Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner

Step 1

Learn the Facts and Myths About Couples and Money

John sat in my office smiling from ear to ear. Indeed, he was practically glowing. After putting in more than 40 years as a successful salesman at a printing company, he was just two months away from retirement. He had come to my office with his wife of more than 30 years, Lucy, to make some plans. Excited about getting started on this new phase of their life together, the two were interviewing me to see if I would be the right financial planner for them. As I usually do in such situations, I began the meeting by asking a simple question: "With only 60 days to go, what does retirement look like to the two of you?"

John leaned forward confidently. "We're moving to South Carolina, where we own some land," he said, "and, we're gonna build us a little two-bedroom house on a lake and I'm going fishing every day!"

With that, he sat back in his chair, grinning like a school kid.

Lucy, however, had quite a different look on her face—a combination of anger and disbelief. Glaring coldly at John as if he were a stranger she was meeting for the first time, she asked him, "And who are you planning to move to South Carolina with?"

Now it was John's turn to look shocked. "Well, with you, of course," he said meekly.

Lucy laughed out loud. "John," she said, "if you think I'm leaving our kids, our grandchildren, and our five-bedroom house in Danville so you can go fishing in Timbuktu, you've got a screw loose!"

John looked at me helplessly, then turned back to Lucy. "But we bought that land in South Carolinato build our dream house on when I retired. Remember, honey?"

"John, that was 20 years ago!" she snapped. "You haven't even mentioned that land in the last 10 years. I was hoping you'd forgotten about it!"


Peter and Mary sat in my office, both completely happy. The day before, after five years of meticulous planning, the two of them—both in their early fifties—had taken early retirement from their respective employers. That's right—two retirements from two separate companies on the same day! They had spent the previous evening celebrating, first at his retirement party, then at hers. The excitement they both felt was contagious. They reminded me of two teenagers who had just graduated from high school.

The couple had come to my office to take care of the paperwork for their 401(k) rollovers. Earlier in the day, they had met with their attorney and their accountant. Tomorrow, they would leave to fulfill a long-held—and long planned-for—dream of theirs: to move to an isolated village in Mongolia for two years as part of a church-sponsored program in which they would help build a new school for local children. An automatic payment program had been set up to take care of all their bills, their retirement accounts were fully and safely invested, and their expenses were covered for the next two years. Their kids were in college and the tuition payments were already arranged. Everything had been anticipated. Peter and Mary could not wait to catch their plane and start living out their dream.


I've started our journey with these two contrasting stories because they are both true—indeed, they both occurred in my office during the same week—and, taken together, they illustrate just how differently different couples can plan for their future. I'm confident that the first couple, John and Lucy, is not the model you want to follow. The second couple may not be your ideal either (especially if, like me, your idea of retirement isn't an isolated village in Mongolia). But the reality is that Peter and Mary's future does sound exciting. That's because it involves a dream they planned together and are now getting to live together. You can't hear about their story without becoming excited for them.

If you are in a relationship right now and have a significant other you plan to be with for a long time, it stands to reason that you want to have a bright future in which you live and finish rich together. But being smart and finishing rich doesn't just happen. It takes real action and positive commitment on your part.

It's Not Just About Money . . .

Here's another important part of Finishing Rich that many couples overlook: it's not just about the money. John and Lucy have money. What they don't have is a plan for the second half of their life together. Although they've been married for more than 30 years, neither has a clue as to how the other expects to spend his or her golden years. John thinks he's going fishing, and Lucy wants to know who he's going fishing with.

Having served as a financial planner for countless couples over the last 10 years, I can tell you from firsthand experience that way too many couples are like John and Lucy. They go through life without making any real plans for their future together; in many cases, they've never even discussed the subject. Each just assumes that somehow the other knows (and agrees with) what he or she happens to want. The result is invariably a disaster.

Then again, I've also seen the exact opposite. Every day I meet and work with couples who have been married for years, sometimes decades, who really do function as a team . . . as one. They really do communicate about their money and they really do plan for their financial future—in other words, they are Smart Couples who are living and finishing rich. This is my goal for you.

The Facts and Myths About Couples and Money

The truth about money management is that it's not really that difficult. If you know what to do and what not to do, it's actually pretty easy. The challenge is that we're not taught about money in school. As a result, much of what we learn about it comes from friends, word of mouth, and marketing. This is why a lot of otherwise smart people spend their whole lives doing the wrong things with their money.

I often tell people it comes down to this . . .

It's not what you know about money—it's what you don't know that can wipe you out.

Since so much of what people have learned about handling money is actually dead wrong, a big part of becoming a Smart Couple who finishes rich is about unlearning what the two of you think you know about the subject. To do this, I'm going to share with you some of the biggest myths about money and couples. By understanding these myths for what they are, and learning the true facts, you will instantly be better prepared to make better decisions about your finances.

Myth No. 1 If we love each other, we won't fight about money.

Fact No. 1 Money has very little to do with love . . . and a lot to do with how much you fight.

Repeat after me: love has nothing to do with money. It doesn't matter if you love your spouse or partner more than anything in the world. If the two of you have conflicting values about money and make financial decisions that fail to accommodate each other's feelings about the subject, you are going to have serious relationship problems.

Love does not conquer all. If it did, then one out of every two marriages would not end in divorce. Love usually gets you to the altar and creates passion for a few years, but a solid, long-lasting marriage takes more than just love. So please stop for a second and consider these basic facts:

1. How you spend money has nothing to do with how much you love each other.

2. The two of you were probably raised differently when it came to money.

3. The two of you probably value money differently.

4. The two of you probably spend money differently.

That's a lot of differences. So if the two of you happen to be fighting about money right now, I've got news for you: you're normal. And here's some even better news: you don't have to change who you are or what you value in order to finish rich. Nor do you need to become financial geniuses. As you will learn in this book, the things you need to do in order to become wealthy are basically quite simple. They don't require a lot of brains or education. They don't require positive-thinking exercises or memorizing mantras. All they require is what I call "positive action."

So if the two of you are fighting over money right now because your attitudes toward it are different, that's okay. Take a deep breath, exhale . . . and "let it go." By the time you're done with this book, you will see how quickly and easily you can transform both your lives and your relationship merely by following the nine simple steps I'm going to lay out for you. In the meantime, just remember—love's got nothing to do with finishing rich . . . nothing!

Myth No. 2 It takes money to make money.

Fact No. 2 It takes very little money to make money . . . as long as you are patient and disciplined.

My grandparents had only a few dollars a week to invest. Nonetheless, over the course of several decades, they became wealthy.

I can see you rolling your eyes. That was then, you say; this is now. Well, not so fast. Let's look at the numbers. The nice thing about building wealth is that it's basically a numbers game, and the rules don't change much over time. Consider the following:

A Dollar Is Still Worth a Lot of Money . . . If It's Forced to Grow Up!

I want you to do an experiment. Go down to your local coffee shop one morning and for one hour count the number of couples buying cups of coffee. If it's a fancy franchise like, say, Starbucks, the price of a nice little cup of cappuccino will be about $2.50. Watch how many nice normal people spend that much every morning on coffee. Have you ever stopped to think about what the cost of those little cups of coffee can add up to over time? How much could you make if you spent $1 less on coffee every day and put what you saved into a good investment program? Let's take a look.

A Dollar a Day Can Grow Up to Be $1 Million . . .

Here's what happens if you start making a dollar a day work for you.

$1 a day at 5% = $1 million in 99 years ("too long . . . won't work") $1 a day at 10% = $1 million in 56 years ("start at age 7, you're a millionaire at 63") $1 a day at 15% = $1 million in 40 years ("start at age 7, you're a millionaire at 47")

Now your brain is having a few thoughts. Okay, a dollar a day and compound interest are interesting and kind of neat, you are thinking, but where are we going to get annual returns of 10 or 15 percent? (The answer is the stock market, and we'll cover that in detail later on.) You're probably also thinking, "Hey, David, it looks great, but I'm not seven years old." That's right, you're not seven. But maybe you have kids who are. If so, do them a favor and show this to them.

Of course, that doesn't solve your problem. You're a lot older than seven, and try as we might, there's no way to turn back the clock. But there is a way to make up for lost time—namely, by kicking in more money. Since you're older than seven, you probably can afford to invest more than $1 a day. Let's see what happens if you put in a grown-up amount.

$10 Can Turn into a Million a Lot Faster Than $1

Here's a startling but probably true fact: if you can manage to save $10 a day, you can get rich.

I'll say that again: all you need to do in order to become wealthy over time is to commit right now to putting a fixed amount of money every day in growth investments. (Don't worry about what kind of growth investments; we'll cover that later on.)

$10 a day at 5% = $1 million in 54 years ("still doesn't work great") $10 a day at 10% = $1 million in 34 years ("not quite so bad . . . we're getting there") $10 a day at 15% = $1 million in 25 years ("that's really just around the corner")

Now let's go crazy. What if both you and your partner saved $10 a day?

$20 a day at 10% =$1 million in 27 years $20 a day at 15% =$1 million in 21 years

There are no tricks here. Becoming rich is nothing more than a matter of committing and sticking to a systematic savings and investment plan. How you set up and run that plan is something we'll deal with later on in this book. For now, I just want you to focus on the fact that you don't need to have money to make money. You just need to make the right decisions—and act on them. Check out the chart below on how to build a million-dollar nest egg.

There's Still Time . . . Even If You're in Your Fifties

Wherever you are right now in your life, a little extra savings can go an amazingly long way toward building a sizable nest egg. Consider the following simple plan for a couple in their fifties.

Say Jim and Maureen decide today to start using the Couples' Latte Factor (a technique we'll learn about in Step Four) to enable each of them to invest an extra $10 a day in their retirement accounts at work (a practice we'll discuss in Step Five). That amounts to an additional investment of $600 a month. Multiply that by 12 and we are now talking about a yearly increase in savings of $7,200. If they both start at age 50 and continue putting money away at that rate until they are 65, the results could be truly phenomenal.

Let's asume Jim and Maureen invest the extra money in a growth portfolio consisting of 75 percent stock-based mutual funds and 25 percent short-term bonds. With this sort of mix, it's reasonable to expect them to earn an annual return on their money of around about 11 percent. (It's not guaranteed, but that's what these investments have averaged for the last 30 years or so.) By the time Jim and Maureen reach 65, their extra savings should total nearly $275,000. And if their emploers have a policy of matching, say, 50 percent of their retirement-plan contributions (which many companies today to), their total would be more than $412,000. Anyway you cut it, that represents a significant extra cushion for retirement.

Remember the truth that...

...most people overestimate what they can do financially in a year—and underestimate what they can achieve financially over a few decades.

Copyright 2002 by David Bach