9.11.2013

Relationship Chronicles: How to Deal With a Partner's Risky Investment Choice

I thought it would be great to do a post on how to deal with your partner's investing style and particular investing choices. The BF and I have been discussing finances again and I thought I'd share a lot of choices that we've been making or are about to make. If you've been reading my blog for awhile, you know that we enjoy having "financial meetings," sometimes planned or sometimes unplanned haha.

A common theme during our meetings is planning. We enjoy discussing our current financial state, including going over income, student loans, living expenses, retirement saving, and other savings goals such as for travel/wedding/ring. I discussed weddings recently, and I will be talking about our plan for an engagement ring soon.

However, one topic that came up last night during one of our meetings was an investment/new venture that BF has been working on for awhile now. It's going to be an online start-up. I've been helping him with the legal research and stuff; I've known about it for about 2 years, but it's always nice to get updates on the finances, discuss the current state of investing, and set expectations.

It's easy to come to an agreement when you are just investing in simple vehicles for retirement such as a 401k or a roth IRA. However, what happens when you or your partner have a certain investing choice that is risky?

Since I've been in that position before and we're still continuing forward with the decision to do so, here are some tips that have really helped us!

1. Communicate all concerns
All relationships require communication. This is definitely no different. I don't know what I would have done if the BF did this on his own without consulting me. We may not have combined finances but we plan to, and I wouldn't want to figure this out in the long run. Open the door for communication by discussing investment options and start off with discussing your concerns. One partner may feel like he/she is alone in the decision, but by offering advice and sharing concerns, I think it shows that you want to be involved and thus your partner will open up more.

2. Ask lots of questions
In a situation like this, it's easy for one person to feel a bit left out. After all, the investing idea was not his/hers and it might not even be something that he/she is interested in. Try to get involved and understand where your partner is coming from. I know my BF is passionate about this endeavor and by asking lots of questions, I was able to ease my mind and also inquire as to his goals and expectations with the future of the business.

3. Estimate risks and balance with potential earnings
This one actually stresses us both out, but it is absolutely necessary in order to gauge whether the investment choice is right for both of you. We like to estimate earnings on the high to low end, and balance it with the potential risks. We play around with numbers and expect for the worse, to understand that it is possible to lose everything; and would we be okay with that?

4. Calculate and allocate for other savings goals
I think a lot of uneasiness comes from the unknown. While investing in a 401k or roth IRA is somewhat safe (with all that data and graphs offered to you), I think comfort can be found even if investing in a risky vehicle such as a start-up business. Consider all other savings goals and whether you are still in line with those.

5. Set a time limit or a budget
There should be an understanding that a risky investment comes with a price to pay. Almost all start-ups fail - I learned that in my entrepreneurship class. However the rewards could be great. We discussed a max amount of money that we wanted to invest but also realized that we couldn't do this forever. We have lots of other savings goals and it's important to account for that. Having a time limit or a budget will help you feel better about the overall cost.

6. Be flexible and prepare for change
With a risky investment choice, there is no automation. We can't automatically send a few hundred bucks to a brokerage firm to handle for us. What we put in has to be monitored closely and possibly used for something else. It's been a great learning experience so far, but being flexible and open-minded helps the process.

7. Get involved
I would say a big part of my enthusiasm for my BF's start-up is the fact that he has kept me in the loop since day one. I enjoy business myself, and I've been helping him with some legal research and website content. If this happens, I'd be ecstatic to work with him. Who knows what the opportunities will be? It's also fun to work with your partner!

I actually didn't intend to come up with a list for this post, but I honestly just put together a few ideas that we've been implementing. It was just easier to organize it all, and you know I love lists! I'm sort of a visual learner, so I like organization!

Of course, these are just tips. At the end of the day, you and your partner decide on what's best for you. It will also depend on either party's response/reaction. I know some people are much more passionate, however I also think it takes compromise and understanding to get down to the bottom of the decision.

Have you ever dealt with a partner's risky investment choice?

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