What to do when DW doesn't understand investing
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audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Hmmm - I wonder how you chose your user name.
Maenad
Recycles dryer sheets
+1 to Independent's strategy, as well as looking into rental real estate for an income stream. Plenty of retirees have rental income paying their way. Bigger Pockets may help with advice.
I was raised by very risk-averse parents who have only ever invested in CDs. Education was what "turned me to the dark side". Some of the Millennial-focused blogs may be more relatable than the numbers-based stuff I find helpful - try Bitches Get Ritches.
I was raised by very risk-averse parents who have only ever invested in CDs. Education was what "turned me to the dark side". Some of the Millennial-focused blogs may be more relatable than the numbers-based stuff I find helpful - try Bitches Get Ritches.
brucethebroker
Thinks s/he gets paid by the post
I understand your concerns. HOWEVER, she is a prime candidate for learning the ropes of RE investing. She most likely knows people already investing (quite possibly in her same office). Buy a copy of "the millionaire real estate investor", by Gary Keller (of Keller Williams real estate company fame). One of the best RE books ever written, IMO (and I have read dozens). "...represents the collected wisdom and experience of over 100 millionaire investors from all walks of life who pursued financial wealth and achieved the life-changing freedom it delivers. This book--in straightforward, no nonsense, easy-to-read style--reveals their proven strategies.", per Amazon.
My real estate investing life was changed when I became licensed to sell, and began rubbing elbows with fellow investors who were Realtors. She can do the same. And then, after trying it out, perhaps you can convince her to diversify into the stock market a little. Good luck.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
A few things... many that have been touched on.
There are a couple risks with cash. One is the risk of theft if we are talking about coin of the realm. The other, more stealthy risk, is inflation risk. Perhaps you can explain it to her as someone who has enough cash to buy a $500,000 home but the time isn't right but will be in 10 years so they put the cash in a safe. 10 years later they open the safe and take the $500,000 out and go to the real estate office but are disappointed as that $500,000 house now costs $650,000 [$500,000 * (1+2.75% inflation)^10 years]. Perhaps she'll understand inflation risk better if you frame it that way.
At a minimum, you should get into an online FDIC insured savings account... they pay ~1.3% or more these days.
The next level is savings for things that you will need the money for in the near term... and on that she is right... you want to keep that money safe from market downs and ups so it will be there when you want/need it.
The next level is savings for long-term things like retirement... that money can be wisely invested in stocks because in the long term it will grow despite constant ups and downs. Have her pick five 25-year periods at random from the last 100 years... and show her how stocks with dividends reinvested have compared to cash with interest reinvested.
And buy a subscription to Kiplinger's Personal Finance or Money magazine and have her read it each month while waiting for clients to show up for appointments. Eventually she will understand and come around.
One other angle is to explain that investing saves you a bundle in taxes. If you invest and collect qualified dividends and long-term capital gains from the sale of appreciated stock then your federal tax is 0% or 15% depending on your income level. If you invest in CDs then your tax is at ordinary rates... which is 22% or more. It is better to pay 15% than 22%.... that should be math that she can understand.
There are a couple risks with cash. One is the risk of theft if we are talking about coin of the realm. The other, more stealthy risk, is inflation risk. Perhaps you can explain it to her as someone who has enough cash to buy a $500,000 home but the time isn't right but will be in 10 years so they put the cash in a safe. 10 years later they open the safe and take the $500,000 out and go to the real estate office but are disappointed as that $500,000 house now costs $650,000 [$500,000 * (1+2.75% inflation)^10 years]. Perhaps she'll understand inflation risk better if you frame it that way.
At a minimum, you should get into an online FDIC insured savings account... they pay ~1.3% or more these days.
The next level is savings for things that you will need the money for in the near term... and on that she is right... you want to keep that money safe from market downs and ups so it will be there when you want/need it.
The next level is savings for long-term things like retirement... that money can be wisely invested in stocks because in the long term it will grow despite constant ups and downs. Have her pick five 25-year periods at random from the last 100 years... and show her how stocks with dividends reinvested have compared to cash with interest reinvested.
And buy a subscription to Kiplinger's Personal Finance or Money magazine and have her read it each month while waiting for clients to show up for appointments. Eventually she will understand and come around.
One other angle is to explain that investing saves you a bundle in taxes. If you invest and collect qualified dividends and long-term capital gains from the sale of appreciated stock then your federal tax is 0% or 15% depending on your income level. If you invest in CDs then your tax is at ordinary rates... which is 22% or more. It is better to pay 15% than 22%.... that should be math that she can understand.
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donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Maybe show her a market chart going back 100 years and some graphics illustrating how her cash savings will dwindle to half their value in 15-20 years. Explain that the objective is to keep a mix of equities and bonds that will allow you to get through the inevitable market troughs.
Edit: I see DrRoy beat me to it. +1 to his suggestion.
Edit: I see DrRoy beat me to it. +1 to his suggestion.
gayl
Thinks s/he gets paid by the post
My 2c:
She understands housing & savings because she is incredibly risk adverse. (Don't flame me that real estate has risks, I know it does but women interpret the roof over their head in a different light) So she ramps up savings + wants a pretty place to live in while it'll be worth more in a decade or so and (for one reason or another) strongly remembers 2001 / 2008.
You have a grasp on the value of the stock market and remember 2011.
Let each of your put away in your retirement accounts as you see fit then share info in 2 yrs. Bet that'll work even if she continues to save / you continue to invest
She understands housing & savings because she is incredibly risk adverse. (Don't flame me that real estate has risks, I know it does but women interpret the roof over their head in a different light) So she ramps up savings + wants a pretty place to live in while it'll be worth more in a decade or so and (for one reason or another) strongly remembers 2001 / 2008.
You have a grasp on the value of the stock market and remember 2011.
Let each of your put away in your retirement accounts as you see fit then share info in 2 yrs. Bet that'll work even if she continues to save / you continue to invest
FIREmenow
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Sounds like the perfect reason for a 50/50 asset allocation!
athena53
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A few more thoughts- I also like Independent's suggestion but it may not have to be split 50-50. Is it possible that your wife will be happy if just $X,000 (or $XX,000) is in a cash equivalent investment? It may be that she'd be happy with something less than half the assets in cash, but enough to make her feel secure that the two of you will be OK in a downturn.
Second- you may want to occasionally share with her the results on what you've invested- the ups AND the downs. Over the long run, she may become more comfortable with downturns after seeing that the good stuff rebounds eventually. Finally, you SHOULD share with her anything especially risky you might want to do. My late husband was a dear man with modest spending habits and a high IQ, but zero interest in investing. He was still my common-sense test. If he didn't like the idea of something I was planning to do, I either didn't do it or took a lower stake, because the outcome affected him, too. A friend once told me her husband the doctor lost half their retirement savings (they were in their 40s) by buying on margin just before the dotcom bubble. She had no idea that was what he was doing till it was too late.
Second- you may want to occasionally share with her the results on what you've invested- the ups AND the downs. Over the long run, she may become more comfortable with downturns after seeing that the good stuff rebounds eventually. Finally, you SHOULD share with her anything especially risky you might want to do. My late husband was a dear man with modest spending habits and a high IQ, but zero interest in investing. He was still my common-sense test. If he didn't like the idea of something I was planning to do, I either didn't do it or took a lower stake, because the outcome affected him, too. A friend once told me her husband the doctor lost half their retirement savings (they were in their 40s) by buying on margin just before the dotcom bubble. She had no idea that was what he was doing till it was too late.
kcowan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1 and commit to invest 50-50 in both RE and Equities. Both sides will learn valuable lessons.
MRG
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Independent hit a nail on the head. My DW is risk hesitant and has a hard time trusting the markets.
When we put some money in our individual Roths she want to be conservative. I told her to pick whatever she wanted. After a couple of years my balance was 2.5x hers. She decided to take on more risk.
When we put some money in our individual Roths she want to be conservative. I told her to pick whatever she wanted. After a couple of years my balance was 2.5x hers. She decided to take on more risk.
jollystomper
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Just a few general things to add to the good advice already given:
- Patience is a virtue. Rome was not built in a day. It may take time for her to be comfortable with investing, so exercise patience.
- Display calmness at times of market downturns. My DW once remarked that seeing how calm and "business as usual" I stayed during the market downturns we lived through kept her from panicking at all the dire news being broadcast.
- Position investing within your overall financial plan. Do not focus so much on the future monetary goal as the role it plays in those plans. My DW got scared when a couple of acquaintances husbands passed away suddenly and within a few months the families had to sell their homes. Showing her how I had the bases covered addressed those fears.
- Be open about you investing actions. Give her regular, honest updates. Do not get too giddy when times are good, or down when times are bad. Do not hide anything.
- Patience is a virtue. Rome was not built in a day. It may take time for her to be comfortable with investing, so exercise patience.
- Display calmness at times of market downturns. My DW once remarked that seeing how calm and "business as usual" I stayed during the market downturns we lived through kept her from panicking at all the dire news being broadcast.
- Position investing within your overall financial plan. Do not focus so much on the future monetary goal as the role it plays in those plans. My DW got scared when a couple of acquaintances husbands passed away suddenly and within a few months the families had to sell their homes. Showing her how I had the bases covered addressed those fears.
- Be open about you investing actions. Give her regular, honest updates. Do not get too giddy when times are good, or down when times are bad. Do not hide anything.
mountainsoft
Thinks s/he gets paid by the post
I hope you mean Certificates of Deposits and not Compact Discs?
I'm going through something similar with my mom. She started buying CD's back when they earned good interest. But now she's only earning about .15% which is worse than many regular savings accounts. It's what she knows and is comfortable with, so it has taken some effort to convince her there are better options. She had a stroke back in May and has blown through her checking with assisted living costs. Now she's going to get hit with a several hundred dollar early withdrawal penalty to have enough to last until the CD matures. I think that finally convinced her it's not a wise option in her current situation.
