Couples: Here’s how to not fight about money
Jean: Merging finances is not the No. 1 reason that couples break up. Money is the No. 1 thing that couples fight about, and we’ve done a lot of surveys that say that. Mostly couples that manage to save money together actually stay together and have very long, happy marriages. Couples that accumulate a lot of debt, on the other hand, are the ones that tend to fight about it because you fight more about money when it’s not there.
Greg: Out of whatever comes into the house — your money, her money — you each carve out the same amount of money that you each get. That’s your autonomy. That’s your play money you can do with whatever you want, and everything else goes toward the joint expenses, the joint savings.
Bartender: And it doesn’t cause friction between the couple?
Greg: That autonomy is important, because I think it reduces that friction. Everybody has a little bit of freedom. If you want to go out drinking with the guys, she doesn’t have to feel like she is subsidizing that. There is a little bit of free money that each of you have to get to do those kinds of things and you are not jeopardizing the ability to pay the household bills.
Jean: The other reason it’s important is that money is kind of like Little League Baseball. When you just go to a Little League Baseball game, if you go with a friend, it is deadly boring, right? But when you’ve got a kid on the field, all of sudden it’s really fun, it’s exciting. If you don’t have money in your own name that you are responsible for managing, you are not going to care about it as much. So you’ve got to give yourself a stake in the game. Again, it’s particularly important for women, because you guys, like it or not, we are going to outlive you and we need to know how to manage money before we are put in the position of having to manage money. Does your wife work outside the house?
Jean: The reason I ask is a lot of people who have one spouse at home miss the opportunity to open a second IRA. You can open a spousal IRA, even if you are not working because your spouse is working.
Greg: Yeah, you have to communicate. It’s an ongoing process. You’ve got 2 people’s goals that you have to incorporate. Two people whose tastes, whose lifestyles you have to incorporate. And things like retirement planning, that’s an area where I do think couples need to work together. One person may have a workplace retirement plan like a 401(k); the other one may not. Or one is going to school and isn’t working right now, and so the other person has to do the saving for both of them in that respect. So I think it’s really important to work together in terms of communicating, not just about the day-to-day expenses, but long term — the goals, where you want to live and the lifestyle you want to have.
Jean: What do we want? What do we want this year? What do we want in 5 years? What do we want in 10 years? And then, how do we get there and how do we use whatever money we have to help us move in the right direction?
Greg: It’s important that both people are in the loop. Regardless of who is managing the finances, the other one needs to know what’s going on, needs to know where to find the important papers. And yes it means you have that unromantic conversation of, “Here’s what you need to know in case I die,” type of thing. It’s important because heaven forbid something should happen. It’s traumatic enough. You don’t want to be completely lost from a financial perspective.