Couple Re-evaluates Priorities and Attitudes About Money by Frederick S. Brown

BACKGROUND ON FREDERICK S. BROWN

A graduate of Yale University, Frederick S. Brown has worked for over 30 years in the field of personal finance. His background includes experience as a stockbroker, investment advisor, personal financial consultant/therapist, educator, author and financial writer. Brown has also taught courses in Personal Financial Management, Business Planning and courses based on his book, "Money and Spirit." Brown has also launched a Web site, www.moneyandspirit.com. The Web site features information designed to help visitors overcome their financial anxieties. Based in Santa Fe, N.M., Brown comes from a long line of bankers who founded Brown Brothers and Harriman, the oldest private bank in the United States.

In this case, the reader tells us she and her husband are planning to buy a new home, and asks how they might finance remodeling a barn attached to the home. She would like to use the remodeled barn to build her pottery business. Her husband had asked her to borrow the money through her business, but her business doesn't have the profits to finance the loan. This perplexed her because her husband knows how little her business is earning at this point.

This exchange brought to light the fact that both husband and wife had different feelings about their finances, and unearthed some issues that had not been previously "on the table." While this case study addresses the personal situation of one particular couple, it addresses a common problem that couples have when one is a craft artist, and the other is not.

Margo e-mailed The Crafts Report that she "had a pressing financial issue" relating to her and her husband Paul's plans to remodel a barn attached to the new home they were buying. She explained that the couple worked out of their current home; that Paul was a telecommunications consultant and had a large income, while she was a potter and made little or nothing. Now that her three children were in school, she was free to expand her business; but, although the new home they were buying was perfect for most of their needs, they needed to remodel the barn to give her the space for her business.

Margo was put in a quandary when suddenly Paul asked her to finance the remodeling herself, using her business as collateral for a loan. Margo hadn't considered doing this, as her business barely made a profit. Since Paul was making a lot of money, she assumed that he would use his income to cover the costs.

Sensing that there was more of psychological reason than a financial reason behind Paul's request, I asked Margo to fill in a financial summary form to help objectify the issue. I started asking her questions about the couple's finances when her husband got on the phone. As I began listening to both of them, I could tell they had different points of view regarding money matters.

Paul was matter-of-fact, super-organized, and totally into record keeping. Margo was much more general, emotional and defensive. Margo admitted that she was the spender, and Paul was the saver. Their differences didn't surprise me since Paul was coming from the more left-brained, analytical, technical mode, and Margo was coming from the more right-brained, intuitive, artistic mode. While Margo was open about feeling overwhelmed, Paul was less so, although I detected in the intensity of his responses that he was very concerned about their financial situation.

Estimating monthly income The first step in determining whether or not the couple could afford the remodeling was to get an accurate estimate of their monthly income. Margo had estimated $7,000 a month for her husband and $700 for herself. She explained that Paul had only been working on his own for three months, and she had taken the average of those months.

Paul, however, wasn't sure he could make that amount every month. He had recently been laid off from his former employer and was forced into working for himself. Although he was able to take many of his clients with him, he couldn't count on his business continuing at its current pace. Also, he had had stress attacks while working for the company, and was afraid if he pushed himself too hard, he would get them back again. He wanted to reduce his income estimate to $5,500 per month, which he thought was more realistic. Since Margo's business was just getting off the ground, she felt that her $700 estimate was very conservative. After establishing these figures, we looked at Margo's estimate of expenses.

Calculating expenses At this point, Paul realized that Margo had used the unrealistic budget estimates in calculating expenses. These weren't accurate in most cases, and Paul had to correct her with more realistic figures.

Once we got a reasonable estimate of monthly expenses, we compared them with Paul and Margo's monthly income estimate and found there wasn't enough money to finance the remodeling. I could tell Paul felt it was not really a priority.

Understanding the project To help him understand Margo's feelings about the project, I asked Margo why the addition shouldn't be delayed until they could save enough money to finance it out of future savings. Margo explained that for more than 10 years she had taken care of the children and run her pottery business on the side. She had never had enough space or time to really have a business, and this frustrated her. Now she felt that she had to have this addition and couldn't wait any longer. Moreover, she had to have the space available when they moved in so she would have room to work.

I caught the desperation in Margo's voice, and I'm sure Paul did too. I then asked Paul if he resented having to pay for most of this move. Paul said he did. Losing his job and having to generate that much money from a new business was more than he had bargained for. When I then asked Margo how she felt about Paul's resentment, she said she understood Paul's feelings, and that she felt guilty for having to rely on him. Yet, expanding her business meant a lot to her. She was very thankful Paul had been willing to spend the money to make the move so that this could be done.

Changing priorities Exchanging these words seemed to clear the air for the two of them as they put aside the idea of Margo's business financing the addition, and delved into their joint finances -- determined to find the money they needed. They calculated that they could extend the payments to the builder to six months since they knew him so well. Also, they could borrow on their credit cards, get some additional cash from Margo's business, and delay spending money on desired but unnecessary appliances for the new home. With these adjustments, both felt they would just have enough money to cover the move and the remodeling.

As we signed-off from our meeting, I was struck by the difference in Paul's and Margo's attitude. Initially feeling overwhelmed, they now felt confident they could manage their situation. All it took was a clearer perspective on their attitudes and finances to work things out.

MAY 2000: TABLE OF CONTENTS