Wednesday, June 11, 2008

Sharing Finances

A few months ago, I wrote an article about having a budget meeting with your spouse here:

This topic came to mind again as I was reading a recent article on CNN Money called What's In Your Spouse's Wallet?

The article talks about the relative ignorance of many couples on what their overall financial situation is (and used poor Silda Spitzer as an example of what financial obliviousness can get you).

Even if your spouse isn't hiring $5000-a-night hookers, and I truly hope he or she is not, blindness to your overall financial situation, and lack of familiarity with your spouse's financial picture will only bring you heartache. And probably a wallet-ache as well.

The article, and many like it talk about what you need to know: assets, debt, income, all that. But how do you go from separate and oblivious to together and on the same team?

The first is to find a reason to be. In a time of 2-wage earner families and more independence, sometimes getting both sides of a couple to agree is the hardest part. So what do you do? Do what the business world does when trying to sell a concept - WIIFM. WIIFM, short for What's In It For Me, means you find the thing that is going to make the idea appealing. Does your spouse want to retire early? Buy a home? Have a big family?

So start talking dreams and goals, not dollars. Find out how your spouse sees the future. What they want. And then share your wants and goals. Then, and only then, will you know where you want to go, and you can start figuring out a road map to get there.

Start with small suggestions. "If we did this, we could....". You catch more flies with honey than with a verbal barrage of "We need to cut out all our spending because you are going to send us to the poorhouse with your constant gadget purchases!!"

Trust me, this is not the way to influence your spouse.

Make a list of pros and cons of the options for combining (or not) your finances. Present the lists you have made to one another. Then come up with an approach you both can live with. A great way to start these discussions is to read Smart Couples Finish Rich by David Bach together.

For combining accounts, the way I see it, there are three options.
  1. Pool it all
  2. Have yours, mine and ours accounts
  3. Pool nothing

I'll confess, we went for option 1. Why? First, it's the least complicated. I don't have to track or transfer to multiple accounts. Everything goes into, and out of basically a single point. We do have some ancillary accounts earmarked for certain things, and retirement accounts, but for our day-to-day finance, it's a single checking and savings account combination.

One question that seems to come up about this sort of arrangement is a lack of financial privacy. I haven't found that to be true. When one of us wants to buy something for the other, we typically use a credit card (paid in full each month) and tell the other not to check the statement. We also have individual 'fun money' that we can use for anything from coffee runs at work to dinner out with a friend, to new shoes. That money doesn't get questioned - it's ours to use as we will.

But none of it is secret. If I buy something, I tell my husband, fun money or no. In my opinion, the well-being of the couple outweighs the right to 'privacy' in key areas, finance being one of them.

What we do have is the right to make decisions with our fun money, and up to certain amounts for other purchases, without discussion. Once we cross that threshhold, the purchase gets discussed.

The other two approaches can work as well, as long as a few things are clear to both of you: what you share and what you don't, the schedules and responsibilities for bill-paying, and where you stand financially.

That last point is the most critical. You must have access to one another's accounts. No, not to 'check up on one another' although that may, at certain points, for certain relationships, be necessary. It's far more basic than that. You need to be able to pay bills and track funds in the event something happens to your spouse. Remember - you aren't roommates, or 'friends with a kick' - your financial situation directly affects your spouse, and theirs yours.

Once you have a plan, and some goals you can share, you can get focused on the nitty gritty, which is combining, or adding each other to accounts. For this, I recommend setting some time goals, otherwise it may end up on the to-do list in perpetuity.

It doesn't hurt to revisit roles and responsibilities periodically after you have worked out your sharing system and put it in place. And I strongly recommend periodic money meetings in order to keep the team part in place. Look at it this way: The Red Sox probably wouldn't have won the World Series twice in the last few years if they didn't occasionally get together to practice. The same goes for the two of you - few teams remain effective if they don't practice and work together.

Sharing finances doesn't have to be a scary process. And you can be a team without fighting each other for control.

If you have a plan.

1 comment:

Anonymous said...

I know my comment is late, but this was a great post. My spouse and I have a budget meeting every two weeks after we get paid. Now that we are in the routine, the meeting doesn't take that long. Because of the meetings:
1. We work together towards our financial goals and money is not a source of discord; and
2. We are more mindful of our current financial state and therefore less apt to engage in any mindless spending.
It's sad that finances are often a major stressor for so many couples.
- julia_goolia