Money Talk: Fostering Effective Financial Conversations

OAAP Attorney Counselor Douglas S. Querin, JD, LPC, CADC I, recently had the opportunity to talk with Portland-area financial therapist Brian H. Farr, LPC, about how to have successful conversations about money. Brian works with clients who are having issues surrounding their finances. Their interview is summarized below.

Q: Brian, I assume finances are nearly always an important issue that should be periodically talked about by those in marital, couple, and partner relationships even in normal times. Why is it any more important today, or is it?

Right now is an important time to talk about finances because COVID-19 has upended finances for so many people. Revenue reductions for law firms and reduced take-home pay for individuals and families are not uncommon. Setting aside time to sit down for a conversation about finances can bring partners into alignment and strengthen relationships. When partners have equal access to critical financial information, creativity and problem-solving are enhanced.

If the money coming in is suddenly less than the money going out, partners must quickly recognize the new reality and take corrective action. Talking about money and working together to address financial problems will minimize misunderstanding and maximize success during an economic downturn.

Q: What are the primary goals of having these financial discussions?

Clarity is an important goal. Many problems with finances occur because partners are not looking at the same set of numbers or are not seeing the numbers in a similar way. In some situations, it will require patience and perseverance to develop a common understanding of the finances, but it is worth the effort to establish that clarity.

Developing a menu of possible actions is another goal for financial discussions. “Now that we have a picture of our current reality, what are the most viable options for moving forward? If needed, where can we make cutbacks?”

A third goal of financial conversations would be for partners to improve their skills at conducting financial conversations. Talking about money can be difficult! Financial uncertainty frequently triggers strong emotions. Learning how to create physical, intellectual, and emotional environments that support effective financial conversations is a worthwhile long-term goal for any financial discussion.

Q: So, where’s the best place for people to start in preparing to have helpful discussions about their finances?

Time and location have an outsized impact on financial discussions. The potential success of these conversations will be compromised when the physical environment is full of distractions (e.g., electronic devices, children) or when the time available is squeezed or compromised (e.g., racing to the next meeting, hungry moments just before dinner, falling asleep). 80% of success is showing up. Choosing the right time and location will allow partners to be fully present for financial discussions.

Equal access to the financial data is another important factor at the beginning of money discussions. In some partnerships, one person has become the money management “expert,” which inevitably disempowers the other partner(s). Knowledge is power. The more knowledgeable money person needs to take responsibility for collecting and presenting the financial data in such a way that it can be understood by the other partner(s). This frequently requires extra time and patience from everyone involved. Equal access and genuine understanding of the partnership data are certainly worth the additional effort.

Q: Can you give some examples of helpful ground rules?

I think that scheduling financial conversations on the calendar can be very helpful. With some advance notice, participants are able to clear their heads and collect their thoughts. Establishing a timeframe for beginning and end provides a clear container. At the start of the meeting, it is good to summarize what you need to address and what you want to accomplish. When possible, I suggest beginning these conversations with the lower-stress financial issues to get some momentum, then tackle the potentially difficult or contentious issues.

The most important objective of a financial conversation is to stay connected enough to continue the conversation. Communication breakdowns can be extremely costly during an economic crisis. Participants in the conversation must take responsibility for their own emotions and reactivity, and eliminate blame. Grounding and conscious breathing can be useful techniques for helping individuals stay present with the facts of a financial discussion. Establishing simple rules for a “time out” can also be helpful: how to request the “time out,” length of time for the cooling off, and commitment for returning to the conversation. At the end of the meeting, summarize the decisions and get clarity on all action items. Then take a moment to celebrate your successful conversation.

Q: Reviewing and talking about finances sounds like it could easily get very technical and complicated, especially if finances have not been routinely reviewed and discussed. Are there some basic categories that can be used to simplify the process?

This is an important point. People bail out of financial discussions that become too complicated. Household and small business finances are not rocket science: money comes in and money goes out. Developing a simple and clear way to track cash flow is critical. The four basic expense categories are: Mostly Fixed, Variable, Periodic, and Debt Payments. Each category has unique tracking characteristics, and each requires different strategies when expense reductions are needed. A wide variety of tracking systems are available. All of them can be effective if the reports are clear enough for all partners to understand.

To help with COVID-19 recovery, I have posted on my website a Household Finances Worksheet with a brief video explanation. This simple worksheet provides an easy pen-and-ink method for developing a quick financial snapshot of monthly expenses and income:

Q: What’s next?

Given our current COVID-19 economic environment, many families (and law partnerships) are being forced to make cuts in their spending. After cash flow is divided into the four categories (above), the opportunities for and limitations to expense reductions become much clearer. Quick cuts to spending can usually be found in the Variable Expenses (e.g., food, entertainment, recreation) and the Periodic Expenses (e.g., dependent care, vacations, gifts). Not surprisingly, Mostly Fixed Expenses are more difficult to change, while reductions in Debt Payments typically require negotiations or restructuring. I encourage people to get clear (and creative) with their understanding of the available options for spending reductions. Then prioritize the options and take action. Do not wait until the money runs out. When confronting a cash flow challenge, take action as soon as possible.

Q: Clearly this process is not a one-time event. What are the parties supposed to do once they have (hopefully) had these discussions?

From my experience, meeting twice a month to review finances is ideal. The meetings can be much shorter when partners meet twice a month, and problems can be addressed quickly. Monthly meetings can also be effective, but there are 30 days of transactions to review, rather than 14 days, so the meeting will be longer.

The purpose of regular, rather than haphazard, financial discussions is to monitor and more effectively navigate financial reality. Partners not meeting regularly would be like driving an automobile with the gauges hidden and one eye closed. Why would you do that to yourself?

Q: I’d imagine these kinds of discussions could quickly become very stressful and might produce some significant anxiety, fear, and/or anger. What recommendations would you make to keep some of these emotional issues from interfering with a successful process?

Yes, talking about money can be very stressful. Financial discussions frequently trigger strong emotional responses connected to feelings around success, survival, and even self-concept. “Who am I in the world if my finances are threatened?”

As I said earlier, the time and location of these conversations has a significant impact on the quality of the conversation. When participants are fully present, there are fewer misunderstandings, which reduces confusion and emotional reactivity. Self-calming techniques are always useful when navigating stressful situations (e.g., mindfulness techniques, conscious breathing, short breaks for stretching, or yoga). It is also a good idea to HALT the conversation when one or more participants are hungry, angry, lonely, tired.

I believe it is important to accept and honor the significant differences that partners bring to these financial conversations. One person might be very comfortable with financial data while the other is uncomfortable. One might be low-key and calm while the other tends to be more anxious. Family of origin financial histories also run the gamut in many partnerships, and these differences must be recognized, honored, and woven into the fabric of successful financial conversations.

Blame is one of the biggest culprits for derailing any financial discussion. Something about money makes finger-pointing much easier than self-reflection. When one partner starts the “blame game,” the other partner(s) will usually fire back with more blame or just withdraw into silence. To prevent these cycles, each participant must identify and take responsibility for their own tendencies toward blame. Establishing a “safe word” to end blame attacks may sound extreme, but blame is so toxic that it must be stopped if partnership financial conversations are to be successful.

Finally, when partners are committed to the long-term success of their partnership, that commitment can serve as the guiding light during these discussions. A genuine (and spoken) desire to protect the partnership during times of crisis will provide both motivation and emotional grounding during difficult financial conversations.

Douglas S. Querin, JD, LPC, CADC I

OAAP Attorney Counselor

Brian H. Farr, LPC