3 Things Our Children Should Know About Money and Relationships

So, last week was a low one for me. I am having a hard time watching friends and clients go through draining divorces and all the attendant regrets, recriminations, if onlies, and should haves that go with that. That’s sounding way too selfish because whatever I feel about it, those involved feel a hundred times worse. Having been through it myself a few years ago I suppose it also triggers memories of bad times and a huge dose of empathy.

What’s even harder is seeing those who come out at age 50 with very little to show for long marriages and careers and a shared life. It makes the process so incredibly hard for those who find themselves literally starting all over again in their 40’s and 50’s. I have heard every permutation of how money issues causes gaping rifts in relationships as surely as sex does. It’s more than the dollar and cents – it comes down to dynamics and how each of us contributes to the subtle nuances in our interactions.

So, this week I am thinking about how to put my insight into helping the next generation – our children. Here’s what I think we need to tell both our girls AND our boys about being in a relationship and how to avoid the standard pitfalls.

Get Involved with the Big decisions

Partner about to put your house up as security for their business or an investment? Find your voice and work it through together. Understand the risks. Weigh up the pros and cons. Be aware of what you are signing and what it means. It doesn’t imply you have the final say but many a good marriage has gone awry because of one person’s insistence on putting JOINT assets on the line for a risky proposition.

It won’t protect you from the consequences if you go ahead and things go bad but at least you will have had the conversation. Stand up and take some responsibility and make a stand if needs be. Just don’t be a victim and say you didn’t understand or didn’t know. No-one can force you to do something against your will and if they do then you would have to reassess that relationship in light of this behaviour.

Don’t Use Money as a Power Tool.

You know the story. The stay at home mum hides the latest purchases from her husband to avoid a scene. He buys golf clubs but whinges every time she comes home with a pair of shoes. Come on, people, what is this? 1955? Like it or not, marriage means you are an economic unit. Whether you work in or out of the home, earn money or not, each half of the partnership has a right to the family income and assets. That’s not me telling you - it’s the law!

This has boundaries of course. Decide on a spending limit that is reasonable to you both. If something is over that limit talk it over with each other. Other than that stop the power games and give each other some respect.

There is nothing so ugly as listening to someone say “She spent all the money I earned and she did nothing other than have lunches with her girlfriends”. No doubt at some point both parties were happy with the arrangement and if you weren’t then…SPEAK UP!

Play Your Part

If your family’s finances are under strain or you want things that cost money don’t sit on the sidelines and expect someone to provide it for you. Yes, having small children is hard work and it makes sense for someone to be the main carer for a time but there is always a way for you to play your part in helping out.

Being the main provider is a huge responsibility. It’s competitive, hard work and can be very stressful when there are more mouths to feed, house and clothe let alone all the consumerist aspirations we all take for granted in this western world.

Doing some paid work has many unseen side benefits in self-esteem and pride that makes keeping your foot in the door a great thing. Just don’t sit there being a prince or princess wondering why you aren’t keeping up with the Jones. You are meant to be a team and each person has a part to play. Some of us are lucky to marry someone who will happily pamper and spoil you all the way but…at what price and what happens if that person isn’t always there?

That’s it.

I am sure you can all have your say on whether I am being fair or not in making these comments. Every situation and relationship is unique. It’s a cliché to say we all have faults and make mistakes along the way, both personally and in our marriages. Our differing personalities make it hard for us all to act in the best possible way all the time.

But…if something is going to change then we all have to look to ourselves to make the necessary alterations. Small modifications in how we react and respond to people transform our relationships. If you take away anything from my ramblings, take that.

The spectrum of life

Life is full of shades of grey isn’t it? Just when you think you’ve formed an opinion on a topic and start to act accordingly, someone or something comes along to challenge its validity. Take home brand groceries for instance. I’ve finally come to recognise the acceptable quality of various private label brands, and in the name of better economy taken the plunge of actually purchasing some of these items. It is compelling as in some cases they’re up to half the price of branded items. So I’m feeling good about myself – choosing where to spend my hard earned cash etc etc.

Next thing I’m reading about Woolworths’ CEO undertaking to double its sale of home brand items. This is followed by an investigation by the Consumer Commission into potential mis-use of power by the giant retailer, talk of anti-competitive behaviour, of small suppliers being “shut-out” of the market, and us consumers being robbed of choice. So now what? I’m left in a quandary – do I continue my virtuous choice of white labels, or express my displeasure at Woolworths’ bullying tactics by eschewing them, and rather purchasing the more expensive brands?

This predicament of inherent contradiction and mixed messages pertains to many major issues and debates we see in the headlines. From mining tax to carbon tax. From upping our refugee intake to saving old growth forests. Discussion on the pros and cons of different policies is guaranteed to turn up the heat at any dinner party…if you have the guts to raise the subject, that is.

In my opinion all’s good as long as we keep talking, arguing and hashing through these hair raising modern dilemmas. The real enemy is one common to all of these problems – apathy. When questions of morality don’t fire up reasonable citizens we’re really in the dwang.

It’s probably the issues which for each of us individually are pure black and white that really get us galvanised into action, to beat our personal drums for a greater good. Starving kids, abused or endangered animals, environmental degradation – no grey there.

A friend of mine has a child with a disability and is incessantly lobbying the government (and all her friends) to move forward with the National Disability Scheme. The 1 million women campaign is set on enlisting a million women to take action on climate change and to reduce carbon emissions in their homes. Jill and I are passionate about increasing financial literacy in young women. There are so many people slogging tirelessly in their own realms, striving to make a small difference in the world around them.

As long as we’re thinking, and acting and discussing issues around us we can live in hope that the world will keep moving to a better place. So, although we may reserve the right to vacillate our views on what to place in our supermarket trolleys, we need to stick fast on those things that really raise our ire.

Who Moved the Goalposts?

Well this issue isn’t going away in a hurry. I am going to follow on from Nicky’s blog last week on executive pay and mine from 2 weeks ago on the Occupy Wall Street movement to further dissect what’s really bugging me about the salaries, bonuses and privileges enjoyed by those in the corporate and financial sector.

I might be biting the hand that feeds me given I work in financial services. I also live in Mosman, which houses many of those working for the institutions that are copping the flak over their reward system. At the end of the day we are all human beings doing our best and we are essentially hardwired to make the most of any opportunities and advantages we can. Let me be clear - this is not a personal attack.

To get you in the mood here is some background reading for those of you who are into it. Read this and this to get a picture of what is going on in corporate Australia. I read them, tried to remain objective but was still left with a sour taste in my mouth.

What’s the story with moving the goalposts on the hurdles for bonuses? What the heck is overriding board discretion (code for really the hurdles don’t actually mean anything we will just give it to you if we feel like it)?

Hands up who has sat in a review with their boss and had it explained why there’s no bonus or pay rise because of the economy, tough times blah blah blah insert lame reason here. Yet…get up the top of the heap (undoubtedly with a lot of hard work no arguments there), buddy up to the board so they can use their “discretion” and those days are well behind you. There’s barely a year in which you don’t see your salary go up.

Now I am not disputing that in most instances there is a huge price to pay in terms of time, energy, accountability and risk of tenure in these senior roles. But bottom line is that there is barely a downside risk to payday when performance is not up to scratch. I can recognize the risk I take in buying Wesfarmers shares with respect to capital and dividend growth but what about those charged with the task of achieving those outcomes. Apparently the buck doesn’t stop here!!

Anyway enough griping and whining. What’s the solution? Again I am going to defer to those with a larger perspective than mine and provide a link here to a great article from the man who wrote The Black Swan – Nassim Nicholas Taleb. His solution – end bonuses for bankers! Although it’s from an American perspective and pertains to bankers more than corporates I think he raises some good points on how the system of reward has become untenable and asymmetrical. As he points out “where is the disincentive for failure?”

Is change actually possible when there are so many powerful vested interests in keeping the status quo? Who has the stomach to take it on? Would we all, as human beings, have our own snouts in the trough if we had the opportunity?

The capitalist system, like anything, is not perfect. But it doesn’t mean, with informed debate about alternatives and solutions, revision can’t be made to shade the imperfections so the system evolves over time into something more stable and equitable.

In reality, we all need to know where the goalposts are once and for all.

Up, up and away

How darn crummy it would have been for those Qantas passengers stranded across the country or across the world. As aircraft take to the skies again, it leaves us wondering about the long-term impact the controversial decision to ground its fleet will have on Qantas. In the short-term CEO Alan Joyce’s extreme approach paid off. Fair Work Australia ruled to terminate the industrial disputes that caused mayhem over the past weeks. The irony is that all this follows hot on the heels of the Qantas AGM, where Alan Joyce feathered his already luxurious nest with a 71 percent increase in total pay – to a cool $5 million. And he’s not alone – the whole management team was awarded pay rises. Rather predictably Qantas has justified Joyce’s pay hike by deeming it “not excessive” in comparison to the salaries of other big boys in town.

These pay increases are against the backdrop of airline plans to cut 1,000 jobs and employees scrabbling for a cost of living increase. The share price has fallen 16 percent over the past year, and no dividends declared for over 2 years. It’s no wonder there is some shareholder objection to the pay increases. Dissenting (mostly retail) shareholders were very vocal at the AGM – hissing and booing and walking out of the meeting. But their votes amounted to just 2.79%. It seems the boys club is thriving as institutional shareholders and proxy advisers ensured the Qantas remuneration report sailed through with a 96% vote in favour. We know Qantas isn’t the only one paying out of the realms of reasonableness in terms of executive remuneration.

Do you ever wonder what those highly paid CEO’s do with their money? I mean how on earth do you allocate each and every day what the average person earns in a month, or a year? Obviously the cash just keeps accumulating onto their ever-expanding mountain of investments, assets and toys. This leads to another question - Why? Why do the corporate leaders of this country, and globally, keep justifying huge annual increases, while those at the bottom of the pile are struggling to keep up with the cost of living? How much can someone possibly need?

Methinks a big part of it is Keeping-Up-With-The-Joneses, on steroids! The remuneration disclosure requirements, meant to keep people honest, have delivered the opposite result. Those enormous executive egos now know exactly what their competitor counterparts are pocketing and feel a need to see them and raise it a hundred thou (or several). Moreover their pay doesn’t seem to have any link to delivery. Hurdles too onerous? Just lower them. Share price at an all time low? Give the management team a raise. Booted due to non-performance? Take a couple of mil to soften the blow to self-esteem.

Our blog last week referred to the Occupy Wall Street protests and in part they are objecting to this sort of disparity in society, where the bigwigs get it all while the battlers who make a real difference get precious little. Let’s get back to basics. Put egos aside and remember that more money does not equal more happiness. It would be refreshing indeed to try a new paradigm, where compensation (financial and non-financial) is truly proportionate to performance. A true meritocracy, one where creativity, endeavour and excellence are rewarded. One where there is blue sky for everyone.