Discussing finances with our loved ones can be difficult Ide

Discussing finances with our loved ones can be difficult.

Identify some of the differences that may arise when discussing joint financial decisions.

What can be done to handle these disagreements peacefully?

Do you have any examples of discussions that went well or badly that you would like to share with the class?

Solution

The basic difference that may arise while discussing joint financial decisions is the difference between the goals of the parties involved. There may also be differences in the level of risk taking ability of each party. Substantial differences and disagreements may arise if one of the parties is more risk averse than the other. This will attract one party towards risk free investments where as the other maybe more adventurous and would want to invest in high return high risk assets. They may also be differences between the amount of investment that the parties think is rational.

The disagreements can be sorted out by firstly having a consensus on the goals of the discussion. The purpose of making the financial decision and the final objective of the same should be clearly ascertained. Thereafter the parties can decide on the amount to be invested and depending upon the risk taking capacity of both the parties the Asset classes may be identified. Hence portion of the total investment may be invested in risk free securities while another part may be invested in high risk securities.

During a discussion with my spouse as regards the retirement planning, we had a disagreement about the investment in stocks which my sopuse was very inetrested in. However I was totally against it duet o the volatile economy and high risk involved. Finally we decided to maintain a fair proportion of our wealth in stocks while the rest could be in low risk assets.