If you and your partner are like most couples, chances are, you fight about money. Numerous studies have shown that money is the No. 1 reason why couples argue — and many of the recently divorced say those battles were the main reason why they untied the knot.
While anyone will tell you that talking about money is the first step in resolving problems, talk alone won’t do the trick.
Business Day study, shows that more than 70% of couples talk about money on a weekly basis. So what’s the problem?
“Most of us don’t know how to talk about money,” says Mary Claire Allvine, a certified financial planner (CFP) and co-author of “The Family CFO: The Couple’s Business Plan for Love and Money.”
“People tend to be emotional and reactive about money, not strategic,” she says.
When emotions run high, people tend to make fiscal mistakes.
And so, to help make your next state-of-the-financial-union meeting run smoothly, we’ve assembled a collection of most common mistakes couples make when handling money issues, along with some advice on how to correct them.
Merging the Finances
The Wrong Approach: United we stand, divided we bank
The Right Approach: It’s yours, mine and ours
One of the first issues newlyweds face is how to handle their finances. “Couples struggle about this one,” says Ruth Hayden, author of “For Richer, Not Poorer: The Money Book for Couples.” Should you merge everything you have and earn into one joint account, or should you maintain individual accounts and open a joint one for household expenses?
Business Day survey found that majority of couples about (64%) put all of their money in joint accounts, while 14% kept everything in separate accounts, and 18% had both. “Married couples should try different ways of handling the money to see what works for them,” says Ginita Wall, CFP and co-founder of the Women’s Institute for Financial Education.
For many newlyweds, the right choice may be somewhere in the middle. “You should have some autonomy money, I should have some autonomy money, and we need to learn how to practice being a couple together with our money,” says Mr. Opoku.
The advice is different when one spouse enters the marriage with a high debt load. Over time — once children and rent bills come into play — many couples find that merging all their finances is simply easier. But unless you’re both comfortable with the idea, there’s no need to rush things.
Dealing with Debt
The Wrong Approach: Your debt will ruin us; you must find a way to pay it off
The Right Approach: It’s our debt: Let’s decide how to pay it off together
Of all the issues that spark a fight, debt ranked No. 1. “That’s one of the places where couples have most disagreement,” says Mrs Gloria Amankwa. Couples often don’t see eye to eye on how much debt is too much and which kind of debt is bad.
Compounding the problem: in many cases, one spouse enters the marriage with a lot more debt than the other. “It’s almost unavoidable. Even if you manage to get to your 20s or 30s without debt, you hook up with a partner who’s in debt.”
What to do in situations like that? Like it or not, once you’re married, your spouse’s debts can become your problem. Granted, you’re not legally responsible for the Visa card, ATM card and bank cheque, balances ran up before you got married, or for any loans opened in your spouse’s name alone — provided you keep your finances completely separate.
Keep spending from your check list
The Wrong Approach: I’m a saver and you’re a spender. That’s the problem
The Right Approach: We both spend, but on different things. Let’s budget
Your husband keeps nagging at you that you spend too much — but then comes home one day with a huge smile and — surprise! — a 70-inch flat-screen plasma TV. He happily explains how he sealed the “terrific” deal. You’re definitely not impressed.
Sound familiar? Spending is the second most common reason why couples fight. What usually happens, explains Mr. Johnny Dolphyne, is that one spouse gets labeled the “spender” and is blamed for skimming all the money out the cheque book. In most cases, however, that’s not accurate. “Studies show that men and women spend the same, they just spend differently,” he said. Women usually take care of most of the family’s daily expenses: the groceries, the bills, clothes for the family — while men spend on large purchases like plasma TVs, cars or computers. “If you counted up your money, you would be spending about the same,” Dolphyne said. “But because you spend so differently, the perception is different.”
The solution here is to identify the real problem, — that you’re both spending money on a tight budget. Then sit down and decide how much money you’ll allocate to the “dailies” of life, and how much to save for the big purchases. “What we’re trying to do is get the ‘Surprise!’ out of it, “he added.
Investing Wisely
The Wrong Approach: You’re a risk-taker, I’m risk-averse. Hands off our retirement savings
The Right Approach: Let’s think in time frames and take as much risk as our goals allow
When it comes to investing, men are more willing to take financial risk than their wives (62% for men vs. 19% for women).
Fighting about how much risk to take with your investments based on how you feel about risk doesn’t do much good, but rather, sit down and talk about your investment goals and time frames, You could be completely risk-averse with money you need for next year, but you can be a huge risk-taker with money you’re saving for retirement. If that doesn’t work for you, seek the help from a broker or a financial consultant.
Whatever your investment choices, review your investments together at least once a year and make sure that, overall, your portfolios balance each other out.
Keeping Money Secrets
The Wrong Approach: What my spouse doesn’t know will never hurt him/her
The Right Approach: Big financial secrets can ruin a marriage
A lady found out that her husband had lost a lot of money trading commodities. The real problem? She didn’t know his little secret. “It got them in horrible trouble!”
Mrs. Esther Klutse says. “He’s very steady, he’s a fabulous doctor, he’s a great dad…but he had this other part of him that’s pure gambler, and it almost brought the marriage down.”
Will you be shocked to hear that most couples do keep money secrets from each other? While secret trading or gambling may not be that common.
Is it a big problem? Depends on how you deal with it. Most people also lie to themselves about what they’re spending, just as they lie to themselves about how much they’re eating, they’d call it embezzlement.
Emergency Planning
The Wrong Approach: We’re fine. We don’t need to worry about money
The Right Approach: Anything could happen. Let’s plan for emergencies
Even if you have a great career, earn a comfortable living and don’t have to worry about debt, you could find yourself woefully unprepared for an emergency. “Couples today are under so much pressure and stress that anything could tip them,” says Mr. Robert Williams. An unexpected accident, illness — anything could throw you off track if you don’t have an emergency savings account.
In conclusion to this piece, with the couples we interviewed, we found a tendency to panic [in an unexpected emergency] that could lead to the wrong decisions.
All couples should have an emergency reserve of three to six months’ worth of living expenses held in a safe place, like a money-market fund.
Simply knowing it’s there can reduce stress, since you know you’re not walking a fine line between comfort and devastation.
By Sheila WILLIAMS
