Marriage and Money: Do’s and Don’ts for Financial Harmony

“My wife lost all her credit cards, but I’m not going to report it. Whoever found them spends less than she does!”
– Henny Youngman, comedian

Stereotypes and jokes aside, disagreements about money are no laughing matter. Money is still the leading cause of stress in a relationship, according to a SunTrust Bank survey, as reported in a February 4, 2015 article on CNBC.com.

Another survey involving 4,500 couples demonstrated that early arguments about money in a marriage is, by far, the strongest predictor of divorce, regardless of the couple’s income, debt, or net worth. Published in the Family Relations Journal and described in a July 14, 2013 Huffington Post article, the study also confirmed that arguments about money were usually longer and more intense than other types of marital disagreements.

When you say “I Do,” it’s important to have strategies and skills for a harmonious financial relationship with your significant other. In this article, we explore 7 Do’s and 7 Don’ts for creating financial harmony.

Communication is Key

DO Talk about money!

DON’T Make the conversation difficult.

Communication is the key to resolving most marital financial challenges, especially where money is concerned. Ideally, communicating about money begins way before the wedding ceremony, perhaps with a prenuptial agreement, and even before that, with open, honest conversations. Share with each other your financial goals, values, money habits and expectations. Share where you’ve been with money, your current financial reality, and where you’d like to go.

Money conversations don’t need to be difficult. Agree not to lose your cool or shame your partner for past mistakes. When couples assume money conversations will be difficult and unpleasant, they tend to avoid talking about money. Procrastination leads to further anxiety, making any money issues even more difficult to discuss.

If you’d rather rearrange the sock drawer (again) than discuss money with each other, set a new context for financial conversations. Financial therapist Bari Tessler recommends having “Money Dates” with your Sweetie. Yes, spreadsheets and numbers will be involved, but you can nibble chocolate, sip wine, and add candles, dreams, laughter, and soulful conversations that help you move forward through the resistance and discuss money in a new light.

Better Together?

DO put structures in place to support your financial goals.

DON’T assume that money will save itself.

In spite of challenges, getting married can have serious financial advantages. It is a natural way to double your income without doubling your expenses. If you can work together towards goals, you reach them much more quickly that you could be working alone. However, without clarifying intentions and taking consistent action, moving into one home and sharing the utilities and mortgage payment doesn’t mean that you will automatically save!

Belinda Rosenblum, CPA, founder of OwnYourMoney.com and author of Self-Worth To Net Worth, says many people initially move in together anticipating opportunities to save money, but they fail to do so because they never put any kind of structured plan into place. “When couples fail to track their money and consciously use it for a specific purpose, whether it’s building emergency savings, paying down debt, or funding a future major purchase, they save nothing,” says Rosenblum.

Determine your method(s) for saving money. Unless you already have access to up to a year’s expenses in emergency savings, it may be too early to “invest” yet. Focus on building liquidity in a whole life policy and/or savings account to start. And most importantly, put the savings strategy in motion through automatic transfers or premium payments.

Delegate and Define Roles, But Don’t Disconnect!

DO contribute to the family finances in a way that uses your strengths

DON’T be ignorant of what your partner is doing!

Oftentimes, one partner handles cash flow/ budgeting (paying the bills), while the other handles the bigger picture investment decisions. In other marriages, the partners choose different financial responsibilities. Perhaps he pays the mortgages while she pays for the utilities and groceries.

Get clear about your roles. Who does what? What do you enjoy doing, and how can you contribute your strengths towards the family’s personal economy?

According to Investopedia, one common solution with a track record of success is for the higher-earning spouse to delegate spending decisions to the lower-earning spouse. It takes a certain personality to be able to make the decision to give up power, but if you can do it, it can keep people focusing on what they excel at – earning money, investing money, or tracking and managing it.

It’s alright if one of you is not interested in handling a certain aspect of your financial life, but it’s not acceptable for either of you to be IGNORANT! At least once a year, preferably once a quarter, you MUST both get on the same page! It doesn’t have to be a heavy meeting, but gain (and share) the knowledge needed to understand how much money comes in to your personal economy, where it goes, and how it is saved and invested.

Know your numbers. Get clear about your income, savings, net worth and cash flow. Understand your budget or spending plan, even if your spending plan means to simply “save 20% and spend the rest.”

Create a Shared Vision

DO prioritize what is important to you.

DON’T make your spouse give up what’s important to him or her.

Power plays especially occur when one spouse earns more than the other, even though both may “work” equally hard, though in different capacities (as a parent, a student, a caregiver, etc.) The money earner (or the one who makes the most money) often wants to dictate the spending priorities. Although there may be some rationale behind this idea, it is still important both partners cooperate as a team and feel they can control some of their own money decisions.

Financial writer Stephanie Taylor Christensen asks couples to consider which two non-essential expenses they are NOT willing to change. Perhaps it is important to him to drive a newer model car (with payments), while she considers a vacation abroad each year a “must.” Establish what each person is unwilling to live without.

Though you may not agree with all of your partner’s spending decisions, strive to understand what is important to them and why. Ultimately, creating a partnership in which you both honor the priorities of the other creates a better relationship.

Keep an Open Book Policy

DO commit to transparency.

DON’T keep financial secrets.

Our financial past may be a source of embarrassment for us, but they can also be opportunities for open communication, trust, and empathy. Total Wealth’s Kate Phillips advises:

“If you are haunted by your money mistakes, don’t ambush your partner with your financial skeletons well into the relationship. Never hide a bankruptcy, foreclosure, or a mountain of credit card debt. Share your past money mistakes (or current money struggles) honestly, along with lessons learned and changes you are making to ensure that past patterns won’t repeat. Discussing money early in a dating relationship is a good test, as you won’t be able to avoid the topic once coupled. You should also know sooner rather than later if your money styles are diametrically opposed (you’re a conservative saver, he is risk-taking spendthrift), or if you have irreconcilable differences in your financial beliefs and values (you had a bankruptcy and he believes that makes you a deadbeat.)”

Once married, the same rules apply. If an investment loses money, don’t try to hide it. When a secret is found out, the loss of trust can be harder to overcome than the loss of money. Honesty is always the best policy.

His and Her Spending Money

DO determine a “play money” or slush fund budget for both partners.

DON’T tell your partner how to spend theirs!

According to Ruth Hayden, author of For Richer, Not Poorer: The Money Book for Couples, spending is the second most common reason why couples fight, according to a SmartMoney survey. What usually happens, explains Hayden, is that one spouse gets labeled the “spender,” although that is often not accurate. “Studies show that men and women spend the same (amount), they just spend differently,” she says. Couple inevitably spend money on different things… things that one values more than the other. She doesn’t think they need to upgrade their flat screen TV, and he wonders how she spent so much shopping for the grandkids.

1. Harv Eker, author of The Millionaire Mind, says the solution is a “play money” fund. First, the partners must agree on a play money or slush fund budget. This could be a set amount each month, a percentage of combined income, or even an amount dictated to them by a bookkeeper, which can work well in situations in which a family has unpredictable cash flows. What’s important is that it is an agreed-upon amount that can be spent after other priorities, such as savings and essential bills are paid. Whether it is $200/per month or $2k, the amount is then equally divided between partners and spent “guilt free” on whatever each wishes.

Nuts and Bolts

Finally, DO What works for YOUR relationship!

But DON’T Skip the Important Stuff.

I (Kim Butler) use a bookkeeper, which disconnects me from minutiae and details I don’t need to know. Our bookkeeper has instructions to-

1. Pay our life insurance premiums first,
2. Then pay business/ payroll,
3. Next, pay the credit cards off (monthly, unless cash flow determines a different schedule.)
4. Lastly, our bookkeeper lets us know if we have spending money.

Saving first is our priority. According to a recent Google consumer survey, most American have less than $1,000 in savings! For many, the distance between comfort and catastrophe is often much shorter than we want to admit.

It is a good idea to be able to access up to a year of expenses, should you ever need to. (And you may wish to have access to even more money to be truly prepared for “opportunities” as well as emergencies!) We store our cash emergency fund in a whole life policy where it can be easily accessed through loans in cases of emergencies or opportunities.

You’ll also want essential paperwork such as:

• A will
• Living will
• Medical POA
• Durable POA
• Life Insurance policies

Last but not least, don’t neglect communicating about the “important stuff.” Two tools we recommend are:

• thetorch.com – a brilliant tool to help people pass simple, essential instructions, and
• LeaveNothingUnsaid – a wonderful resource for writing loved ones a letter.

Can We Help You Achieve Financial Harmony?

Contact Partners for Prosperity to start your own whole life policy to build liquidity, or to inquire about our investment options for growth and cash flow that is not correlated to the stock market.