Financial Planning for Joint Goals

Jackie Lam

By Jackie Lam
Jackie Lam is the creator of Cheapsters, where she helps freelancers get by in the gig economy. She lives in L.A., where she is on the perpetual hunt for the perfect breakfast burrito.
Posted on 06/26/2018

When it comes to financial planning and relationships, it's complicated. And if you're going beyond the traditional partnership route and working toward a common money goal with others, it ups the complexity. For instance, let's say you and a few trusted friends want to all go in and buy a multi-unit house together. Or you and your family pitch in for common monthly expenses.

No matter what the personal situation, working together toward a communal goal comes with a host of added financial and legal considerations.

No need to fret. We asked some experts to weigh in and offer a few pointers on how you can navigate the murky waters of financially planning together:

Get Vulnerable

You know how you'll need to bare your financial soul and talk everything from numbers to deep-seeded fears with your partner? You'll need to do the same with friends you're buying a house with. "If you can't talk about your personal finances, you can't do business," points out Pamela Capalad, CERTIFIED FINANCIAL PLANNER(TM) professional and founder of Dead Day Job Army (DDJA), a group designed for people of color to create their own financial independence and build generational wealth. "There's a certain level of vulnerability that's necessary if you want to go into such an endeavor."

This goes before you make big plans to save for a down payment on a multiplex, or to start saving for that dream vacay to Costa Rica. You'll need to know where the other people are coming from, the money attitudes they've developed over time that shape their perceptions and relationship with finances, and any fears and concerns they may have about taking on such a joint project.

For instance, with DDJA, one of the cohorts is a group of good friends who live all over the U.S. and want to pool their resources to buy property together. But before they even get into the logistics and nitty-gritty of going in for such a large, long-term purchase, it's crucial to be able to candidly talk about their money situations.

Iron Out the Details

Once you get to the point you can talk openly about your finances, you'll want to figure out how to actually structure everything. As Capalad explains, it's time to get down into the details.

"What does everyone have to put in?," she asks. "If they put in the same amount or different amount, what are the terms and conditions?" Plus, what if someone down the line decides to bow out, or are no longer able to commit to the original goals. If that's the case, you'll need to all get on the same page with exit plans.

Suss Out Complexities of Life Insurance

Estate planning with joint assets can be a tricky matter, so you'll want to figure out how communal property or money you may saved together in a joint banking account will be handled. Otherwise, what happens to your assets may be ambiguous and lead to stress and headaches after you've passed.

You'll want to work with a financial planner to suss out the details with all members involved. If you already have a will in place—huge kudos to you, by the way—you'll need to revisit your estate plan to make proper changes. Don't delay! The sooner, the better. If you let things fall by the wayside, it'll just make things more difficult.

Create a Business Plan

While these are trusted folks you know and love, you're also doing something major with your finances. In turn, you'll want to treat these goals as a business plan, recommends Jean Marie Dillon, MA, CFP®, AFC®, of Freedom Financial Counseling. "Business partners may decide to break-up or muck-up the business deal either in not sharing costs equitably, failure to pay back money borrowed, and even bringing other, perhaps unwanted 'shareholders' into the deal," she explains.

Using your awesome communication skills about money, you'll want to have a serious sit-down with your partners to discuss all the potential scenarios—both good and bad.

And just like you would do with a business endeavor, you'll want to get everything in writing. This is particularly important if you're borrowing or loaning money to friends or family, explains Dillon. You'll need to get the terms of the loan in writing with signatures. "That way, if a borrower fails to pay back the loan, the lender may be able to write off the loan as a capital loss in the year that the loan has defaulted under certain taxable situations," says Dillon. "Without a signed document, the lender has no means to do so."

For non-traditional couples and those financial planning with friends for a joint money goal, it's key to have the proper approach, information and understanding. It'll help in a major way to get everyone on the same page. In turn, you can help boost your communal wealth, and everybody wins.