Canadian Personal Finance Blog

Michael James talked about found money yesterday and the joy of paying off bills with found money, and how we should not squander this found wealth, and really use it to create happiness in the future by paying off debt now. I think this is a sensible approach to found money, but it made me think about another post I did a while ago, which was how couples deal with money.

Many times found money can cause a great deal of consternation between spouses because each have their own idea of what the best thing is to do with found money.

I think this is natural, as with most every subject possible spouses are going to have their own ideas, but the problem arises when the two ideas are contradictory or even orthogonal to each other.

Say Mary and Bob get $10,000.00 in found money from an inheritance. Mary thinks she’d like to go on a nice vacation with the family because the family has never really been on a vacation, however, Bob thinks that putting that money on their Mortgage (thus shortening it’s term by 5 years), is the right answer.

Reading this, it sounds like an easy enough “problem” to deal with, both folks want to do what they think is best with the money, but the problem now is you have is a simple difference of opinion. The problem I have seen in my life and from other folks I know is that this is not a simple problem, because:

• There is no wrong answer (or right answer)
• Both spouses have voiced their opinion, and thus feel they have the right answer.
• Money and money management is a divisive factor in many relationships

Is there a Solution?

Only if both parties are willing to compromise, or one is willing to lose (i.e. typical Prisoner’s Dilemma issue). Wikipedia’s explanation of the Prisoner’s Dilemma is:

Two prisoners (the players) during the interrogation each have a choice: whether to betray the other one, and thus to decrease his own jail time by, for example, 1 month (as a compensation for the cooperation), while increasing the jail time for the other by, for example, 10 years, or to stay silent. Each of the prisoners is only interested in receiving the least possible sentence. It shall be assumed that the prisoners make their choices (to betray or to stay silent) simultaneously, and they know for sure that their choice cannot affect the choice of the other one.

All right I am stretching this (feel free to leave a comment), but the need to compromise and find the best solution for the couple is not always obvious to either spouse, and sometimes they feel it is not in their best interest (they got their way the last time, so I want my way this time). Sound familiar to any of my readers? Never happened to you?

Resolution?

I have no canned simple answer for this one, because as I keep saying, Money is a strange and divisive thing in a relationship, especially if the spouses do not agree in terms of money and how to use it.

What needs to be done is have clear lines of communication and rational discussions between the spouses about what they want to do, and a decision made that doesn’t cause either to feel that they have “lost” in this decision. Sounds easy doesn’t it ?

Think this is a simple thing to resolve? You and your spouse never have these issues? Then you are either very lucky (or very naive).

As I am on the road, I give you one of my favorite postings about financial advice Advice: Best Financial Advice Ever Given. I like this story for many reasons but specifically:

• It is my father’s advice at it’s best, not preaching and always causes me to think.
• It shows the importance of parents to talk to their children about money and their views on money.

Advice: Best Financial Advice Ever Given

My parents have been very helpful in my life, both financially, but also with very wise advice, and with that in mind, I’d like to share you a story my father told me (kind of a parable):

There once was a court jester who enjoyed a good joke, usually at the expense of the King, which got the Jester into deep trouble. One day the Jester was having a particularly “devilish” day and insulted the Queen in a large public forum. The King was OUTRAGED by this and ordered the Jester executed for his insolence and the guards dragged the Jester off to the dungeons.

Hours passed and the Jester (who was a quick thinking man) thought how can I get myself out of this mess? Finally the door to his dungeon opened and the guards dragged him back to the King. The King said, “I have enjoyed your buffooneries over the years, so I will give you one wish before I put you to death for your crimes.”.

The Jester thought what could he wish? Then he came up with a plan, he knew that the King adored his horses so he came up with the following, “Sire, all I ask is that you give me a year’s reprieve, and during that time, I will teach your horses to Sing! This will make you the envy of all other monarchs. If at the end of this year I am unable to get your horses to Sing you can execute me in any gruesome fashion you wish.”. The King looked perplexed and then confused, but finally he thought that he had nothing to lose, he would either be the envy of Europe or the Jester would be executed, either way was fine by him.

The guards then took the Jester towards the Royal stable, when one of the Guards asked the Jester, “Why would you make such an obviously impossible deal, surely you know no one can get a horse to sing?”

The Jester smiled and whispered to the guard, “Many things can transpire in a year my friend, I could die and thus I have cheated the executioner… the King could die and I might get a reprieve… or the horses could sing!”

My Dad told me this story after we discussed payments schemes for money he was loaning me to buy my first house. What was he telling me? I’ll leave that to you gentle reader, as usual with a story from my Dad, you get from it, what you think, not necessarily what he thinks you should.

Saturday I learned again the importance of backup plans and the folly of “hoping for the best” and not “planning for the worst”. I spent most of the afternoon and evening waiting to catch a flight overseas that never made it out due to the Super storm that hit Ottawa. I ended up eventually leaving the next day later and it disrupted all plans that I had for meetings and such and has made a busy week now a hectic and possibly unproductive week.

What were my mistakes:

It is winter in Canada until April, if you travel between November and April you must at least think about the possibility that your travel may well be disrupted by bad weather. This kind of disruption can happen any time in the year, but is much more acute in the winter.

• I knew bad weather might be coming, yet I remained optimistic that I might be able to get out of Ottawa. This kind of optimism is naïve, there must be an executable backup plan, or you will be at the mercy of the next issue.
• The Amex Travel emergency response number for travellers who use the Amex Travel bureau never answered. Yes, it was a terrible weekend, yes there was a warning waits might be long, but my colleague and I waited for over 3 hours once and 2 hours another time (on hold) and never spoke to anyone.
  • This means we are most likely liable for penalty charges for hotels and travel legs that we could not cancel.

These mistakes seem easy to fix in future travel plans, and I think I am just out of practice.

What does this have to do with Personal Finance?

Without a good backup plan in place how will you deal with a major disruption occurs?

• If you work in a company that is in peril right now, do you have a plan in case you get laid off?
  • Are you hoping for the best, when you know you are being too optimistic?
  • Do you even know what might happen if you get laid off? Would you get a termination package, or would you get the minimum the company can give you?
• The stock market is going in the crapper (no wait, that’s not a scenario, that is right now)
  • Do you have an investment strategy or heuristic that you can live with and that allows you to sleep at night knowing you have a plan?
  • Are you relying on a brokers advice, or worse, your friends advice (or you read copious Financial Blogs) to tell you when it is best to buy and sell? Fool hardy is where that goes.
  • What if you died tomorrow, what would happen financially? Can your family cope with this? Do you have enough insurance? How do you know what enough is?

These are a few examples of financial or life “storms” that if you are hoping for the best will blow your finances out the door (or pile snow up to the tops of your financial windows).

What to do?

Planning, first and foremost is where you start, and if you don’t, you don’t have anyone to complain to, except yourself.

The French President Nicolas Sarkozy is asking that very question. How can the economic measures done include the relative happiness of the populous in the economic growth ?

Interesting question but who cares? If there is economic growth the relative happiness of any single worker has very little to do with any of this, that is the nature of the free market system. I am not saying that employers and governments should not care about happiness of workers in their companies or their countries, what I am saying, is: They don’t. The only time the relative happiness of employees or workers ever comes into play is when there is a scarcity of those employees and then the Employers must then make sure their employees are happy (to retain them).

Case in Point

Over my thirty years working various jobs my best examples of what makes people happy is simply whether they get good pay raises,whether their direct boss or the people they work with are good to work with, and whether they enjoy their direct job. I have been lucky in that most of my bosses have been reasonable folk and the folk I work with the same, so my only “happiness” monitor was and is money.

How do I make more money? I really don’t know. Years when I think I have been effective, I have had little or no pay raise, years where I feel I have failed I have been rewarded highly (and vice versa). If someone could train me in how to increase my Happiness by increasing my income, I’d be even happier. If anyone cares to comment on getting a raise, I am interested in hearing your Happiness and Pay Raise stories.

Anecdote

Two years in a row I went into my “pay adjustment” discussions with my boss expecting raises and both times I got not much:

• The first year my company had not done very well and the stock had dropped a fair amount and the statement I got from my boss at the time was, “How can you expect a raise look at the stock price?“
• The next year, the same boss and I went into our adjust meeting, the stock had rebounded the company was doing much better and when I asked about why my raise was about the same as the previous lean year, given the stock price had rebounded, I got the statement, “The Stock Price, has nothing to do with your relative pay raise“.

Bosses say the darndest things don’t they?