Certified financial planner Richard Colarossi counseled a Long Island couple in their investments and monetary strategies for decades before the wife revealed to him a startling secret: She’d hidden hundreds of thousands of dollars from her husband, who’d supported her for over 30 years.
The wife wanted to ensure the security of her children from another marriage, but the kids had grown into successful adults and didn’t need the help. After time, she started feeling guilty about concealing the nest egg from her husband, and turned to Colarossi, a partner at Colarossi & Williams in Islandia, for advice.
“She approached me about this in confidence,” he noted. “I was taken aback because I’d known them for a long time and didn’t expect this. She mentioned that this had played on her mind for many years … and my response was that she should come clean and explain why she did it.”
Therein lies some of the best advice financial planners routinely give to couples when it comes to monetary matters: total, unmitigated honesty.
Finance is a black-and-white world of numbers and charts, and marriage is anything but. When those worlds collide it can be a boiling mess that leads to divorce or worse – unless, experts say, all parties are up-front every step of the way.
Colarossi, who believes financial planners “cannot calculate for emotion in this environment,” said even smart and forward-thinking couples who diligently plan their finances face “emotions related to marriage and finance (that) can be mixed and confusing,” and the only way to keep things calm is to keep things straight.
“First and foremost, present the facts,” he said. “I’ve seen a breakup due to dishonesty about spending habits – money being withdrawn early from IRA accounts without the other spouse being aware. I’ve also experienced couples hiding money from each other, then having to ‘come clean’ for whatever circumstances. This doesn’t go over that easy.”
It’s a common theme among all Long Island financial planners who deal with married couples. Ronald Rogé, chairman and CEO of Bohemia wealth-management advisors R. W. Rogé & Co., agreed that when it comes to couples and finances, “all progress begins by telling the truth.”
“The numbers are the facts because the input to a plan comes from the clients themselves,” Rogé said. “So you present the facts, then (the adviser) works with the clients to make sure they understand the consequences of ignoring the facts.”
When it comes to shared finances, married couples tend to fall into clear categories.
According to Rogé, “Usually one is a heavy-duty saver and the other is an overspender.”
There are other factors involved in creating a happy marriage – “Those are for marriage counselors to address,” he noted – but dealing with this common contrast leads directly to the other essential part of successfully shared finances: compromise.
“Agree to work on your differences,” Rogé said. “Don’t be critical of the other person.”
He often advises couples to employ the “Indian talking-stick method” when discussing their savings plans and bottom lines: The person holding the stick gets to talk uninterrupted and the other person has to listen, then vice versa when the stick is passed. It sounds rather basic, but “this will help them understand one another better,” according to Rogé.
“They can then work with their adviser in a more informed manner,” he said. “Many times, the adviser may come up with an acceptable solution they both agree upon.”
Basic open-communication lessons often pay off in the financial-planning realm. Rogé cited another couple with very different thoughts on investing – he was a natural risk-taker, she was conservative in the extreme – and said by talking through their contradictory methods, he was able to come up with a winning long-term plan.
He counseled the wife on the safety and security of U.S. Treasury bonds, Rogé said, while the husband was given a “stock play account.” After 20 years of maturing bonds and modest mutual funds, the result was “a perfectly balanced portfolio of stocks, bonds and cash.”
What shared finances really boil down to, Rogé noted, is an understanding – and clear separation – of the brain’s analytical and emotional sides.
“Great financial planners have a good balance between the left brain and the right brain,” he said. “They can identify with the needs of the [couple] and figure out what they need to hear to understand the message you’re trying to deliver.”
The honesty, open communication and compromise all add up to the one thing no partnership – financial or matrimonial – can survive without: adaptability. Circumstances change, especially when it comes to money, and even the best-laid financial plans must be able to roll with the times.
“Illness, job loss and job relocation can and will be big stress elements, just to mention a few,” Colarossi said. “Couples must adapt and live within their means. (These) are two important ingredients for healthy finances and healthy marriages.”
And sometimes, he added, adapting to change is not an entirely bad thing, as proven by the wife who hid the nest egg from her second husband.
“They did not divorce,” Colarossi said. “[The husband] was disappointed, but happy to have the money.”