Episode 356 – Abby Davisson: How to Make Decisions About Money and Love

24:58So I think that that's something that's been a trend where we're seeing people, whereas the trend, the norm was to move wherever the opportunities were for your career. Now, I think there's a trend that we're seeing of people thinking through, actually, if we both want to continue to work in a lot of major cities, you need two incomes to really make it work. We need to be closer to family. So that's something to think through. Also, if there are other factors, whether it's for health perspectives, hobbies you really enjoy, there's really interesting research that different parts of certainly the U.S., and I imagine this is true for Canada, attract different personality types.

25:36Richard Florida has done really interesting research in this area. You might think about the places in the country that are best suited for not just your career prospects, but also the personalities and activities. And then when it comes to a preference for city versus suburb, it's really thinking through what are the criteria that are important to you? And we have an exercise in the book to help with this, assigning prioritization to those criteria, just as you would as you're thinking through any nuanced decision. And then following the framework, having conversations with people who live there, trying to do some check-ins, and ultimately not just looking at the financial, is this a good investment for us to buy here or to continue to rent here?

26:18But how is it going to make me happy or how is it going to contribute to my well-being on other dimensions, which I think some of us often skip when it comes to those types of decisions. I love that. How would you suggest that people think about the rent versus own decision? There are so many different calculators that you can find online right now. One of the things that I think is not discussed enough is your preferences for having autonomy. So this idea of not being able to make much changes, is it really great for you to outsource everything to a landlord? And that, again, is one of those decisions where you don't have to make a lot of sub decisions under that because you have someone else managing it?

26:59Or are you going to be somebody who's frustrated when you really want to change the way a certain part of the home looks and you can't because it's not yours. So thinking through some of the personality related aspects can be helpful. One of the things I sometimes get asked is, well, what do you think about home renovations? There is a trend towards saying, okay, well, you can buy a house and then just evolve it over time. One of the things that I think is interesting is, again, personality wise, some of us tend to be more maximizers when it comes to decisions, meaning we're trying to really get the right answer, the best version of whatever it is, whether that's a pair of black pants, whether that's the perfect fixtures for a bathroom.

27:41And some of us are more satisficers. We're fine with whatever pair of pants, as long as they fit and are black, or if a bathroom works and it lets me do what I need to do there, I'm good with it. We saw this firsthand. My husband and I tend towards the maximizer type. And so we remodeled one bathroom and it nearly killed us because we felt like all the different decisions that we had to make. It was like a second job after we performed our first job during the day. We had a ton of choices to make at night. Whereas my sister-in-law remodeled an entire house as she was working full-time expecting her second child.

28:14And she is much more of a satisficer. And so she just made those decisions and moved on. And so that's one of those areas where you don't necessarily think about that before you undertake a remodel, but it can really significantly impact your wellbeing. Oh yeah. We did a kitchen years ago and it was so stressful. And then recently we haven't started yet, but we're going to do another small renovation project in our house. I found somebody whose work I really like. And I was just like, listen, this is the general idea of what we want to do. I don't want you to ask me for any input. Just do it. I like what you do.

28:46Just please don't ask me anything and just do it. So we'll see how that goes. Classic Ben. I think it sounds like you made the decision to trust the expert that you hired and you were going to be okay with whatever they did. Yeah, exactly. Coming back to the 5C framework, can we use housing as an example? And can you take us through like how a couple would use the 5Cs to make that housing decision? I can actually share a personal example because I've used it myself, both my co-author and I actually used the 5C framework to make decisions about whether to stay or move with different outcomes. So she used it and decided to move twice, actually, since we've written the book.

29:23And I can share my experience, which is pre-COVID, we were in a small footprint home in the center of San Francisco. My husband and I commuted downtown. We had our two young kids in nearby schools, and we had outsourced a lot of the childcare that we were just talking about. When everything shut down in the pandemic, we found ourselves working remotely from rooms that were not intended to be home offices. Our kids were Zooming in to remote school from our dining room table. They were four and seven at the time. Eventually, we had a couple of college students who would come in and help them stay on Zoom tasks while we attempted to do our jobs.

30:00And we were all on top of each other all the time. And we thought we just need more space. When we started to clarify, we said we need more space. We need schools that are open. And so then we would communicate with each other. And I would say this conversation had been simmering, the city versus suburbs conversation for a while. and COVID really turned it up to a boil. What we learned is that where and when you communicate is just as important, in fact, more important than what you say in that communication. So for example, we would bring this up as we were brushing our teeth, getting ready for bed at night.

30:32Not a great time to have conversations about major life decisions. So we started having these conversations on hikes. That was one of the activities that was available to us at the time. And it turns out that when we got away from the stress of being locked down in our house, away from the dirty dishes and the chores that needed to be done out into the hiking trails. We could think more expansively, our kids would run ahead, and it was a better conversation. Then we considered the choices, decided on a specific suburb that was close to my dad, and we had some friends there. And we started checking in with realtors, with people who had left the city and moved to that particular suburb.

31:11But we also checked in with a published study. And interestingly enough, I was writing the chapter on moving as we were going through this process. And I came across this study in the Journal of Environmental Psychology about the impact of density on well-being and family happiness. So square footage per person, essentially. You would think that the more space you have, the better. Well, it turns out there's a point of diminishing returns. And actually, once the home gets too big, like if there's a separate wing for the kids, children, particularly boys, which is what we have can feel disconnected and lonely.

31:46So that was interesting. And then it also turns out that a family's perception of a space is a far bigger indicator on family harmony than the actual physical square space. So as we were complaining about, oh, this place is too small, and we're all on top of each other, we were not doing ourselves any favors when it came to our family functioning. So we started to move to the consequences and had some houses we were interested in. We're about to put in some offers and we did the math. And based on the fact that everyone needed more space at the time, home prices were quite inflated. And also we realized that taking on a bigger mortgage, which we would be doing, would be tethering us more tightly to our corporate salaries.

32:30And so when we had that realization, we reclarified and said, hold on, do we really value more space and open schools? Or do we value career flexibility? And we want to actually take advantage of the fact that we had been in our current home for quite a while, we had home equity buildup, and that would provide a bit of a financial cushion. It turned out that we both decided we wanted career flexibility, more than more space. And once we made that decision to stay, it turns out we were able to think more creatively about how to get more space and schools that were open. So I decided to rent an office is where I'm speaking to you from an office that's a seven minute walk from my home.

33:10And we ended up switching our kids schools to independent school that had more flexibility and was able to be open. And that's where they both go today. So this idea, once you cut off one avenue, which you think is the only way to get what you want, you can have more creative choices that help you have your cake and eat it too. And now, fast forward today, my husband and I both started our own businesses. And so we did get the career flexibility and went to the entrepreneurial path. Wow, great story. How should couples think through the division of work and childcare? So this is also one of those conversations that is so much easier to have when it's a theoretical conversation before there's a actual baby that needs to be cared for.

33:52So making it clear whether continuing to work full time is important to you. I, for example, had always thought my mom had paused her career when she had me and my brother, and then actually went to work in a part-time capacity. And I thought, oh, part-time work seems like the way to have both. And it turns out that in my co-authors class, I learned about all of the ways that part-time work is actually a great deal for the employer and not such a great deal from the employee perspective in terms of you often work more hours than you're being compensated for, you don't have as much access to benefits, etc.

34:27And so I had kind of resolved in that class that I was going to find a way to continue to work full time. And so I had told that to my husband, when we were first dating and said, this is important to me, I want kids, but I also don't want to have to compromise my career in order to do that. And he agreed that that was something he was open to. And so getting those conversations out early on, to make sure that nobody has assumptions about, do you want kids First of all, do you want to continue in your career? What does that mean in terms of our budget needs then? Because child care is quite expensive, particularly in the US.

35:01And then talking about if you assume that your parents are going to help you care for your child, have you actually talked to them about it? I think sometimes people make assumptions of my mom is going to love caring for her grandchildren. Check in with her about it because that might be like, I'd love to come visit and hang out with them for a couple hours on a weekend, as opposed to, I would like to be your nanny. So those are, again, important conversations to navigate ahead of time. My parents did that for my sister who has a young child. They're just now ending their nanny duty. I think they're super excited to do it, but I know now that it's come to an end, they're kind of like, that was intense.

35:41Happy to go back to see them less regularly. Yeah, exactly. You mentioned this earlier. How common is it for someone who decides to be a stay-at-home parent to successfully return to a career later? The data is mixed on it. Definitely a lot of factors help to ease those ramps back into the workplace. So the ability of someone to keep their skills and their network warm during the time that they're away is really critical. If they have a license, say they're a professional that has gone through a licensing program, continue to keep that license active so there's not a re-licensing effort that needs to happen is also important.

36:20And so one of the things that if you do decide to take a career pause is to go into that intentionally and say, you know, I'm making this decision for this period of time, but I know this is not forever. And I think the challenges that we see are when people, again, slide into the arrangement as a gradual thing, or maybe they got laid off right before. They think that we're actually seeing, unfortunately, a trend towards with all the layoffs that are happening, people getting laid off on parental leave. they are realizing, okay, well, I thought I would have a job, but I don't. I'm not working right now.

36:53Maybe I'll stay home with this child. And then not having put those steps proactively in place to think about how am I going to keep my skills and network sharp, then it is much more challenging to get back into the workplace afterwards. So like all of these decisions, the key is don't slide, decide. How would the 5C framework apply to deciding whether to end a marriage? I was just at an event speaking with a fellow panelist who is a divorce attorney. And the second C of communication is really the key. So if you have tried to have a lot of conversations with your partner, there have been issues, you have tried couples therapy, you've tried to rely on trusted experts, and you're really not able to move past some of these insurmountable challenges.

37:39the key to clarify is how to separate while still maintaining a collegial relationship. Because I think the hardest parts, particularly when there are children involved, is when the conflict becomes so large and toxic that it really has a negative effect on the entire unit. And so my co-author went through a divorce with her first husband, and she talked about how it was very helpful when she clarified the five C's didn't exist at the time, but we developed it together as part of our research. But she said the biggest help for her was to clarify that what was important to her was to maintain a positive relationship with her ex-husband so that the kids would not have negative outcomes from that divorce.

38:27She eventually remarried and her new husband and ex-husband actually knew each other. And her new husband, second husband, proposed, what do you think about having her ex and he had remarried at that point over for Thanksgiving? So our kids wouldn't have to go to two houses to two different Thanksgiving experiences. And she said, that's interesting. Ask me again in five years. Five years later, he asked her and she said, okay, at this point, I'm open to it. Now he's since passed away. But for many years, they hosted a joint Thanksgiving experience. And so their children were able to have that still have all families involved, that point of clarifying what was important to you, once you do that, it makes all the other seas move more smoothly because it is your North Star that you're using as a guide to solve for the situation.

39:13So that's an example of how having clarity about what's the priority in that experience. It's not to say divorce isn't incredibly hard and painful, but that it can have a positive outcome for children when you have that type of clarity. Yeah, that sounds like a really smart solution. How does divorce affect children more generally? Studies show that what really is the linchpin is the amount of conflict in the divorce. And so when you're able to work through the issues and set up an arrangement where the kids are having as much stability as possible, that does not have a negative effect on the children.

39:50We've seen creative solutions such as parents, often one person is moving out of the home, to a new home, we've seen creative solutions where the existing family home becomes the place where different parents move into. So the kids continue to stay in the home. Each parent has a separate place that they're then moving into during the weeks that they're not parenting the kids. And obviously that takes a lot of resources, so it's not an option for everyone. Again, when you think about the choices, there are choices that help get you closer to having what is needed for children to maintain their stability after a family rift like a divorce.

40:28How has the concept of retirement changed over time? It's changed a lot and it's still changing as longevity has gotten longer and longer so that the demographers estimate that the average baby born today in an industrialized nation has a 50 % chance likelihood of living to 100. When you think about that, you think about that our traditional retirement age is 65, the math doesn't math to just be educated for the first third of your life, work for a third of your life, and then be retired. So you will end up having to pay for a very long retirement with that type of arrangement. So this idea of having periods of time where you're dialing up and dialing down the amount of autonomy that you have in your life, as opposed to just flipping a light switch off of your career at a certain age, is becoming more of the norm.

41:19And so you've seen perhaps this idea of mini retirements in the news where millennials or even younger people are saying, I'm not going to delay retirement to 65. I'm actually going to take a couple years and do some things that I might not be able to do when I'm older from a physical perspective. And I'm going to plan for that financially. And I'm going to treat retirement not as one thing that I do at the very end of my life, but that's something I intersperse into my life because I want to work longer. I'm going to have to work longer to finance it, but I don't want it to be just a sprint that I'm working until one day I then suddenly have the entire day available to go be quote unquote retired.

42:00In light of the changing nature of retirement, how important is it for adult children to discuss their parents' retirement plans with them? I think it's really important. And it's certainly important for you to discuss not just retirement plans, but plans for how they want to be cared for when they can no longer care for themselves. Lots of things that are really uncomfortable. We don't like to think about endings. We don't like to think about death in our society. But these are really important conversations to have, again, while it's still theoretical, while it's still, you're not sitting in an emergency room being like, has anyone talked to mom about what she wanted in terms of her care?

42:39This is something unfortunately that my family had to do because we didn't have any of those conversations. And then my mom had a serious accident that left her in the ICU. And we realized we should have had a lot of these conversations earlier. It actually happened on the day that was supposed to be her last day of job before she retired. So life is very ironic sometimes. I like to say, especially if you're working with a financial advisor, if you're working on something for yourself, your estate plan, for example, it's a great time to approach your parents and to say, we're starting to think through some of these questions for ourselves around our retirement planning, around how we want to be cared for when we can no longer care for ourselves.

43:17And I realized we've never had these conversations. Can you help me understand how you approach these topics, the things that you've set in place? So that can be a good way into the conversation. But there's also a lot of data on how dementia and some of these degenerative diseases can be diagnosed up to seven years earlier based on activity in bank accounts, as opposed to by a doctor. So if you start to see things like double credit card payments, missed credit card payments, there's an impact on credit scores, that can be a warning and an indicator that there might be some concerning neurological issues before, again, it gets to a point where they're giving an official diagnosis by the doctor.

43:58So these are really helpful conversations to have because they can raise issues that you might not know about for many years. How involved should the adult children be in their parents' retirement financial planning? It really depends on a lot of factors. An important conversation to have is how the parents want to care for themselves when they can no longer support themselves and care for themselves, whether they can pay for that, and how, if they anticipate needing any financial support, depending on your family's situation, your parents might say, yes, we've thought about that. We want to stay in our home as long as possible.

44:33And we've set aside money funds in order to do that. Great. Other families might be in a very different situation, in which case the children will have to be very involved, not only in their financial planning, but in actually providing support. So you're the sandwich generation where you're paying for childcare, as well as contributing to your parents being able to have care for themselves is very real. As we are in this silver tsunami of more people turning 65 every day than ever, we're certainly going to begin to see more situations where people are supporting both their children and their parents.

45:07So I think it's very critical to have the conversation to understand what you're working with so that you can start to take steps to understand how involved you'll need to be. Yeah, it makes a lot of sense. Rather than it being a surprise and you're like, oh, the adult child doesn't have it factored into their own financial plan. All of a sudden they have to provide support unexpectedly. That can be very stressful. It's one of these things where the conversation is so uncomfortable and I've had it myself in less than ideal circumstances. It is so much better to have it proactively when it's just a hypothetical than when it is a necessary situation.

45:39The point about cognitive decline is really interesting too. Here in Canada, we, by our regulatory body, are required, I think. I can't remember if it's encouraged or required. I should know definitively. But anyway, something that we assigned to client accounts is something called a trusted contact person, a TCP. And it's basically if we see signs of cognitive decline and it's a person who we can contact. So the client gives us permission ahead of time to contact this person just to say like, Hey, this person who you're the trusted contact person for is exhibiting these behaviors. We just want to let you know.

46:11So we've definitely seen cases where in the client's financial accounts, we'll see something that just doesn't quite look right. And then we'll speak to an adult child or another relative that they trust. And in a lot of cases, it has come back where it's like they have been struggling. So thanks for letting us know. It makes a lot of sense. Yeah, I think it's not talked about enough, especially with so many ways that seniors are unfortunately susceptible to fraud as well, to phishing attempts, all the ways that our devices let people in when they shouldn't. That's certainly something that is another trigger for the concern.

46:42So it's great that that is a requirement potentially. I know there are services that are set in place when it's called Careful that is able to provide that monitoring as well. So we've talked about all these money and love decisions. How should people apply this kind of thinking to finding the right partner in the first place? A question that I get sometimes, aren't you taking the romance out of it if you're telling me to apply a framework to my future partner? And I don't think it takes the romance out of it. I mean, I definitely think there's room for romance. But given that the person who you marry or decide to spend your life with is the biggest career decision you make, it's a huge financial decision, it definitely should be a decision that you go into with some planfulness and rational thought instead of just letting your heart lead you.

47:31And I also do not believe that there's only one person out there for anyone. So I think letting go of that impossible standard of finding the one person is really important. And there's some really interesting research when it comes to choices. So thinking about using the framework, clarifying what is important to you. And again, not just the laundry list. My co-author likes to say, don't think about your potential partner as if you're ordering a pizza. I want olives. I want pepperoni. You might not find your wish list in one person, but clarify what are those values that you have that are really important to you that someone else share.

48:09Certainly communicating, having those conversations with a potential partner to see if you're on the same page instead of waiting to see how the relationship goes before you broach them. That should be an indicator of how well the relationship is going is, are you able to talk about these tough things? Are you able to have these uncomfortable conversations in a way that actually helps you feel more connected as opposed to makes it seem like this is an insurmountable object or we can't have this conversation. And then when it comes to choices, there's really interesting research by a professor named Baba Shiv out of Stanford, who looked at the effects of sequential choice.

48:46So if you think about dating apps, it's lots of sequential choice. There's endless people who you can swipe and continue to see other options versus simultaneous choice. So he has an arranged marriage. And so when he was growing up in India, and said, I'm ready to get married. His parents went out and found three potential partners for him. He met each of those three partners, told his parents which one was his first choice. Each of his potential partners told their parents. And fortunately for him, his first choice was also her first choice. And so they married. It got him thinking about what are the effects of having a simultaneous choice.

49:24And it turns out people who choose between simultaneous options have more satisfying experiences, not just in the dating realm, but when it comes to deciding what to have for lunch. And if you always think there's a next great option around the corner, then you're going to be hungry forever. Thinking about using that research to guide you, checking in with couples who have endured long relationships in a positive way that you admire and ask them, how did you think about deciding to get together? What are the things that you attribute your long standing relationship to having that perspective with people you admire is helpful.

50:01And then exploring the likely consequences. Dating is a way of forecasting. I'm trying before I buy. I want to stress test this relationship. So let's go on a trip together. Let's put ourselves in a stressful situation so we can start to see how we might do under pressure when we're not in the honeymoon phase or when we have to face something that's really challenging. making sure you're not just together under idle circumstances all the time, but that you're actually modeling what it might be to be in a challenging situation. How should people decide when relationship is serious? That is a subjective term.

50:36I think being able to have these conversations, if you think that this is someone that you're excited about, you want to take the relationship to the next level, then have these conversations with them. I think that certainly if it's somebody you want to introduce to your parents or to other important people to you, if it's somebody you want to travel with, these are then the indicators that would say, okay, we'll try to have a conversation about money and see how that goes. Try to have a conversation about children. And again, it doesn't have to be sitting down and saying, okay, so how many kids do you want?

51:08I remember a conversation very early on that my husband and I had where I was raised Jewish. And I knew that that was important to me to raise my children Jewish. He was raised with one parent who was Jewish, one parent who was Protestant and both and neither. So we had a conversation over dinner. We were just dating. Kids were light years away from either of our minds. And I said, it's important to me to raise my kids Jewish. I always imagined that I would do that. And he said, I'm open to that. My family celebrated Christmas and Hanukkah and everything. And I felt like I didn't really have a specific religion.

51:40So I like the idea of having kids who have a strong identity that works for me. And I remember being like, whew, okay, I think we just checked that item off the list, even though this wasn't something that was imminent for either of us, but we're able to talk about how we might want to handle that in a way when it still felt like we were fantasizing about it. What about marriage? So as taking a relationship seriously, how should couples decide to take that next step and actually get married? It is a really big step. There are lots of financial considerations that certainly in a long-term marriage, when more than 10 years, there are real requirements around.

52:14So it's not a step people should take lightly. the data show that people are waiting longer to get married. It means they have more assets and often more debt when they get married. And so having a conversation where you are really transparent with your finances is really crucial if that's something that you're planning to do. My co-author and I really encourage people, even if they're not planning to get a prenuptial agreement, to do the type of revealing that is required in order to get a prenup because that sparks really helpful conversations and can breed more trust and intimacy. I think a lot of people have this concern that if they have these conversations, they're going to lead to conflict.

52:54But my co-author's second husband was a psychiatrist and he had this great term, which is intimacy is into me see, meaning you're asking someone to look into your deepest, darkest, innermost hopes, concerns, fears. Those are all linked to money. To be able to talk about those things with each other before you walk down the aisle or as a way to determine if this is somebody you want to walk down the aisle with is a really helpful step. Last one on kind of the framework thinking. What about kids? Marriage is a big decision. Kids are probably a bigger decision. How should couples think through that one?

53:31There's so many aspects to it. It's very tied to career, to money, to family, to home, you know, all the other pieces. And it's one of these things where there are actual biological realities, where you cannot just put off this decision indefinitely. I remember looking at a chart that my doctor showed me that showed age on one axis and level of complications on another axis. As your age increases, so do unfortunately, a lot of the complications and developmental differences that can happen in pregnancy. And so So it was an area that my husband and I were kicking the can down the road on. We had like a rolling two-year plan and then got to two years and we're like, well, we're not ready for kids.

54:12You're never going to feel ready for any of these big things. Marriage, kids. I remember looking at a house for the first time. We didn't feel ready to buy a house. But the research shows that things that people regret are not the risks that they did take, but often the risks that they didn't take. The research is that happiness dips for parents pretty quickly and then kind of as a gradual climb back up. But it's really about purpose and meaning. Parents have a high dose of that. And so if it's something that you think that you want to do, starting to embark on that journey sooner rather than later can be really beneficial.

54:48Some of the people who have used the framework and have told me it's been so helpful for them is same-sex couples because they know that it's going to be a bigger investment, more work for them, more effort. And so they want to make sure that they're going in as deliberately as possible into that journey. This is an area where you actually might want to do it separately and then come together and talk about, I mean, certainly have the conversations, but then go do your own research, go talk to people who have decided to have children, not decided to have children, and then come back and talk about the results because you need to both be on the same page about wanting it.

55:24That's a really interesting idea to do it separately. You co-authored this book. as you've given us a ton of your own examples. You've lived a lot of these decisions. What were your biggest learnings working with your co-author in writing this book? Well, she is just a wonderful person. I say she's a national treasure because she just turned 84 and her second husband actually passed away while we were waiting for the book to be published. And she did move again. She moved into a retirement community and someone introduced her to a widower who was moving into that same community and they have a wonderful relationship now.

55:58And they just went through the process of getting a joint credit card. So money and love conversations can happen at any age is what she has taught me. Another learning that I've had from her is our chapter on senior years at the end of the book was originally titled The Golden Years. And I remember when we were submitting the manuscript, she said, this title doesn't work for me because these are hard years. She at that time was the full-time caregiver for her second husband who had Parkinson's. She was also witnessing a lot of her friends and peers getting sick, passing away. She said, I go to a funeral every other week, it seems like.

56:38This isn't the golden years. You're in the golden years. You have young kids. Your friends are healthy. You can pick up and go on a trip together without someone saying they can't go because they just had this new diagnosis. You're in the golden years. And so frankly, that plus a lot of other things in my life helped me clarify the fact that I wanted to pull forward this idea of radical autonomy for myself and be more present for my kids when they're in a tricky middle school age, when I'm still as physically healthy as I can be. Working with her has given me a lot of insight, And I really attribute that to her wisdom and the perspective that intergenerational relationships can offer.

57:20Amazing. This was so much fun, Abby. Our final question for you. How do you define success in your life? I love that question. I've thought about it a lot. And for a lot of years, I let other people's definitions drive my own. I went to really competitive schools. I tried to reach for the highest ring that I could and ascended to a job that was once my dream job, running the foundation of a Fortune 200 company. And ultimately, I've had to decide for myself that success means to have well-being in multiple areas of my life. That means being able to have a career that pays the bills, helps me be helpful to people, feels purposeful to me, but that also allows me to spend time with my family and play tennis every week.

58:07So I'm really happy to be able to do all those things. I think it's really critical that everyone think about the definition of success for themselves. Great answer. Great to meet you. And thanks for joining us. Great to meet you too. And thanks for having me. Thanks, Abby.