Financially fit couples share their 6 secrets

Published 5:44 pm Tuesday, May 11, 2010

Pick the brains of the most “financially fit” Americans, then dissect their good habits.

That’s the premise of a new study from Florida State University, where researchers identified the common traits of everyday folks with high levels of financial well-being.

The results? Surprisingly, some very basic habits, says Dr. David Eccles, a psychology professor and research scientist at Florida State’s Learning Systems Institute. He boils them down to the Simple 6:

Talk money with your partner.

Get advice from employers.

Work out what you’ll need.

Forecast what you’ll have.

Save more.

Owe less.

Question: What’s your definition of being financially fit?

Answer: Like it or loathe it, the single biggest difference a person can make in (his or her) life — after your health — is to learn how to look after yourself financially … It means building the financial reserves to cope with life’s challenges and increase your ability to retire comfortably. We don’t set dollar amounts because it depends on people’s standard of living and their expectations. For some, that’s a husband, wife and three children who each have a cell phone and a laptop. Elsewhere, there is one cell phone and perhaps one laptop in the whole family. These things vary hugely.

Q: How’d you identity these financially savvy Americans whose habits are so laudable?

A: We had a sample of households who were very similar: married, average age 55, all had children, all owned a home, no bankruptcies, no divorces, all within 10 years max from retirement. The salaries ranged from $30,000 to $200,000, but the average was about $120,000 combined for husband and wife … within each group of our best/worst performers we had incomes in the low/middle/high ranges.

We controlled for lifetime income from age 18 (inheritances, huge medical bills) … then looked at what their net worth — from the least to the most — as they were nearing retirement age. We ranked them from best to worst and looked at their personal financial habits.

Q: Some of the Simple 6 habits you identified are pretty basic maximizing savings, minimizing debt, for instance.

A: They’re not astounding. They don’t pass what we in academia call the “grandmother test”: You tell your grandmother the results of your two-year study and she says, “I could have told you that.” The best households aren’t using any sophisticated investing strategies … but they’ve (adopted) some basic habits that are very important.

(Such as) “Ask your employer.” Most financially fit households were ones where the wives, in particular, had sought out information from their employer. At the risk of sounding sexist, husbands historically have assumed control for finding out how to manage finances, how to set up a retirement account. But we found our “upper group” was definitely marked by equality: both partners trying to manage and understand their personal finances … For instance, one partner reads somewhere that there’s a higher limit for contributions this year to a Roth IRA. So the partner goes home and tells (his/her) spouse: ‘Did you know that?’ That’s knowledge being actively shared.

Q: What’s the biggest single obstacle to Americans saving for retirement?

A: It’s too far in the future if you’re young … and right now, our conventional spending patterns are not aligned with what we earn. Buying lunch out every day is normal; bringing it is slumming. That’s a huge amount of money (spent on eating out) each month.

The credit (card) boom of the last 20 years helped create that mindset; the recession may help change those habits. Maybe there’ll be a “new normal” … bringing your lunch three days a week instead of eating out five days a week.