Money is known to be the number one problem in marriages and is also the number one cause of divorce. Here is a three-step approach to managing your money as a married couple …
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Edwin Louis Cole said “Marriage may be the closest thing to heaven or hell any of us will know on this earth” and money plays a big part in that …
So what can we do to manage our money together more effectively as a married couple? I recommend a three-step process:
Step 1: Understand your spouse
Like many other things that cause debates (like how to raise and discipline children), your spouse has a personal view on money that has been forged by what they were taught, how they grew up and life experiences.
We need to try and understand our spouses and why they are doing what they are doing.
Talk to your spouse about how they view money. Start by asking open ended questions like: “How did your parents view and manage money when you were young?” “What would you say if a friend asked you if they can borrow some money?” “Would you ever want to be dependent on your children to support you financially?” “Can you think of anything significant that has happened in your life that may have caused you to view life and money in a certain way?”
A lot of research is going into behavioural science that tries to analyse why people tend to make the decisions that they do. A good exercise would be to determine what your and your spouse’s money personality is.
Try Lisa Smith’s article on Investopedia called Test your money personality where she defines five main money personalities: “Big Spender”, “Saver”, “Shopper”, “Debtor” and “Investor”.
Once you’ve looked a bit deeper, you may come across some very real fears or even insecurities about life and money, or perhaps they just haven’t given the consequences of their opinions that much thought.
Like many other things that cause debates (like how to raise and discipline children), your spouse has a personal view on money that has been forged by what they were taught, how they grew up and their life experiences
Step 2: Develop a financial and money management plan
Understand that you are on the same team and that your marriage is more important than money.
Effectively both partners will want a certain amount of security and a certain amount of freedom with money. Respect that.
Your way may not necessarily be the right way or the only way. Make a decision that even though you both may be very different, there is a way that you can work together and find a plan that is the best for both of you.
Also remember that the health of your marriage is more important than any money matters.
Define your dreams and set reachable goals
Take the time to look ahead and define each of your financial dreams and write them down. Then set reachable goals of how you can achieve them.
My dream has always been to visit a beautiful little town called “Dijon” in France where my ancestors originally came from. I’ve calculated that if I just cut out my lunch at the coffee shop in our office park at R49 per work day every day and pack my own sandwiches instead and invest this money in a savings account yielding 6% interest, I can actually go on an overseas holiday to the value of R50 000 in 3,5 years! And with R500 extra savings per month I can go in less than 2,5 years!
Start by setting common goals: like you both love travelling and you both want the best schooling you can afford for your children. Then you should also set retirement goals: when and where would you like to retire? How much retirement income do you require?
Effectively both partners will want a certain amount of security and a certain amount of freedom with money. Respect that
One of the most important factors that will determine how fast you reach your goals is debt
A financial planner will be able to assist you to put a “debtonation” plan together to help you deal with your debt. They will also be able to do an investment and retirement plan for you to help you reach your goals.
Set a realistic budget and designate responsibilities
In setting up a realistic budget you need to bear the following things in mind:
- 1. Start seeing your money as “OURS” and not “MINE” and “YOURS”
- 2. Define “needs” vs. “wants”.
- 3. Understand that to get out of debt and to meet any goals you MUST live on less than you earn.
- 4. Allow each other some freedom to spend some of your money on what you feel is important to you. EACH partner MUST give and take a little
- 5. Designate and share responsibilities. Who will keep track? Where will each of you try and cut back on costs?
One strategy that you could follow is to allow each spouse a certain budgeted amount to do with as they please, while budgeting a majority of money toward household costs and joint goals and dreams.
Step 3: TAKE ACTION, Track progress and COMMUNICATE
- Each partner needs to be committed to their part
- Keep good records of all purchases and track your expenses on a monthly basis against your budget and bank statements.
- Stick to your budget and when you can’t, talk about it
- Set aside regular times (at least once a month) to discuss your finances. You cannot get physically fit without taking the time to exercise. Similarly, you cannot become financially fit without spending time planning your finances.
- Talk to each other before making big financial or spending decisions
- Don’t hide things from each other, negotiate, be honest, don’t build resentment about something you agreed on and most importantly be quick to forgive.
- Remember not to talk to each other about money matters when you are angry!
Then just keep going and soon you will reap the rewards of reaching your goals and dreams like sipping a cappuccino in a pâtisserie in Dijon.