Investing With Your Significant Other

Today’s post is a very personal story about investing.  

It’s a story about when Mrs. Tako and I were still very young.  We both started our lives as very different people, from very different backgrounds.  I had piles of debt, and she had piles of cash uninvested.  I grew up in the country, brought-up on a regimen of hard labor.  Mrs. Tako grew up in the city and spent her time on education, language, and travel.

Despite the financial differences we started with, we’ve found a way to come together financially.  We save together, we spent together, and through all the minor differences we’ve found a way to share the same big financial goals in life — financial independence and escape from the 50 hour work week.

Two Kinds of People

In a relationship, there’s almost always two kinds of people:  A Saver, and a Spender.  The Saver focuses his or her time on saving money and investing it.  The Saver views money as precious commodity meant to be put to work (earning even more dollars).  The Spender views money as a useful commodity to be traded for the purpose of enjoying life.  For Spenders, they believe there’s always going to be more dollars coming-in because of work paychecks, so why bother saving?

I’m drawing broad lines here, but the reality is that both Spenders and Savers actually do a little of both, spending and saving.  The key difference, is how they view the money supply in their life.

Perhaps Savers come from backgrounds where their family had large periods of unemployment, disability, and other economic related tragedies.  Savers learned the “value of a dollar” at key developmental periods in their life, and those kinds of experiences tend to stick.

Spenders on the other hand, may have come from a background of plenty…an uninterrupted supply of cash that just kept flowing their way.  There was no need to worry about where the next meal would come from, and absolutely no lack of comfort in their lives.  Living in wealthy countries can do that to a person.

Spenders might also have the blinders on when it comes to the monetary needs of retirement.  For many, spending that uninterrupted fountain of cash has the effect of putting the focus on the present, not the distant future.  Even Savers can be ignorant of the costs of retirement, and who can blame them — Predicting investment returns, housing, and healthcare costs 40 years from now seems like an impossible task.

So which are you on this spectrum of extremes?  Are you a Spender or more of a Saver?

Getting Started Together

When Mrs. Tako and I first met, I was more of the Saver.  I’ve had my fair share of economic difficulties in life, and I didn’t wish to revisit them.  Saving was in my blood.  I saved for the bad times (always a priority in my mind), and hoped for a financial future free of the 50 hour work week.

Mrs. Tako (in contrast) might have had an easier “go” at life economically.  In our relationship she tends to be more of the Spender.  (Let’s be clear though: she might be more of a spender, but she still manages to save a significant amount of money.)

When Mrs. Tako and I first started our relationship, I was already big on investing.  In addition to a small but growing 401k, I owned mutual funds and individual stocks in my taxable account, and had already build a pretty decent dividend income by that time.

Mrs. Tako put most of her money in a checking account.  Like most young people our age, she wasn’t exposed to investing concepts in school, and she certainly didn’t have a business background.  

For many young people, this story sounds entirely all too common.  To them, the stock market looks like a giant casino — like you might find in Las Vegas.  A wretched hive of scum and villainy.  A place to gamble money on “investments”, but not a safe place to keep it.

All that changed after Mrs. Tako and I started dating.  We talked about money.  She was quite curious about what I was doing with my money, and I was very happy to answer questions for this cute young lady in my life.  

(Maybe it was all my talk about passive income sources that won her over…)

Eventually, after weeks of discussion, I convinced Mrs. Tako to make a small investment of her own, with excess cash.  An investment in her taxable account intended to educate her on the basics of investing and to get all that cash working.  

But what would she invest in?  She already had some savings in her 401k, but it wasn’t really doing a great job of educating her…and that certainly wasn’t doing much for her post-tax money.

No, what we needed wasn’t a big blended investment milkshake, what we needed was an investment she could watch, grow and harvest the fruit from over time.

A First Investment

Ultimately we decided Mrs. Tako’s first investment should be something she would be interested in.  A company that produced products she liked, and she wouldn’t mind reading about for years.  The kind of company she could get behind and follow…

But where to start?  Mrs. Tako’s main interests in life have always revolved around just a few key things: Food, Clothes, and Mr. Tako (I might be a little optimistic on this last one).  We clearly needed to take advantage of her interest in the first two.

While everyone does need to eat, I wasn’t convinced low margin food businesses would make a great first investment.  Apparel companies were the other option, and ultimately the sector we decided on.  

After doing our research, we decided she would invest in a “clothing and beauty” products company, known as Limited Brands (now renamed L. Brands).  She purchased 300 shares at $11.46 per share in early 2003.  It was her very first investment.

Limited Brands

Over the years, Mrs. Tako’s investment in Limited Brands has turned out to be a very smart first investment…not because she’s made huge amounts of money (she has), and not because it was a stable ride (it wasn’t).

The key reason it was a great learning investment was because she follows it.  Even today, when we hold dozens of other investments, she follows that company far closer than any of the rest.  

Every time Limited Brands publishes a 10Q or 10k we talk about it as a couple.  We talk about the progress of the company, what management is doing, and how they’re spending our earnings.

Yes, we still hold those same 300 shares today.  We never sold, despite recessions, business difficulties, and a constantly evolving apparel industry.  We continued to believe the company is well managed, and invests capital well.

This first investment also taught Mrs. Tako some of the key differences between investing and gambling, and why the stock market itself is not something to be feared — it’s just a place to buy and sell companies.  

Some days Mr. Market is going to think your company is wonderful, and he’ll quote you a high price.  Other days, he’s going to think it’s garbage, and he’s going to quote you a low price.  For long term investors, what Mr. Market thinks on a daily basis is irrelevant.

Ultimately, buying good companies at the right price and holding-on is what makes all the difference.

Over the years, Limited Brands has changed names, sold brands, bought others, and transformed itself to fit with the times….all while being a shareholder friendly company.

Thirteen years later, Mrs. Tako’s original $11.46/share investment in Limited Brands has returned over $27.47 dollars per share in dividends alone (More than twice the initial purchase price in dividends!), and the stock price itself has risen over 5 times the original purchase price.

Through it all, we held on (and realized some very acceptable returns).

Trust, It’s Important

Ultimately, that first investment built a significant amount of financial trust between us, and it’s lead to many more investments as a couple.  Today, we’re worth over 2 million dollars together (and growing).

Trust is important between couples when it comes to finances — Something I can’t stress enough.  Learn to trust each other when it comes to money, and you’ll both sleep better at night.

I know Mrs. Tako’s not going to go out and spend hundreds of dollars on haircuts and designer handbags, and she knows that I’ll continue to do what I’ve always done — read like crazy, count our pennies, and make smart investments for our future.

How do I know this?  Practice.  We’ve built that trust up over time.  We each trust each other to work toward our shared goals, and not screw it up with dumb financial moves.  

Talk About It:  Shared Goals

One of our greatest assets as a couple has absolutely nothing to do with finances, and everything to do with how we communicate.  We talk about money…a lot.  It is absolutely NOT a taboo subject in our household.  

We’ll talk about money whenever something financial comes up — on vacations, car trips, restaurants, on the beach, when I’m blogging, and even when I’m cooking.  Money knows no boundaries in our household, and that’s a key distinction in our relationship.

While we might not always agree on individual purchases, we do eventually find common ground….because WE TALK ABOUT IT.

I can’t recommend this enough to other couples — either those just starting out, or more established couples.  Talk about finances.  Talk about investing.  Talk about money together until you’re blue in the face.

Don’t give up if you initially disagree.  Keep talking.  Finding common ground on your financial goals isn’t going to be easy, and it isn’t going to happen until you talk it through in great detail.

Mrs. Tako and I do this at least once a month.  When I publish our regular Dividend Income and Expenses report, I take that opportunity to go over the numbers with her.  We talk about the changes we’d like make, and how that’s going to affect our finances too.

Final Thoughts

Relationships, like investments, don’t always move in straight lines.  It doesn’t matter if you’re the Saver or the Spender.  There will be disagreements, and financial downturns….just like investing.  

Don’t get discouraged if your significant other doesn’t always see eye-to-eye on all things financial.  Keep talking, and always try to keep things in the context of your shared goals and common ground.

Allow each other to make mistakes too. We all make mistakes, and it’s normal.  Without mistakes we can’t continue to improve.  

Like two people rowing a boat, you’ll make better progress when you row together.  We certainly did.

Communicate, educate, and share goals with each other.  Keep doing that, and eventually something really wonderful will happen.