Bobbi Rebell, CFP®
Personal Finance Expert at Tally
February 16, 2021
In recent weeks, the Gamestop debacle caught both Wall Street and mainstream America by storm. Suddenly, everyone seemed to be talking about getting rich by buying hot stocks. While it’s understandable how exciting these opportunities may have seemed, unfortunately, many people may have lost money they could not afford to lose by taking bigger risks than they may have realized. And because of the fear of missing out, in some cases, people traded Gamestop or other ‘hot stocks” without consulting their partner first, even though the money was not theirs alone to put at risk.
And that is where financial decisions can have serious negative consequences for relationships. If one partner is acting impulsively and buying stocks based on message boards like Reddit’s WallStreetBets and related media reports, they are effectively gambling with their relationship as much as with their finances. It’s understandable how doing this might alienate their partner and damage their relationship along with their bank account. There are more intentional ways to invest, as well as spend and manage your money, to consider, especially if you’re married or in a committed relationship with joint goals and aspirations. The financial decisions you make now not only impact your financial future, but can impact the future of your relationship.
The recent events surrounding Gamestop stock may have jumpstarted important and somewhat heated investment conversations between many couples. If you and your partner are not on the same page when it comes to your investing strategy and priorities, let’s look at a few ways you can come together and find solutions that work for both of you.
If after reading up on all the hype on Reddit’s WallStreetBets your partner becomes interested in day trading, you might want to sit down together and create an investment plan that you’re both comfortable with. One way to make investing feel a lot less risky is to understand the difference between day trading and investing. What’s happening on Reddit is essentially a coordinated day trade. My take on day trading is that its gambling, and unless you really know what you’re doing, don’t do it. And if you think you know what you're doing, you're probably wrong — which means you still shouldn’t do it. This sounds harsh, but day trading is not easy. This is even more true when you’re trying to master day trading without a strong financial education background and probably on the side of working a full-time job as well.
So how do you tell your partner that you’re not happy with their investment (or day trading) strategy? Having an open and honest conversation is key here. As much as we like to focus on the romantic part of our relationship, there comes a more pragmatic time when we must face the fact that our relationship is also a financial partnership. Regardless of how you manage your money together, it’s helpful to have an open conversation about your goals and what you can do financially to meet them. It’s important not to let misunderstandings build up or to make big investment decisions without getting the go-ahead from your significant other. Going behind their back to make a big financial move can only lead to distrust and resentment. Ouch.
Hearing about friends, acquaintances or family members making a ton of money on the stock market can bring on major FOMO — and bring it on fast. Before you let the fear of missing out guide your investing strategy, take some time to really think about if you’re ready to invest and to accept the risks that come along with it.
A little bit of perspective doesn’t hurt either. The truth is that some people may have gotten lucky with their timing and made a nice profit. But remember, people always love to talk about their wins, but they rarely admit when they later lose all of it and maybe more. Like most gamblers, when they do come out ahead, they're likely to keep gambling and eventually lose. Except for this time, they won’t tell you all about it over dinner. People tend to keep their losses to themselves.
If you do decide you want to start investing, which is a good thing if done with a bit of planning and forethought, there are a few steps you can take as a couple to make sure you’re doing so in a way that keeps both of you feeling comfortable.
01. Organizing your money. Investing can feel a lot less risky if you’re not using the money you had mentally earmarked for a different financial goal. Before you begin investing, you might want to consider setting aside the money needed to reach your joint, short-term goals. These goals might include buying a car, renovating a kitchen or saving for a downpayment on a house. You will also want to make sure you have your emergency fund in a good place as well.
02. Identifying your risk level. Once you have identified how much money you have available for longer-term investing (read: you don’t expect to need it for at least five years), discuss how much risk you each want to take with that money. There is no one size fits all approach to investing, so make sure to focus on what is right for you, knowing it may be different from your friends and family. If you need help coming up with the right strategy, a better path forward can be to work with an investment advisor.
03. Skipping the hype. When it comes to stocks like Gamestop, AMC, and others that were trading like crazy recently, that’s not investing, it’s gambling.
04. Consider skipping individual stocks. The truth is, for many investors there is no need to buy individual stocks. Every situation is different depending on your goals, but Exchange Traded Funds (ETFs) that mirror indexes or focus on sectors can be a cost-efficient way to diversify your investments. That way, you’re not putting all of your eggs in one big basket.
Relationships work well when both people can agree on big topics — and money is undoubtedly a topic of considerable proportion. Making the best of both your money and your relationship means being able to make choices that are good for your future together. Using a solution such as Tally to help manage parts of the money topic might just take some stress off of a relationship and allow you to focus on the road ahead.