couples and money – Wilson Rogers & Company

Financial Rules For Marriage

Many failed marriages often cite financial troubles as a major factor in the breakup. This isn’t surprising because the way we use our time and money often reflects our values. Without a strong set of shared values, marriages can drift apart. But, dealing with finances together can bring a couple closer. With that said, here are some principles that you can use to help build wealth and strengthen your marriage.

Start as newlyweds. There’s no better time to establish the rules of a relationship than at the beginning. Furthermore, every seven years you delay starting a savings plan cuts in half your ultimate net worth in retirement. Chances are you know someone who’s getting
married this year (of even this month) so send them a copy of this blog post. It may be more valuable than the check you write.

Budget as a team. Shared activities help you build and integrate your values and keep your finances in sync with the rest of your life. Couples that share philanthropic causes or other activities often do better financially because their common vision allow them to work together instead of pulling in different directions.

The more opportunities to forge shared values, the better the marriage team. Even the simple process of creating and
adjusting a family budget, provides a forum for discussion of what is really important to the family.

Realize that a budget gives you freedom. Partners without a budget can, and often do, fight about every dollar spent. Every purchase is an opportunity for values and priorities to clash. Yet couples who have worked together on a budget are already in agreement on the big picture. Once the difficult decisions are made about what will help further the family’s values, the specific purchases in each category are much less relevant.

Additionally, couples with a budget do not get concerned about spending until a category goes over the budgeted amount. Having decided how much money the family can afford to spend on clothes for him or her, the scrutiny over if he prefers lots of inexpensive clothes and she prefers a few nice pieces tends to diminish. Thus, a budget allows discretion and freedom to prevail within cooperation and teamwork.

Pay yourself first. The best way to achieve your financial goals is by moderating your spending and staying on track with your savings needs. Only after you have saved several times your annual salary does the rate of appreciation become more important than the rate of savings.

To pay yourself first, set up an automatic monthly transfer from your checking account to an investment account where your contribution is automatically invested in a diversified portfolio. Even a small amount makes a big difference. Just five hundred dollars a month (just $6,000 a year) at 11.5% each year will compound to a million dollars by the middle of the 26th year. Money makes money. And the money that money makes, makes even more money.

Limit spending unless you both agree. A single mistake can undo months of frugality and sacrifice. Therefore, big purchases require both members of the team to agree. Honoring each other in this way helps avoid resentment and disgust.

When a couple is just starting out, this dollar limit may be very small, perhaps only fifty dollars. As the couple matures, they will grow to anticipate each other’s wisdom and values; plus, they will likely be able to increase their discretionary spending limits.

Differentiate your needs from wants. In the US, nearly all of our purchases are wants, not needs. Humans really need little more than food, shelter and clothing to survive. It is easy to fall into the
misconception that we deserve nice things because we work hard. But “true” wealth is what you save, not what you spend. The textbook definition of capital is deferred consumption, and wealthy people learn to value financial security over immediate gratification.

Our company has worked with families with very modest incomes who, through saving and investing, have grown to be millionaires. On the other hand, we have worked with couples who spent every dollar of dual six-figure incomes. The difference in achieving financial success is separating needs from wants.

Everyone should own a piece of the budget. Both members of a marriage should have a slice of the budget which is completely at their discretion. So long as their spending stays within this thin slice of the budget pie, they can be completely frivolous. Perhaps it is only 0.5% of your total budget, but it will provide a place to put purchases that otherwise might cause marital strife.

If one partner collects Strawberry Shortcake dolls and the other signed collectible baseball cards, they can both enjoy their frivolous
expenditures without jeopardizing budget items that are more
important to the family.

Couples that learn to live proportionately maintain their balance whether they are rich or poor. No matter the circumstances, they include some fun, some gifting, and some investing as a reflection of their shared family values.

Relationships and Money

Q: My girlfriend and I are in a rather serious relationship and I am thinking about asking her to marry me. One thing that bothers me is that we tend to argue a lot about money – our views are just different. I’ve been told that money can ruin a marriage so I’m just not sure what to do at this point. Any ideas?

A: It seems like most people in relationships argue about money to some degree. Some argue about spending too much, making too little, not saving enough – the list is almost endless. Yet, at some point you’ve got to stop and ask yourself, is it the money that’s the problem or is it just the result of another issue?

The primary reason that couples argue about money is that they fail to gain “alignment” regarding a particular situation. He wants the Chevy Camaro and she wants the Lexus IS – the two items aren’t aligned so let’s start WW III to see who wins! Arguing in general isn’t healthy, and it sure won’t solve any money problems that you’re having. The key is to figure out what the problem is and solve it. In the above case the problem is: we need a car without too hefty of a monthly note. Once the focus is shifted to addressing that problem, then we can address what car we can afford.

Here are some ways for people to constructively talk, not argue, about their money:

Is it really the money? As stated above, the cause of most “money arguments” isn’t really the money itself. It could be related to one person making more than the other. It could be that you all are sharing expenses but not in a way that is “even” according to how much you individually make. When you figure out what the real problem is you should address it and not the money. For example if you make 55% of the monthly income and she makes 45%, why not try splitting the joint bills that way? You’ll both be shouldering your appropriate amount of the expenses and it may make you feel as if you are really being treated as equals.

Don’t shout, talk it out. Shouting gets you nothing but a night on the couch and some high blood pressure – both of which are unnecessary. When you have differing views about a particular item, ask some questions to find out what the issue is. Make sure that you listen to what the other person has to say before you respond. Most of all just make sure that you are respectful of the other person’s views. No one likes to feel as if his or her opinion isn’t important. Besides, you wouldn’t yell at your boss so why would you yell at someone you love?

Set the goals and then put them on autopilot. Let’s say you both want to buy a house and agree that you should be saving up for that gigantic down payment. But when she gets your joint credit card bill she sees that you charged $500 on new stereo components for your car. Then you all argue about who is dedicated to the goals and why one person is holding you both back. Sound familiar? The easy fix is once you set goals, automate their funding so neither of you has to worry about it materializing. Set up a separate bank account, have the money deducted from each of your checking accounts and call it a day. Automate to eliminate the arguing.

Make it a family affair. Family finances are not the sole responsibility of one person – no matter who the breadwinner is. Couples have to make it a priority of discussing THEIR finances TOGETHER – this can’t be stressed enough. So once a month the two of you should sit down and go over the money earned, bills paid, expenses incurred, progress towards goals, banking statements, etc. If you all see something that starts an argument, take a step back and look at your long tem goals. How does whatever you all are arguing, excuse us, talking about fit into your long-term goals? By putting your finances into the open, you all shouldn’t be surprised by something when you see the bill for it.

Work out the kinks BEFORE not AFTER the wedding. Don’t think that the words “I do” will solve anything that you have a problem with now – it will just make you committed to those differences. If you have concerns about your partner’s approach to finances, or vice versa, make sure you all realistically confront those differences. If one person is a spend thrift and the other person is Ebenezer Scrooge, you all need to figure out if there is some type of middle ground between you two. If the other person doesn’t want to change, you might want to reevaluate the relationship. Simply thinking that not discussing the issue will make it go away is like hoping that a bill collector just forgets your phone number – it ain’t gonna happen! Besides, if you don’t address the problem now and you all do have very different perspectives, then you are setting yourself up for one stressed-out marriage – we know some good therapists if you want the numbers.

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