Couples and Money

Wow, our guest bloggers have been working hard for us and you! Nice job Amy and John.  I myself got a little wrapped up in my intensive financial literacy class this year, and am finally here to report on our experiences. First up, a conversation about couples and money. I hope you readers will join me.

It seems many people are still in financial trouble these days and it’s taking a toll on their relationships. Every so often you hear a crazy statistic about how people (lots of them) lie to their partners about money and also how financial cheating is as serious or more serious than actual cheating.   For example, see this from the Huffington post.  Or this from cnn money. 

I always wonder where and how these pollsters are collecting their data. Are we talking about lying in answers to questions like “did you give your brother $5,000?” or more like “You missed the auto detailing day at work and had your car detailed at the airport instead? Didn’t that cost a lot more?” Aren’t half-truths in response to these two questions two very different things?” I challenge you to keep track of the money lies you tell both big and small and then we can talk about whether they matter or not.

One thing seemed clear after the weekend. When there is enough money to go around, it is easier not to fight about money. No big surprises there but what else?

1. KEEPING FIXED COSTS WAY DOWN MAKES FOR HAPPIER LIVES. I know, I know, now you tell us, after we bought the big house. In All Your Worth, Elizabeth Warren and  Amelia Tyagi suggest spending just 50% of your net income on the bare-bones basics or needs (meaning the things you’d spend on even if you were unemployed, just to survive).This is very hard to do in some parts of the country, but if you can, it makes life easier and more fun. Somewhat humorous, somewhat sad story about this part of the equation below.

2. EVERYONE NEEDS THEIR OWN MONEY TO BLOW, HOWEVER SMALL IN AMOUNT. This is part of the Warren and Tyagi plan too, that a person’s or couple’s “wants” should captures 30% of net income. Some of the 30% you spend as a couple, but some you get to yourself to do with what you like with it. This ‘ll take care of that car detail conversation, and no, getting a car detailed is not a need.

3. YOU CAN’T KEEP BIG SECRETS IF YOU ARE COMMITTED TO THE RELATIONSHIP.  See question above about your brother. Unless of course your finances are separate and there is enough to go around, then do what you like….. unless even that impairs joint goals. Boy this is tricky, with LOTS of exceptions, and exceptions to exceptions.

4. REGARDLESS OF HOW MUCH BETTER YOUR PARTNER IS WITH MONEY THAN YOU ARE, STAY INFORMED. You don’t want to hear my sad clinic stories. Bob blogged about reverse mortgages a while back and I have a humdinger to report about on that topic.

5. HAVE JOINT GOALS AND MAKE A GAME OF SAVING FOR THEM. That is how Stewart and I got out of the rat race and landed here. We are competitive and so we saved a lot.  The Prize? Best saver got to pick out and drive our new (now necessary) second car.

6. IF YOU ARE MARRIED, DO NOT HIDE DEBTS! You are business partners in the eyes of the law. A work friend of mine tried to refinance a credit union loan with my help. While we were there, she found out about a card her husband had hid, on which he was also over the limit. It messed up their joint credit. Now there are trust issues.

7. CAN’T PAY OFF YOUR BALANCES THIS MONTH? PUT CREDIT CARDS ON ICE. Literally. Put them in water and freeze them. This makes them much harder to use.

8. TRY TO SEE THE CONNECTION BETWEEN THE DECISIONS YOU MAKE TODAY (STARBUCKS ANYONE?) AND THE FREEDOM YOU’LL ENJOY LATER. One of my students explained this connection by saying since the class two weekends ago, she has not wished to go out to eat or even order a pizza. She has learned to cook because she does not want to pay for those meals over the next 10-20 years, but would rather buy new meals later with saved money or current income.

9. DO NOT NAG. Be positive and empathetic. If nothing changes, see 10. below.

10. IF YOU ARE NOT MARRIED AND JUST CAN’T SEEM TO AGREE  ON THESE THINGS, WALK WAY. Don’t lie to yourself either. Money differences are a big deal. Divorce costs a lot. Find someone you are financially compatible with.

Of course, there are more tips, but I wanted to briefly comment on tip number one above.

Before I do, as background, the basic Warren and Tyagi  All Your Worth formula, which really works,  is as follows:

 •Allocate 50% to Needs (which the authors call Must-Haves). Needs include housing, transportation, groceries, insurance, and clothes you really need.

 •Spend 30% on Wants. Wants include cable television, clothing beyond the basics, restaurant meals, concert tickets, comic books, knitting supplies, etc.

 •Set aside 20% for Savings, including debt repayment.

Here is the story: A friend of a friend actually read All Your Worth before I did and recommended it to me many years ago. She knows I like and teach this sort of thing. I knew she had struggled with bad partners and many money woes, to the point of pawn, payday loans etc. Now she said she was doing well and just LOVED this book, the only financial book that had helped her.

After reading it, I asked her how she was doing with her All Your Worth percentages.  She said she was working on it and doing so much better but still not quite there.  When I asked her for more details (I know, people must love talking to me at cocktail parties, right?), she said she still had not gotten her needs down to less than 100%. 

Say what?  This person (who makes over $50,000) loves the book but is spending all her net income on what she considers her bare bones needs? She clearly is confusing needs with wants. Curious indeed. Anyway, try this 50% thing and let me know how it goes. And please add money tips for couples, thanks!

Comments

[Ben]

Great tips. In and effort to keep things simple, I always try to emphasize two things:

1. Spend less than you earn.
2. Make a budget that both you and your spouse agree on. When you do, round up the expenses and round down the income.

[Nathalie Martin]

fabulous ideas Ben. You and my husband are financial twins. He goes a step futher and under-estimates assets and over-estimates liabilities. As a result, we are in far better shape than we'd be under my watch. NM

[Simon Campbell]

Separating your wants from your needs also applies to big purchases like a vehicle or a house. More often than not, we get carried away with our desires and if a lender approves us for a $250,000 home loan, we start looking for $250,000 homes. However, the lender is not responsible for making sure you can realistically pay these mortgage payments – we are. Nothing can trash a marriage faster than facing foreclosure because of over spending.

I wrote an interesting blog article about how to avoid foreclosure by making sound decisions at http://www.bankforeclosuressale.com/wp/article-01044142.html.