By Lee Sherman
If you’re like most married couples your biggest initial arguments will be about money. According to a 2018 survey by Ramsey Solutions, “money fights are the second leading cause of divorce, behind infidelity”. People tend to come to a marriage with set ideas about how money should be managed, debt, different levels of risk tolerance, and completely different value systems.
There are a couple of ways to avoid these blow-ups. Marriage counselors recommend keeping at least some of your money in a separate account, with a clear understanding of what kind of spending is acceptable. Money managers on the other hand, suggest, that, rather than having to deal with the complexities of multiple accounts, you maintain a single account that allows you to get an at-a-glance view of all activity.
All together now
The success of a joint account is largely tied to the transparency it provides into your financial picture. With the help of an app like Mint or Personal Capital, you’ll gain the confidence that comes from knowing exactly how much you have at any given time and where every penny is spent. Maintaining a combined account, also allows you to consolidate rewards points. A joint account is also recommended if, as is often the case, one partner makes more than the other. With a strategy for managing your joint income and budget in place, you’ll be much better positioned when one of the other of you loses your job or can’t work for some reason. As part of your overall budget, it makes sense to give each partner an allowance that they can draw from the joint account without having to first ask for permission.
Separate but equal
The complete trust required to allow your partner to see everything you’re spending isn’t for every couple. Your partner might not be so understanding when they see how much you’re spending on golf or buying clothes. If you have an expensive hobby, you should discuss up-front how much of your budget should be allocated to that hobby. By putting limits in place ahead of time, it gives each partner the ability to have discretionary income without having to worry about asking for permission each time, which can lead to unnecessary conflict. You may agree to always pay off your credit cards each month. Or to always discuss purchases over a few hundred dollars.
Even if you’ve decided to combine your finances, when it comes to paying the bills, you might want to assign each partner the chore of paying particular bills. For example, in our household, my wife handles the grocery bills, while I’m in charge of paying for technical things like WiFi and Netflix.
Some couples choose not to combine their finances. If you’re getting married later in life or if this isn’t your first marriage, you may come with debt or be set in your ways when it comes to managing your money. If you have an approach that works, there’s no reason to make sweeping changes.
The key to this decision, say both therapists and financial advisors alike, is to have that difficult up-front conversation about what is acceptable to both parties. Your financial advisor has tools that can help you determine your risk tolerance when it comes to how much and where you will invest your combined income. If it isn’t the same as your partner, you can come up with a compromise that works for both of you. With the right plan in place, you may be able to avoid those awkward conversations about money that derail some marriages.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.