit more fully from her life.

What should we learn from Jane and Mary?  Family finances are a shared responsibility.  You don’t have to split them evenly.  However, you must outline common goals and review them periodically.  Because one spouse will probably outlive the other, it is imperative they both understand the family finances.

Over-saving is almost as dangerous as under-saving because it diminishes the quality-of-life aspect of money.  Money is not something to hoard and use exclusively for essentials.  At times, out of necessity, you might have to go into hoard mode, but once an individual or family unit develops an appropriate savings and investment methodology, the excess, if there is any, should be spent.

If you over-save and keep expenses to the essentials, you too can build a tremendous net worth, but you are paying a steep price.  The price you pay is what most people consider a diminished quality of life.  You must find a balance.  A healthy goal is to save 5–10% of every paycheck when you first start working into your employers retirement plan if they have one.  If they don’t, put it into an IRA.  Lastly, put 100% of it into a diversified 100% stock offering such as an S&P500 index fund.  As you get older, you can and should increase the savings rate but you don't need to go overboard like Robert.

We have learned that wealth is a state of mind.  You determine if you are wealthy.  The assumption behind this statement is that you must at least understand the value or worth of your assets.  In the case of Mary, she was wealthy by almost anybody’s standards, but because she didn’t know her financial condition, she couldn’t answer the question “are you wealthy?”  There is a saying “ignorance is bliss.”  Let me tell you that in the case of Mary, it wasn’t bliss.  She must have either lived in a state of financial apprehension or complete trust in her husband.  I hope it was the latter.  Robert, on the other hand, knew the family finances intimately but may or may not have thought they were wealthy.  I can’t explain what particular set of circumstances let Robert think that he was behaving rationally, but he certainly thought he was “saving for retirement.”  Let me say one last time when it comes to your family finances, ignorance is not bliss.  All couples must work as a team when it comes to finances.    

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