By David John Marotta
No married couple wants a scandal, even if it is just financial in nature. Money problems can ruin the love affair with your spouse. The work of blending two lives in harmony requires certain basic commitments. Many families today are financially troubled. Most of these are in denial. The rest of them are looking for a quick fix. Even a financial planner can’t help unless the couple is willing to make five simple commitments. You can always choose to find something to fight about. But if you are serious about removing the financial obstacles in your love life, you should commit to the following money management rules.
First, take the time to provide open accounting to your spouse. Most financial arguments are not about how to spend your money, but about how money was actually spent. Just like every publicly traded company is required to give a public accounting of its finances, couples should do the same. In the public sector, it’s considered a scandal when a corporation fails to provide its financial information in a timely fashion. The same rules should apply at home. Financial accountability, openness, and honesty are essential in marriage.
Next, make saving money your first priority. Pay yourself first. Couples should agree on a savings rate and should prioritize their savings above all other budget categories. Savings should be automated and protected from impulse spending habits.
I’ve come to believe that savings should even be prioritized above debt reduction. I’ve found that couples that are in debt cannot seem to get out of debt because they are using what should be going into savings to service their debt rather than adjusting their lifestyle so that they are spending less than they make.
Set a limit on what you can spend without first getting the approval of your spouse. Each spouse must sign off on spending that might be a budget buster. If you are young or your finances are in trouble, the amount should be fairly low. As you get more experience and your finances are in harmony, you can raise the amount. Any purchases above that amount should require the agreement of both spouses.
In the same way, any purchases beyond what was budgeted should require the agreement of both spouses as to which budget category is going to be reduced in order to make up the difference. If your spouse asks you to wait before making the purchase, lean toward waiting graciously. Ask what you would do if you did not have the money at all. Then, do that instead. Delaying a large purchase even by a month can significantly increase your financial health.
Set rules for the acceptable use of credit. In my experience, the easy use of credit cards ruins much financial harmony. It is better when the use of credit cards is limited to only certain required budget items. Using a credit card for groceries or gasoline may be harmless. But when credit cards are used for clothes or eating out, optional spending is unnecessarily inflated.
There are several advantages to using credit cards, but each of these advantages becomes powerful disadvantages for a family struggling to make ends meet. Credit allows couples to avoid asking the tough question about what they would do if they did not have the money. Credit makes spending easy and simplifies check-writing. These advantages are as helpful as giving an alcoholic a place to sleep in the back of the bar.
Either spouse should be able to veto the use of credit cards entirely. Only if both parties agree to the use of credit cards, should they be allowed – and then only within certain guidelines.
Credit should only be used for specific required monthly categories, and then only by the spouse who is less apt to make extra purchases on impulse. If you are struggling with your finances, stop using credit cards entirely.
Agree together that ignorance will not be used as an excuse. Both parties must be willing to learn. Just like a good love life, finances cannot be handled well by just one party. Many problems stem as much from ignorance and abdication by one party than spending by the other. If you don’t have the time or the interest to be involved in the family’s finances, then you may be the problem. Ask for help and start learning.
David John Marotta works at Marotta Asset Management, Inc. of Charlottesville which provides fee-only financial planning and asset management.
I agree. I went through a terrible divorce and part of the problem was grounded in money issues. I remarried about 10 years ago and I learned from that failed relationship. My spouse and I have developed a workable financial plan.
1. My spouse and I each use a charge card for all dining out and entertainment. We then pay them off each and every month. This gives us an entertainment budget for the year, which handles the internal conversation that “we never do anything”. Ditto for any vacations.
2. We run financial software on the home PC; I do most of the data entry but all accounts are included and we both have full access. I use Quicken, but others prefer MS Money. This keeps track of all savings, spending and retirement accounts. It generates the entertainment budget I mentioned in Item 1, as well as provides all manner of useful and interesting reports.
3. Both my spouse and I “Pay ourselves” first. Payroll checks are deposited to the family savings account. Then on a monthly basis, funds are transferred to the “spending” checking account. Monthly retirement savings goals are also automatically transferred to the appropriate accounts. Any decision to spend then reduces the family savings. We have become much more aware of the impact of our spending on our finances.
4. We each have a discretionary checking account. On a periodic basis, these are funded and provide for individual discretionary spending. My account isn’t large; it currently has about $725 in it; my spouse’s is larger. These accounts provide us the opportunity to save and spend independently.
A marriage is a partnership and it does require work and compromise. If the partners can agree on the financial goals, that does seem to facilitate our relationship.
Couples need to talk about what money means to them, who is frugal and who is spendy before they get married. It would be so much easier if a pre-marital course was compulsary [like a driver’s license].
1. What worked for us was to divide the basic expenses [rental, utilities, food, insurance, transportation] and contribute based on our earnings. Initially, DH’s net was 1/3 more than mine so he paid 5/6. I caught up eventually to 50/50.
2. I was able to convince DH that paying interest was like sitting on the doorstep and burning money so we agreed that whatever went on CC would be paid in full on it’s due date.
3. DH dislikes shopping and neither of us are ‘trendy’ so no disagreements on spending for clothes or housewares.
4. We each contributed to an emergency fund [$ 1,000. initial now $3,000.] to take care of ‘life happens’ problems. This really worked to avoid mountains of stress. Sums are replaced ASAP.
5. We each get Petty Cash to cover discretionary spending. However, once it’s gone…it’s gone until the next month. While DH pays for dinner out or entertainment, I rebate my share either before or after the event.
6. Before making a major purchase, we do research and must convince the other of it’s value or it’s a ‘no go.’ For example,it took us 2 months this fall to agree on which brand & level of car to buy. This worked to our advantage as the prices kept dropping and the salesmen were hungry for business.