Term Deposits
9 December 2020

Money conflicts in retirement

Look at any list of the most common causes of a relationship breakdown and arguments over money will be one of them. Not having enough money to pay bills causes stress in a relationship, however, even those with high incomes or significant wealth can find themselves arguing about overspending, gambling, taking financial risks, being too frivolous or too frugal with money, giving money to family members, and so on. Conflicts over finances can occur at any stage in a relationship, especially in retirement.

Avoiding and resolving money conflicts is a relatively simple process providing both parties are willing to co-operate. What makes it so easy is that, when it comes to financial decisions, there is no right or wrong answer. A good financial decision is one that is made in full knowledge of the consequences, while taking into account the values held by the decision maker. In a relationship, difficulties arise when one or both parties make decisions without proper consideration of the consequences, or without acknowledging or respecting the different values of the other person. Providing there is sufficient money to pay the bills, resolving money conflicts is simply about addressing these issues.

To fully understand the consequences of financial decisions requires a high level of financial literacy. It is not possible to make a good decision about how much you can afford to spend in retirement unless you have planned what your future needs are likely to be and made an assessment of how much money is needed to cover them - using a realistic set of assumptions.

Nor is it possible to make a good investment decision unless you have estimated the potential risks and returns. Once the consequences are understood, and this is a purely objective exercise, they need to be considered in the light of personal values and attitudes, which are by definition completely subjective. Some people are risk takers, some are not. Some get enjoyment in life from spending money on expensive possessions while others get their pleasure from family and friends. Failure on the part of one person to understand the consequences of overspending, gambling and taking financial risks can destroy relationships, as can failure to consider the other person’s values and attitudes.

Real life examples

Bob was a man about town who, with Joan’s help, had built up a successful business. Bob considered himself to be something of an entrepreneur. His wife, on the other hand, was more conservative in her approach to life and valued financial security. Bob and Joan sold their business with a view to retirement and Bob set about making investments in property and other businesses, without full consideration of the risks and returns. Inevitably, the investments did not live up to Bob’s high hopes. In Joan’s eyes, Bob was gambling with their financial future. Unable to tolerate the risks she perceived, she left Bob, along with half of the now impaired assets. Bob’s failure to understand the consequences of his decisions and to take Joan’s needs into account cost him not only money but his relationship.

In another situation, Jim and Helen were newly retired. Jim was a conservative fellow who worried about having enough money for his retirement. He was concerned about the amount of money Helen was spending on beauty treatments and felt that now they were retired, Helen had to cut back on what he considered to be luxuries. Fortunately, they went to see a financial adviser who did some forward planning based on the level of income they thought would be required to cover their future goals. It became clear that they were in a good financial position. The adviser recommended that they each agree a fortnightly personal budget that could be spent on whatever they wanted, without having to get permission from each other. This amount was transferred fortnightly from their joint account to an individual bank account. Helen was able to continue her beauty treatments by paying for them from her personal budget. Problem solved!

Conflicts over money are really no different than any other conflicts in a relationship. To resolve them requires good communication, objectivity and consideration of the other person’s point of view.

Photo of Liz Koh
Written by:

Liz Koh

Liz is one of New Zealand's most well known financial commentators, and as an Authorised Financial Adviser, Liz has helped hundreds of Kiwis prepare for life when the pay cheque stops. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.

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