Couples and Money: Achieve Financial Harmony and Prosperity

by Monica Steinisch

Money can wreck a relationship. In fact, how they spend, save, and account for money is one of the leading sources of friction between couples. In virtually every study, money ranks as the first or second most argued-about topic for twosomes of all types.

While "coupledom" can create conflict, it also can be the key to financial success: You can achieve far more as a united team than you can by working alone. If you and your partner can reach a meeting of the minds regarding money, you'll not only experience more peace in your relationship, you stand to achieve greater prosperity. For some couples, that's a big if. Here are some tips for achieving financial harmony.

Communication is key

Ask why couples fight about money and you'll hear that lack of communication has a lot to do with it. Whether the silence is intentional or not, it will keep your partnership from being as fulfilling, productive, and enjoyable as it could be. It's time to start talking.

One way to clear the air is to explore your "money personality," which is shaped by upbringing, education, and personal experience. It's what makes one person a saver and another a spender. Sharing perspectives on money can help couples start to see eye-to-eye, or at the very least, to understand why the other half behaves the way he or she does.

Every duo also needs to dive into a more nuts-and-bolts discussion of long-term goals and priorities. Where do things like retirement, home ownership, financial security, children, and travel fall on each person's list of priorities? Your lists might not match up exactly, but they should come pretty close; couples with very different priorities end up working against each other.

If you're having trouble agreeing on which financial goals are most important, Deborah Knuckey, author of "Conscious Spending for Couples, Seven Skills for Financial Harmony," says you need to ask not only what each partner wants but why.

"Goals that sound very different may be more similar than you think," says Knuckey. For example, if one person says he wants to take a lot of family trips, what he really might be longing for is the opportunity to spend more time relaxing with loved ones. Understanding the motivation behind a goal makes it possible to come up with alternatives that fit into the household's long-term financial plan.

Before you and your partner sit down for your heart-to-heart, consider the timing. In her book "Talking Money: Everything You Need to Know About Your Finances and Your Future," Jean Chatzky cautions that trying to discuss money when you're angry about the most recent financial transgression is just asking for a fight. Hold off on discussing money--or any sensitive topic--until the storm has passed.

Tackling practical money matters

Getting to financial harmony is a journey that starts with the basics--agreeing on how the two of you will allocate your income, make purchases, pay bills, and balance the books.

Saving & spending:

Particularly for couples with money issues, a budget is crucial. The household budget, or spending plan, can be the key to achieving your goals, building wealth, and avoiding conflicts over money, but only if both partners are involved in creating it.

Two essential elements of the budget are the savings and discretionary spending categories. Savings should be a fixed expense in the budget and the first "bill" you pay each month. (Experts agree that "paying yourself first" is one of the secrets to financial success.) Discretionary spending is secondary to savings and other financial obligations, but it is still an important part of the spending plan.

Many experts--Dr. Phil McGraw included--say it's essential that everyone has some financial freedom--a certain amount of pocket money to spend on anything he or she wants without having to account for or justify purchases.

The key to making the arrangement work is not the amount of the allowance, but the fact that both partners respect the rules: no complaints about how your partner spends his or her money and no spending more than you've agreed on. Once you're out of money, there aren't any more lattes or lottery tickets until next "payday."

For couples with very different spending habits, it also helps to mutually agree to a limit on the size of purchase either partner can make without consulting the other. That threshold may be $100 or $1,000; whatever the limit, both partners must approve any purchase over that amount that is not paid for with someone's allowance.

Accounts: Checking, savings, and credit cards:

If the thought of commingling your finances with your partner gives you the sense of jumping off a cliff, then you may want to keep your finances at least somewhat separate for now. Kim Grenier, a credit union member in Massachusetts, says she and her husband keep separate checkbooks and couldn't be happier with the arrangement. Grenier and other readers responded to our "What's Your Story" feature for this article.

"He's an ATM/debit card user that never records his purchases," she says, while she likes to know exactly how much is in her account at all times. "It saves a lot of conflict and surprises to keep separate accounts. Best thing we could ever do!" The two just celebrated their 10th wedding anniversary.

Knuckey agrees that separate accounts can be a great solution to money conflicts but advises couples to keep the total number of accounts to a minimum--say, one checking/share draft, savings, and credit card account per person and one joint account of each type for the couple. That way you avoid the accounting mistakes that happen because there are so many open accounts to track and manage.

Chatzky recommends that even partners who decide to commingle their finances have at least one credit card in each individual's name to maintain a separate credit history.

Bookkeeping and bill paying:

One way to handle the day-to-day bookkeeping, which includes making credit union/bank deposits, paying bills, balancing the checkbook, and comparing actual spending against the family budget, is to tackle all of the financial chores together. Another approach is to have the person who is better at the task manage the household finances, with both partners reviewing the books together on a regular basis.

Knuckey recommends using a computer software program to track family finances, and signing up for an automatic bill-pay program for making payments. "I write only two checks a month--everything else is paid automatically," says Knuckey. "The more you automate, the easier it is to manage the books and avoid arguments over little mistakes."

Bob, a Pennsylvania credit union member, agrees, adding that those tools along with payroll direct deposit "make it easy to see exactly what you have spent and what you have left."

There's no one system that works for every couple. According to Knuckey, conflict often arises because one partner thinks he or she is getting the short end of the stick--by contributing more, having less spending money, not having an equal say about goals and so on--so the most important criterion for whatever approach you take is that everyone think it's fair.

Four money mistakes every couple should avoid

Extremism. Work on changing your ways if you're on either end of the spectrum from shopaholic to cheapskate. It's a lot easier to have a meeting of the minds when both partners practice moderation. Secrecy. Don't hide your spending from your partner. Once you lose your partner's trust, it'll be an uphill battle to win it back. Assigning blame. If both partners stay involved, one can't blame the other for the household's money troubles. Using money as a weapon. Spending to get back at your partner won't solve your relationship issues, it will just make you unhappy and broke.

July 19, 2004