Ray Advani knows that couples often find themselves arguing about money. As the head of Tie the Money Knot, he talks about money issues new spouses face from getting joint accounts to supporting grown children.
He spoke with us about how to square your finances away when you have different financial philosophies as well as other topics. Read on:
How common are money troubles in marriage?
The reality is that money troubles are far more common than meets the eye. Financial issues or disagreements are often noted as being among the most common reasons for divorce, so clearly this is a widespread issue. A big part of this, I believe, is that money is a taboo subject with some people and one that's discussed with hesitation by many others. As with many other aspects of life, the better we can communicate about what's important, the better our chances are to find positive, winning solutions.
How should couples start talking about money?
Being open and honest about money is extremely important, and that spirit should be the foundation of discussions on the subject. Approaching things by setting ultimatums is not a good way to start, nor is blindsiding the other person. Rather, being straightforward and transparent while treating the other person with respect is vital. It's important to have these discussions well before getting married, and even better would be doing so before getting engaged. There is little to be afraid of when you think about it, as these discussions are too important to fear!
What are some good strategies for couples to balance their beliefs about money?
Three overriding concepts that would be wise to keep in mind are:
- People are more important than money
- Treat your partner as you would want to be treated: with love, respect and understanding
- Compromise and working toward a win-win is better than demanding what you want
By keeping these concepts in mind, there are many differences that can be managed quite nicely through a variety of strategies. The ability to meet somewhere in the middle when you have different viewpoints is a good thing for the relationship in general, so you might as well approach finances this way, too. Two examples of strategies that can work are:
- Setting aside some separate "personal" funds each month for each person to spend without accountability to the other.
- Agreeing that outside of the personal fund allocation, any purchases over a certain dollar amount threshold (which can vary by couple) should be agreed upon by both people.
Is the household expenses a task one spouse or the other should tackle, or is it a group effort?
If it could be a team effort, that would be ideal. The more a couple can work together, the better.
However, if it's more efficient for one person to do it based on the system they decide on for managing expenses, then it's fine to have just one person handle it. It can also be much more efficient to have one person do it if the other simply isn't wired to be patient enough to handle expenses.
Is there a difference in the challenges faced by single-earner households compared to dual-earners?
Absolutely there are differences between what single-earner households are challenged by versus what dual-income households have to deal with.
For starters, two is greater than one. Having two incomes can offer the ability to make more, and ultimately save more as well. Single-earner households, with similar expense levels but lower earnings, have a lower "profit margin." This makes taking care of things beyond the day-to-day needs a little more challenging. As in, things such as saving for retirement, college for kids, housing, healthcare and so on.
Beyond the lower potential income that a single-earner household has, it's also one that carries more risk. If the single-earner loses his or her job, the household's income can quickly go to zero while bleeding savings dry in short order. That creates less room for error with jobs, and can add stress to the relationship.
To be fair, there are some obvious benefits that could accrue to some households with one person working and the other not working outside the house. It's a lifestyle choice, and there isn't a right or wrong answer. But there are some very real, legitimate challenges that single-earner households face that are different from those of dual-earners, and it's important to be aware of them.
Where do you see personal finance heading in the future?
Great question. I see personal finance headed toward a place where there is more readily available data, as well as insights, that can be right there for people to access. This visibility, as well as the explosive growth in social media, blogs, mobile technology and newer ways to communicate and share information, could bring more openness and accountability.
For example, not that long ago people paid their bills with checks, used a check register and had to either use a self-made spreadsheet or written journal to track expenses. Investments and balance checks were made either in person or over the phone - or perhaps by mail. It was hard to find out how much someone paid for a home, and would have been a rude topic to discuss.
Now, people are regularly paying bills and tracking expenses - if they're so inclined - online with relative ease. Investments and balance checks are easily done in moments online, in vastly less time. Home sale information is often easily available online. Everything is more clearly visible, and faster.
This progress, I believe, is going to continue. Rather than being a taboo topic, personal finance seems to be headed toward being one that's more open - with increasing amounts of resources readily available to help people make better and better decisions. Exciting times indeed!
For more ideas and thoughts from Ray, follow him on Twitter.