It can be hard enough to tackle your own spending habits and pay, much less discuss them with another person. But whether it’s planning for the future with your significant other or managing expectations with friends who like to spend more than you, there are several important conversations you need to be prepared for.
Of course, money talk is also important outside your personal relationships. People are often reluctant to talk about compensation in the workplace -- and it’s even tougher for women, who research shows get penalized for negotiating salaries. But you need to know how to discuss compensation, whether you’re interviewing for a new job or about to have a year-end review.
It's crucial to have a conversation about money with the following people:
Your Spouse Or Partner
If you’re sharing a life with someone, you’re likely sharing expenses, too. That can range from splitting the grocery bills to planning for long-term health care insurance and your children’s education.
Experts recommend having a conversation about money as early as possible so both partners are able to clarify their financial goals as a couple. Both individuals need to be transparent about their spending histories and any debt they might be carrying.
Gabrielle Clemens, a financial planner in Boston, suggests identifying values and goals rather than speaking solely about money.
“Money is emotional,” Clemens said. Talking about values and goals “takes the edge off money and turns a relationship into a more meaningful one.”
If a couple wants to take a cruise every year, for example, that means talking about what it’s going to cost and who will contribute the funds.
When it comes to more longterm plans, couples need to talk about who might have to stop working or work part-time to take care of children. As a couple ages, health care becomes critical, and there should be a mutual financial commitment to services like assisted living and nursing homes.
It’s natural for friends to have different salaries or different approaches to spending, but that becomes less comfortable if you find yourself pressured to spend more than you can afford.
The reality is that some friends may be hurting your finances. “If a friend is encouraging you to indulge in bad financial habits, you need to have a conversation and be clear about your own financial goals,” said Laura Adams, host of the "Money Girl" podcast.
Let your friend know why you’re not able to join them for certain outings, Adams added. Maybe you’re saving for a car or want to pay off student loans, and you have to cut back on social spending.
Who knows? Maybe your responsible behavior will encourage your friend to adopt some new goals as well.
No matter where you are in your career, you want to make sure that you’re being paid what you deserve.
That begins with your first job. While it’s not surprising that many new graduates feel uncomfortable bringing up pay (they’re probably just grateful they landed a job), a young employee can benefit a lot from negotiating -- landing not only a higher annual salary, but also increased benefits and job flexibility in some cases.
It’s important to come to the table armed with information about the average pay range in your industry and a clear sense of the skills and experience you can offer the team. Plus, managers expect candidates to negotiate salary, and there’s usually a little room to bump up your compensation.
If you’re still hesitant to discuss pay, consider this: Missing out on salary negotiations as a new graduate could result in a loss of hundreds of thousands of dollars during your lifetime. One study found that gaining a $5,000 raise on an annual salary of $55,000 would lead to an extra $600,000 earned over a 40-year career.
As you rise in the ranks or move on to a new job, it’s crucial to keep having those conversations about compensation. If you’re taking on more responsibility or are bringing in a desirable skill set, those are reasons to talk with your boss about getting paid accordingly.
Another tip: Talking to your coworkers can also help boost your salary. If employees are open about compensation, it helps everyone understand whether they’re being paid fairly and can illuminate widespread gender or racial discrimination in the workplace.
Parents can be supportive mentors when it comes to financial advice. They’ve already been through the various life stages you’re going through, and you can ask them to share the things they wish they’d known about money when they were your age.
Learn from their mistakes and their successes, but also make sure to think independently.
“Parents’ goals may be different from your own,” Adams said.
Of course, if you don’t think your parents have made wise financial decisions, look for other mentors. Another relative or even a close professor may be happy to help guide you through milestones like graduating or getting your first job, Adams said.
Your Financial Advisor
Many people assume that they don’t earn enough money to need a financial advisor. But Adams said the majority would benefit from speaking with one.
A financial advisor can walk you through big life decisions, like buying a car or a home, and help you meet your goals in five, 10 or 20 years. "Even if you don't understand finance, just ask questions,” Adams said.
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