When I got married , the question everyone asked was, “does it feel different?” At first, I’d shrug, laugh it off, and answer with a quick “not really.” Much later as I pondered the question, I realized things were different. I didn’t love my wife more or less the day after we exchanged vows. (I loved her 1,000 times more, if she is reading this J). Yet, the big shift was in how we viewed our finances. For starters, I realized we now view our lives as “one vision.” We have a mutual sense of ownership in the outcome. No longer can we operate our finances in a vacuum. She can’t go spend $1,000 on shoes nor can I buy $1,000 of Bruce Springsteen tickets without it affecting one another. That was the big shift— a joint ownership in our finances.
Recently, after a conversation with one of my partners, David Levy, I realized this “joint finances” is something I should write about. Being that finances is the NUMBER 1 reason for divorce, I figured no time like the present to bring this topic to light. Heck maybe this blog might even save a few relationships in the process!
Best Practices. Through my years guiding couples, I’ve seen family finances handled a million different ways. Like how no snowflake has a duplicate, no two people handle finances exactly the same way. I’ve seen it handled beautifully and horribly. In that regard, I’d like to give you my most prominent and best practices as a starting point: Transparency – The key to a healthy financial marriage is transparency. The couples whom I see work best both come in for their financial check-ups. There is a clear, open dialogue between us all about everything financial. There are no secret bank accounts, credit card debts, or skeletons in the closet. This can be a scary thing (whether one day into a marriage or 40 years), but being open and honest with your significant other about finances is almost always a good thing. Communication – I’ve been on this Radical Candor kick lately and seen amazing things come from it. Why are we often afraid to communicate with those that are closest to us? Do we not think our spouse can handle a direct conversation about finances, among other things? The key to staying in front of financial stress is communication. Your fears, desires, goals, and expectations all can be communicated openly. If your spouse is not interested in the family finances (which many significant others are not), at least force them to listen once a year. It’s important for you, it’s important for them, and it’s crucially important for your family. Outsourcing – Another key to getting family finances right is to outsource. Use a professional like us here at Diversified, LLC to help mediate, since money and finances are so emotionally charged. It’s funny, when my wife tells me to see a doctor (for literally any ailment), I don’t tend to listen. When my doctor tells me the same, I book the very next appointment possible. As a financial professional, we deliver the facts with an emotional detachment, yet sensitivity. Some things we say are items you may not be comfortable saying to your spouse. As the old saying goes, “There are three sides to every story.” Let us be the truth.
Handling Joint Finances.
There is no great one way to handle joining finances, although there are wrong ways to be sure. Let me share a few of the ways I’ve seen work best.
- Make everything joint — such as investment accounts, savings accounts, and checking accounts. Divide and conquer what bills each other handles. Do regular check ins over wine and dinner. Talk through what’s working and what isn’t. Where are you spending too much money? Where can you save more? When it’s time to meet with your financial planner, both should attend. As a fun aside, I’d also recommend having a dollar threshold on what you can spend without having to consult the other spouse.
- Have everything separate except joint expenses. Some couples work best when they have some joint account that covers all of their joint expenses. This means items like the kid’s expenses, joint household expenses, and vacation expenses. Then, they commit to an amount they are each going to put into a separate personal account. This money is a discretionary expense that can be used for whatever. They need not consult their significant other about how they choose to use it. They still plan and save with one vision, but like the independence of doing what they want with their stash.
- I’ve seen couples have success with the divide and conquer approach, meaning they look at their finances separately. For instance, one person is always responsible for the house expenses while the other handles vacations. They are also responsible individually for saving appropriately for retirement. This can become somewhat tricky, but usually workable if you engage outside help. These individuals don’t combine investment accounts. More often than not, I see this approach in second marriages. However, it can be as effective as the others if you keep the best practices front and center.
These are three high level approaches that work for different couples. As long as you keep things open an honest, you should be able to operate utilizing any one (or a combination) of them. Those that lose that transparency or equal respect are almost always the ones that sit in my office with financial stress.
When to start? The last topic on this subject is when to start having this dialogue. If you’re married the simple answer is yesterday! If not, the sooner the better. You don’t want to get into a marriage so incompatible in the financial department that it is destined to fail. Remember finances is the number one reason marriages fail! Start that open and honest conversation to make sure you are on the same page. I am a huge proponent of not combining finances until the ink settles on that marriage contract. I’ve seen too many horror stories. There isn’t much to be gained by prematurely starting to combine finances. I do! All you have to do is be committed to the “I do.” Part of your promise is that you (should) want to have an open and honest marriage, especially when it comes to finances. “I do” means you respect one another enough to make this a priority. If more people take this approach, we can start changing those divorce statistics one couple at a time!