Friday, October 17, 2014

The Psychology of Happy Marriages

When i was in college, one of my favorite psychology professors would give life lessons based on psychological studies as a reward for being on point as a class. I loved it. One week he spoke about qualities of happy and unhappy marriages. According to studies, the number one reason couples fight is money. 

That fact has stuck with me over the years. I've already discussed that Will and I went through Dave Ramsey's Financial Peace University (FPU) course together. Finances have been part of our discussion for a while. We want to keep ourselves on the same page and be positioned for a strong future.

Recently one of my friends got involved with Primerica. I'd honestly never heard of the company before my friend introduced me to it. (He actually said that Dave Ramsey got started with this company and uses some of its ideas in his own work.) My friend offered to do a free Financial Needs Analysis for us. You know, I really thought I was decent at finances, but that whole experience challenged my thinking. 

Let me pause here to say I really encourage couples to take advantage of financial education. If the number one reason you're going to fight is going to be money, be proactive by increasing your understanding of finances and making a plan to deal with it together. One thing we've come to realize is that we do not share a brain. We have to get on the same page by reading and talking things out. Otherwise, what happens? We end up making assumptions. And you know what they say about assumptions, right?

There is obviously no one company that has all the answers. As much as we were able to take from Dave Ramsey, Primerica still taught us new concepts. I'm sure there are other gurus and companies that will teach us more. So I'm not pushing any one product at you, I'm really just saying one of the best decisions we have made so far is studying finances together. Ok, back to the story.

In FPU your main focus is getting out of debt. There are other steps, sure, but you focus every spare penny to the goal of being debt-free. When we went for our Financial Needs Analysis with Primerica they talked to us about the balance between getting out of debt and using the time value of money to build savings for retirement. If you'd like to test this concept, use this calculator

Basically, the whole concept is that when you invest money and draw a return on that investment, the total available to you will grow the longer you leave the money alone. So if I invest $200/month over 10 years at a 5% rate of return I will have contributed $24,000 and gained a $7,700 return for a total of $31,700. (I'm rounding here.) On the other hand, if I were to make the same contribution, stop contributing at all after ten years, then pull the money out after 20 years have elapsed guess what my total would be? Around $51,600! 

Holy. Crap.

I realize that I'm a little old to be saying this, but I have neglected my 401k. I'll admit it. I wanted to free myself of debt before I really focused on it. And I have a graduate degree in business. Mmmkay. I admit it. I still did not heed a concept I already knew about - the time value of money. 

Again I say, I really encourage people to take advantage of financial education. Will and I are both graduate educated and still we have a long way to go in learning to deal with money. This is not a problem specific to any type of person - we all have it; however, it's amazing what you learn and how it impacts the next 30 years of your life...and your satisfaction within your marriage. They say that women naturally seek security (savings, retirement) while men are naturally more comfortable with risk (investment) and decreased savings. When you know you're prone to disagree, it's time to get educated and find your path together. 

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