Blueprint for Financial Freedom
By Dayana Yochim
Our winning financial
combination as a couple was featured in Dayana Yochim's commentary, below.
Dayana is the Principal of The Motley Fool School, and author of The
Motley Fool's Guide to Couples & Cash
and the co-author of The Motley Fool Personal Finance Workbook.
When it comes to
getting two people to agree on anything, from the color of Corian for the
countertop to an acceptable amount of investment risk, things get a bit dicey.
Dayana Yochim shows twosomes how to spruce up their finances -- together -- and
make the project go smoothly.
Did you know that laying
drywall together can make your marriage stronger? According to a 2003 survey by
hand-tool maker Great Neck Saw Manufacturers, 54% of couples actually enjoy
working with each other on home-improvement projects. And 9% of handy couples
said that fixing up their homes together is -- get this -- romantic.
Twosomes could learn a few
things about tackling money issues from this very unlikely source. (Take a
moment now to picture your beloved sporting a perfectly worn leather tool
holster and rugged flannel shirt, beaming at a job well done. OK, enough
It's not too
far of a leap to connect the similarities of home-improvement
projects to other household chores, including
managing the family finances. Both have the opportunity for big payoffs. Both have the
potential to be fraught with frustrations. Both undertakings are
designed to increase comfort, livability, and, in some instances, a
lovely southern view. Neither is free from a certain amount of
drudgery, anxiety, or opportunity, not to mention the risk of a few
paper cuts or trips to the emergency room.
But in matters of money
and small construction, four hands are always better than two. The old saw about
measuring twice and cutting once can get dull if you're the one doing all the
measuring and cutting.
Billy and Akaisha
frequent Fool.com contributors, were like most couples working long hours at the
office in the hopes of someday celebrating their successes with a cushy
retirement. But retiring "early" at age 55 meant that they would have to carry
on working 60- to 80-hour work weeks for another 20 years.
They decided that their
present happiness was just as important as their future well-being. Actually,
Billy was the one who decided that a dramatic shift was due. It took a bit of
negotiating and number-crunching to get Akaisha on board with
the plan to leave the rat race and travel the world.
Billy and Akaisha Kaderli retired
early and travel the world on $30k a year. Read their advice:
The difference between
construction and financial affairs is that matters of the heart tend to have
more fluid rules. (You probably don't want to test the accepted rules of
positive-negative charges when it comes to handling wiring.) Just because
there are black and white numbers in your checkbook, that doesn't mean you
can treat this topic with
black and white answers. Consensus is key if you
want your union to last till death do you part.
Akaisha describes the
negotiations in their household this way: "Billy was like a bulldog with a
chew toy -- a bulldog who also knows how to crunch numbers. He's the one who
simplified our personal infrustructure from a
what-does-this-cost-us point of view, and then laid out his findings to me."
To avoid coming to blows,
consider treating your finances as you would a fixer-upper. Come up with a
master plan for your family's future -- together. Tackle big projects
retirement) and small ones (cutting down the entertainment budget) --
together. When you keep the ultimate payoff in mind (and perhaps a few snapshots
of your retirement manse on the fridge), developing a shared vision of what
could be is that much sweeter.
For the Kaderlis, the
vision of what could be was leaving the rat race at age 38 and traveling the
world. And that's exactly what they've been doing since 1991. But getting there
was nothing short of a major financial reconstruction. Says Akaisha, "Neither of
us could have created this unique lifestyle alone. Both of us had to be willing
to endure growing pains and come back to the discussion table again and again."
Do the Prep Work
Before any renovation project -- whether it's retiring at age 38 or paying
off the house early -- there's a certain amount of prep work to be done. Having
a clear financial goal and a dedication toward reaching it are key.
Start off by thinking of
money as opportunity. The best things in life are indeed free -- like catching
the twinkling eye of your Sig. O across the room at a cocktail party. All other
things require cash. Don't avoid the topic of finances just because you think
it's unromantic. Instead, start your money conversation by
your dreams. Maybe you both pine for an
early retirement, a summer home, sending the
kids to your alma mater. Next, start brainstorming ways to align your finances
with your life goals.
As you lay out your
project, play to your strengths. Who's better at bargain shopping? Which one of
you has a knack for researching things online? Answer these questions, and
you've started to form your plan of attack.
Don't use trouble spots as
an excuse to give up. According to the Great Neck survey, 6% of couples say that
they fought like cats and dogs during their home renovations. Their main
complaints? A full 20% think that their partner can be too bossy, and 16% said
their partner is too much of a perfectionist. When things get heated and nerves
frazzled, take a break and approach the project with fresh eyes and a full
night's rest. Oh, and try not to be a bossy perfectionist.
Finally, divide and
conquer. This is the old "I'll cook if you do the dishes" rule at play. Even if
one of you is giddy with excitement over balancing the checkbook or reviewing
your insurance needs once a year, it takes two to make your financial whoopee
work. That may mean that one person does most of the heavy lifting when it comes
to money matters while the other picks up the slack in other areas of household
With the tarp rolled out
and the kids packed off to the babysitter, it's time to don your grubby clothes
and get to work.
Spruce Up the Exterior
A little superficial housekeeping can go a long way to improving your living
conditions. Just finished your taxes? What a great time to dig a little deeper
into your financial files! Bill and Akaisha started with a
piece of paper
tracked their day-to-day expenditures. From there, they extrapolated and
developed a financial snapshot with more perspective. That was the jumping-off
point for their financial overhaul.
Perform a Patch Test
Don't you hate it when that perfect shade of celadon on the 1-inch-by-1-inch
sample turns into what your brother-in-law affectionately refers to as "the
puke-green room?" Before you go hog-wild rearranging your finances, run through
a few scenarios. What would happen if you were forced to live off one salary for
six months? How much would it pay off in the future to increase your
contribution to your work retirement plan by 3%?
Billy and Akaisha figured
out that they could sustain their dream early retirement on $20,000 in 1991
Dollars a year.
Here's more on how they came to that conclusion. Borrow and outright
steal from their plan the parts that best serve your financial goals.
Pick One Project at a
In home renovation, it's all about increasing the resale value of your
abode. In finances it's, well, getting the most bang for your buck -- the "bang"
being enjoyment and peace of mind. Whether it's retirement savings, paying down
debt, or adding to your child's college savings, concentrate first on one area
that'll give your family the biggest payoff. After that, tackle your next
project with the same zeal.
Lean on Your Partner
Couples said that one of the most satisfying parts about working together on
home-improvement projects is proving that they could work together, according to
the Great Neck survey. And while wielding sharp objects, no less. Ah,
One of the hardest parts
about Billy and Akaisha's unconventional retirement was dealing with
the emotional component of their decisions. They faced times of uncertainty in their
journey, but together they made it through by constant assessment, research, and
reaching out to others who were on the same path.
Don't Be Shy About
Calling for Backup
Asking for reinforcements is not a sign of failure. But before you cede any
financial decisions to others, do your homework. You wouldn't hire an
electrician without calling his references. Same goes for your financial pros.
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