While you manage your finances, you will soon find yourself having to go through tough money conversations. This can either be with family members or even your financial planner. Nevertheless, there are challenging money topics you cannot avoid if you are serious about financial planning for the long haul.
The health crisis also has a lot to do with the fact that people are starting to embrace these topics as a necessary step in reaching their goals. In the past, many people might be quick to pass up on the opportunity to tackle these financial areas. They were not your everyday money topics you can easily engage people in.
But now, more and more people are starting to realize the importance of facing tough money conversations. Many people now see the value of taking these difficult conversations head-on. The importance of these topics was realized by a lot of people during the pandemic. The health crisis impacted many families far more than just health concerns.
As soon as the pandemic showed everyone that it was here to stay for a long time, businesses had to start pivoting their operations. This meant that a lot of people were thrust to rapid changes in the workplace. But now that the economy is starting to bounce back up, the lessons of the past few years still hold. And because of those, these tough financial conversations are more common than ever.
Here are some of them worth looking into.
Importance of having an emergency money
One of the tough money conversations you need to go through is talking about reserve funds. Before the health crisis, this was not a topic people would discuss. For one, they did not see the importance of having an emergency fund. They were not too thrilled with the fact that they had to save up and set aside as much as a year’s worth of expenses for the unexpected.
But as soon as people started to feel the negative financial impact of the health crisis, having an emergency fund started to make a lot of sense. It was the perfect situation that highlighted the need to have funds you can dip into when emergencies happen. Because of this, people are now more open to the idea of an emergency fund.
It was not a priority before compared to paying down debt or even retirement savings. But now, it has become part of the financial planning conversation. Having a dependable savings account in times of emergency situations can help you recover faster and keep you out of debt. You get to focus on the more important things and not your everyday expenses.
Tough money conversations include estate planning
Much like how an emergency fund is important simply because you do not know what life brings you, the same goes for estate planning. A lot of planning happens for your current needs to your retirement years. You might even be excited about your golden years as you spend your days doing the things you love. But what are your plans beyond that? Do you know what happens to your estate when you pass away?
Most people tend to put off this type of planning simply because mortality is a difficult subject. Death is not an easy concept to accept. In fact, CNBC shares that about 67%of Americans have no estate plan. As you try to plan for the future to see how you can enjoy the fruits of your hard work, death suddenly becomes scary. It gives you the idea of an abrupt stop in life. At this point, everything else becomes meaningless.
To a certain extent, estate planning can give you a different point of view – it allows you to focus on the things that matter most to you. Death is inevitable and the sooner you plan for it, the better. It helps the people you leave behind to manage your estate the way you want it to handle. It leaves behind specific instructions to people you love on how they can divide up your estate.
Enjoying your money now
The opposite of estate planning is planning for the present. But it would be hard to believe that this is also one of the tough money conversations you would ever have. For one, we are wired to prepare for the future. Although some people prefer to use up everything they have for the present, most Americans would always have their sights on their future needs.
One concept that makes this a challenging topic to talk about is the idea of selfishness. The moment you start to talk about your “present happiness” seems to take away the importance of future needs – both yours and your family’s needs. But there is a certain need to enjoy life now as well. For one thing, you never really know how much longer you have.
The challenge is striking a healthy balance between planning for the future and enjoying life at present. Doing too much for one could make you miss out on future opportunities or forget to live life at present. This is the reason why it is a difficult topic for most people. Trying to do both is not easy but equally important.
What’s your trigger?
One of the reasons why people put off tough money conversations is because they get irritated talking about it. If you feel the same way, there is a good chance that money conversations trigger an emotional response from your end. It might be a good idea to try and figure out the root cause to allow you to have rational money conversations.
It is possible that at this point, you do not want to talk about and deal with serious topics such as death or even divorce. The subject of mental health might be an issue you are not prepared to deal with at the moment. Although these are important topics you have to plan for or at least talk about, you do not have to force the topic.
You can choose to talk about it when you feel a little bit more comfortable. But do not wait too long. A healthy balance is setting a date when you will sit down and talk about it. It can be with your spouse, family, friend, or even your lawyer. The goal is to prepare yourself mentally as the date approaches so get the courage to talk about it.
Tough money decisions to make
Tough financial conversations normally include challenging money decisions as well. It can be making a tough decision between your needs and wants, trying to figure out a way to earn from your hobby or even controlling impulse purchases.
A good rule of thumb when you need to make a tough decision is to base them on your goals. Will your choice bring you closer to your goals or pull you further away from them? If it will help you get to your goals faster or at the very least, keep you on track then that is usually the better choice. Keep in mind also that oftentimes, focusing on your goals means putting off your wants.
Tough money conversations are an opportunity to assess your financial growth and maturity as you try and make the right decision to bring you closer to your goals.