My wife and I met in grad school. I was putting myself through school, had a used $1600 Jetta, and was working days while I went to school at night. She had a three-year-old Acura, used her parents’ credit card, and had never held a job. Needless to say, our experience with money was vastly different. Yet together we have been able to overcome our different backgrounds to buy a house, build up our retirement nest egg, and have enough so our kids can enjoy soccer and dance. Here are some keys for successful money management with your partner.
Talk
Money – like religion and politics – is not talked about in some families. However, bringing that attitude into a new relationship can cause mistrust and friction. Before we married, we talked about combining our checking accounts (pros and cons), what we hoped to achieve in the next few years, and how we could go about getting there. When money got tight, we discussed budgeting ideas and devised a plan we could both live with. Before we had a child, we talked about whether one of us wanted to stay home and if we could afford that.
These aren’t formal meetings with agendas and pastries. Sometimes we talked at the kitchen table. Sometimes we talked as we walked around the neighborhood or drove to a friend’s house. Sometimes we managed the plan perfectly; other times it blew up in our faces. But having a common goal and knowing where we wanted to go made even the mistakes tolerable.
As your life changes, your money needs and dreams will change too. When we first married, I never dreamed of how much fun it would be to see my daughter dance or my son play soccer. The talks we had when we were newlyweds were very different from the talks we’ve had since then. That’s okay. Just keep the lines of communication open and go into it with an open mind.
Don’t worry about the difference in salaries
People often equate money with power. This can cause problems in a relationship if one person is making significantly more than the other. The person making more may believe they are in charge of spending and investing, that they don’t have to discuss major purchases, or that the other person is lacking somehow.
Remember that the person across the table is someone you love. It doesn’t really matter if they are contributing exactly 50% of the income. One of the worst things you can do is demand the person earning less do more chores around the house or have less “play” money. And if you’re making less, don’t succumb to this. You’re equal partners, not shareholders in a company.
Someone is spending too much
Coming from different backgrounds means that couples may have different ideas on the value of money. Where $20 might seem like a lot to one of you, $100 may seem like a drop in the bucket to the other. So spending $150 for a pair of jeans may not cause you a moment’s hesitation, while your partner may expect to buy 10 pairs of jeans for that amount. Instead of trying to change how someone thinks about money, reframe the discussion.
In our budget, we allot miscellaneous money for each of us. You can think of it as fun money, play money, whatever. Basically it’s an amount of money per month that we can spend however we want. And it rolls over. So if you want a $500 stereo system and you have $250 in the miscellaneous pile, you can save up for it. Similarly, if you’re out with your friends and spend $100 (and you have the same $250), no worries.
One person is in charge
Money is fun to learn and talk about. Money is the most boring thing in the world. It’s okay to be on either end of the spectrum or somewhere in between. The problem arises when the person who enjoys (or knows more) about finances takes over the majority of the decisions regarding money – or feels like they have to make all the decisions.
This is dangerous for several reasons:
Something could happen to one of you. And if it’s the person who is paying the bills and making investments, the other party may not only have to go through a personal loss but at the same time figure out how to handle the bills and determine where the money is.
The dream may be coming off the rails. Even if you’re discussing your hopes and dreams, not being involved in the financial end of the equation may result in unhappy surprises. You need to know that you’re on the path to retirement or that if one of you is staying home there’s money to pay the bills. Being involved lets you do that.
Cost of life. If you’re not involved in money decisions, you could have an unrealistic idea of the cost of life. How much is your house payment? What’s left on the loan? Is $250 per month a lot for electricity?
Plus, knowing the ins and outs of money is empowering. You don’t need to love it, you can give it to a professional to manage, but you still need to know what’s going on and have a simple understanding of why it’s being done that way.
If you’re making the majority of decisions, work to keep your partner involved. Make sure they know how to pay the bills, the number of accounts (checking, investing, retirement, etc.) you have open, and where the online passwords are kept. When you consider changing an investment, explain why you might be thinking of that. And if you have a professional money manager, make sure you meet with that person together.
Never too late
Most money issues can be solved by open communication, where each of you is coming to the table without bringing up the $300 that went to cousin Eddie or the new stereo for the car. Have a calm, honest discussion about where you want to be and how to get there. And it’s never too late to start talking (and learning) about money. Find a time to discuss your dreams, ask your partner what they dream of, and map out a plan to get you there.