Money is a hot topic that many couples argue about.
In fact, money is one of the most common issues couples fight about, along with kids, mess, in-laws, and sex.
Fights about money often arise in the absence of open discussions. Views on money, spending, saving, and financial responsibility between you and your partner can vary widely.
Assuming your partner has the same opinions as you about financial matters and goals, without talking about it is a recipe for disaster.
The most common money arguments are about different views on spending or saving, spending habits, distribution of funds when income isn’t equal between partners, and the expenditure of individual and joint funds.
So, what do you do when these arguments become commonplace in your relationship?
1. Spending vs. saving
When it comes to money, some people like to spend it, and some like to save it. In your relationship, this can get a little sticky when one of you wants to spend, and the other wants to save.
The difference between spenders and savers is a matter of values.
If you’re a saver, you likely value financial security. When you have money in savings and a financial buffer for unexpected life events like sickness, job loss, or economic recession, you will feel safer and more in control of your life. Your approach will be more cautious and defensive when it comes to spending and investing money, especially when it comes to purchasing products and services you deem to be unnecessary.
Spenders value living in the moment. If you’re a spender, you probably love to be spontaneous and maybe even impulsive at times. You value immediate gratification and prioritise pleasurable experiences over long-term financial security. You’re not concerned about the future because you’re happy to trust that everything will work out in the long run, and living in the moment and having fun and pleasure right now is more important.
So, if you’re in a spender-saver relationship, the challenge is to find common ground and find ways to meet both needs.
Sit down with your partner and have a conversation about goals. Focus on listening and avoid defensiveness.
Talk about what you each want in the short-term and the long-term. Once you know and agree on where you’re going, it’s easier to make a plan to get there.
Look at your goals and make a budget to help you achieve them. Budgets include savings to build security and reach long-term goals and amounts allotted for leisure, entertainment, and social events.
A crucial part of successfully maintaining your plans and reaching your goals is understanding how you each perceive risk. Your different risk profiles will guide you towards investments that will work best for you while helping you achieve your long-term goals. An online assessment such as this can help you each determine your risk profile.
A solid financial plan includes elements of both spending and saving. Having a plan that incorporates both tendencies will satisfy the spender and the saver in your relationship and result in a more robust financial framework in your life.
2. Significant income gap between you and your partner
I work with many couples where one partner earns significantly more than their partner. It’s not unusual for one partner to have an income that is double or triple that of their partner’s income.
Earning significantly more (or less) than your partner can put a lot of pressure on your relationship. A power dynamic can evolve, that if left unchecked, creates a power imbalance between you and your partner.
Resolving an earning discrepancy in your relationship is all about balance. Find a solution that works for both of you. Remember that earning more doesn’t correspond to having more power in the relationship. You and your partner are equals.
One way to maintain the balance may be to put money towards the same costs by contributing a percentage of each of your earnings. This way, you are both paying for the same things, but the amount paid is proportionate to the amount earned.
For example, if you earn 50% more than your partner and you’re purchasing a product that is $1000, rather than split the cost 50/50 and both pay $500, you may choose to split the cost 25/75, so you pay $750 and your partner pays $250.
I’ve also worked with couples where they negotiate to have the partner on the lower income contribute what they would normally pay for cheaper experience, and the partner on the higher income upgrades them to both for a premium experience.
For example, if your partner has a small annual holiday budget and is used to flying economy class and staying in budget accommodation, they contribute what they would normally spend to the cost of the holiday. Then, as the higher income earning partner, you book 5-star accommodation and business class flights, while gladly paying the difference for the premium experience.
The critical point in bridging the income gap between you both is working together towards a solution. Don’t put your partner in a position of power over yourself. Always remember that you’re two halves working together to make a stronger, better whole.
3. Your money or our money?
You go to work and you earn a paycheque, that money is yours, right?
When you share a life and expenses with someone else, that answer isn’t always clear cut anymore. How much of your income goes toward meeting joint expenses, joint goals? How much of it do you get to keep for your own spending?
Having a joint bank account is an easy way to dispel this problem. Whatever funds are in the joint account is “our money” to meet joint expenses and goals, and funds in your separate personal account are “your money”, for your spending. You both contribute equally to the joint account so that you’re each carrying the same financial responsibility for your joint expenses.
The distinction between where your money is held for different purposes makes it easier to differentiate what funds you get to exercise free reign over, and which ones are set aside for meeting your financial responsibilities.
I often recommend Scott Pape’s, The Barefoot Investor to my clients with money issues who want to learn how to use a simple structure to divide and share income and build wealth for the future.
Scott recommends couples take 100% of their income and divide it into the following buckets/bank accounts:
- 60% to Daily Expenses Account: all the bills and living expenses you need to live
- 20% to Fire Extinguisher Account: pay down all debts such as mortgage and credit cards
- 10% to Splurge Account: for the finer things in life that you don’t need but enjoy
- 10% to Smile Account: for long-term savings
Scott also recommends you have a Mojo Account. Once your debts are paid off, you then save 3-6 months’ worth of income for emergency savings in your Mojo account.
Having discussions about money with your partner doesn’t mean you’ll never fight about it. However, talking about money, getting on the same page about money matters, and planning how to handle these situations goes a long way to relieving tension around money problems as a couple.