If you want to risk starting some arguments around the dinner table this holiday season, be sure to bring up religion and politics.
No, wait — make that sex and personal finance.
Sex and personal finance/money ranked first and second among five “taboo” topics for discussion in a TD Ameritrade survey this year. They beat out the other three taboo topics that were evaluated— religion, politics and health issues.
Financial subjects might warrant some discussion if you hope to help relatives or friends, especially young adults, deal with debts, low savings rates, missed investment opportunities or the other money ailments that plague tens of millions of Americans.
“It’s amazing the number of people who don’t have the discussions they need,” said Jeff Young, an investment adviser at First Financial Equity Corp. in Scottsdale.
If you’re in a position to offer guidance and share suggestions, there are ways to broach these topics without opening floodgates of guilt, embarrassment, resentment or regret.
Recognize misgivings over debts
In the TD Ameritrade survey of roughly 1,000 adults released in July, personal student loan debts ranked as the most taboo topic, cited by 36% of respondents. Other top taboos included child-care expenses, living paycheck to paycheck, credit-card debts and a lack of emergency funds.
By contrast, retirement planning and income were the two least-cited taboo topics. Taken together, respondents seemed less comfortable discussing the debt/expense side of the equation compared with their assets/income.
That notion was supported by another survey question that asked respondents why they are reluctant to discuss personal-finance issues. The majority said they consider such topics to be “impolite” or they don’t want to be viewed as braggarts. But about three respondents in 10 said they didn’t want to be seen as failures or acknowledged that they’re not faring as well financially as they’d like or as other people expect.
“I’d steer clear of judgmental topics, and that includes saying things about a spouse that implies a lack of financial responsibility,” said Jim Dew, a certified financial planner at Dew Wealth Management in Scottsdale. “That can create all sorts of problems later.”
Talk concepts, not dollars
People who are uneasy disclosing their money problems might be more receptive if you provide strategies and suggestions in general terms without delving into dollar figures or personal details. Several broad themes apply to much of the American population and, most likely, to some of your friends or relatives: Debts are high, emergency savings low and retirement preparations behind schedule, to cite some common examples.
When talking to people of a different generation, keep in mind that those individuals might evaluate financial mistakes and priorities differently. In the TD Ameritrade survey, baby boomers ranked their top mistake as not having a 401(k) retirement plan, followed by not contributing enough to receive full employer matching funds and not opening Individual Retirement Accounts.
But millennials cited the lack of emergency savings as the top perceived mistake, followed by low credit scores and keeping financial secrets from a spouse or partner.
If you’re being given financial advice, keep one caveat in mind: The person most boastful or opinionated about providing such advice might not be especially well qualified to give it. “I’d consider the source,” Dew said.
Respondents in the TD Ameritrade survey said they were most comfortable discussing finances with spouses/significant partners. Financial advisers were next, followed by parents, children, close friends, other relatives and then co-workers. If family members can’t discuss these issues frankly, it might be time to hire an impartial financial adviser.
Focus on positive, long-term practices
Perhaps the best advice you can give others is to help them develop sound practices and habits for managing money. “Focus on prudent, smart things to do correctly over time” rather than make predictions about the stock market, the election, the direction of the economy and so on, Dew said.
He recommends three financial rules of thumb for just about anyone.
One is to automate your finances by making sure car, mortgage and other bills are paid routinely and by regularly diverting a portion of your paycheck into a workplace 401(k) retirement plan, if available. If saving money has been tough, earmark perhaps $50 per paycheck into a dedicated savings account that’s separate from your checking account.
“If the money comes out automatically, you won’t miss it,” Dew said.
A second suggestion is to save half of every raise you get on the job. “Spend half and save half,” he said. “In five or 10 years, you will have saved a lot.”
Dew’s third suggestion is to get basic legal documents in place, which should include a will as well as a financial power of attorney and health-care power of attorney. A will appoints someone to make decisions such as how to transfer your assets at death, while the two powers of attorney name someone to act on your behalf if you’re alive but incapable of doing so.
(For Arizona residents, some key documents are available for free download under the “seniors” section of azag.gov, the website of the state attorney general’s office.)
These recommendations are especially important for single people without a spouse to make decisions for them. Trusts or other more advanced estate-planning documents also might be warranted, but at least get the basics down first, Dew suggests.
Organize the information
With younger family members, discussions often should focus on helping them develop sound financial practices, but with aging relatives, it’s often more a case of finding out what they need and where they keep wills and other key documents — without seeming like you’re trying to take control.
For a checklist of financial accounts, utility providers, key contacts and more, this eight-page summary from Merrill Lynch and Bank of America, titled “Organizing your Financial Life,” can be very handy. It can help parents or other family members stay on top of their financial documents as well as online accounts.
Brokerage and other financial accounts as well as real estate often transfer relatively easily at death compared with personal property such as jewelry, antiques, furnishings and even photos, Young said. Yet these items can result in family disputes later.
“In my experience, personal property often causes the most problems,” he said. “I’ve seen families torn asunder over this.”
Hence, it can be a good idea to help parents or other elderly residents start the discussion about whom should get which personal items.
Also, take the time to help elderly relatives reduce the odds of becoming fraud victims by inquiring who has been trying to contact them over the phone. Even in a high-tech age, scams targeting seniors frequently are initiated by cold calls.
“We all get (unsolicited calls) and many are from scammers,” wrote Lisa Weintraub Schifferle, an attorney with the Federal Trade Commission in a blog this month on holiday scams. “Remind people to just hang up.”
