Unsurprisingly, money trouble is one of the leading causes of divorce worldwide. In fact, here at home the latest Stats SA figures show that 44.4% of divorces were in respect of couples whose marriages lasted less than a decade. Finding financial common ground in a long-term relationship takes time, compromise and communication, coupled with sound financial planning principles. In our 15 years’ experience in guiding couples financially, these are our thoughts on making money work in your relationship:
1. Know each other
Your attitudes and responses to money are an accumulation of all that you have experienced and learnt through your lifetime, and the same goes for your partner. Although you may hold similar beliefs, it is highly likely that you will each have different financial personalities. Expecting two differing personalities to always agree is unrealistic, so the first step is to understand each other’s backgrounds and history with money. It very often happens that one partner is overly-cautious with money to the point of being unnecessarily frugal, whereas the other partner is happy to seek a balance between saving and spending. It’s also often the case that one partner, for instance, is a social spender who likes to display his wealth in the form of fashion, homes and vehicles, while the other is a cautious investor who prefers to quietly build her wealth. Understanding each other’s money personalities and attitudes will break down barriers of miscommunication and lay the groundwork for more open dialogue.
Beware: Emotions can be barriers to communication which makes it really important to understand each other’s emotional attachment to, or detachment from, money. Failure to unpack each other’s attitudes and feelings towards things such as debt, borrowing money, and taking investment risk, may result in you becoming locked in a perpetual game of tug-of-war.
2. Find a financial mentor
Find a financial planning practice that is willing to engage with you at the outset of your financial journey, and who will walk alongside you as you build your wealth together. While some niche practices target high net worth individuals only, there are many fee-based practices that take a long-term view on their clients and who want to be part of your wealth-creation journey. Besides for financial planning advice, a good advisor will act as a mentor, guide and sounding board for all future financial decisions.
Beware: Be sure to find a financial planner that will work with you as a couple and who makes time to understand each of you. The financial planning industry is still very male-dominated, and many women attest to feeling misunderstood and under-serviced in this area. Make sure your financial planner sees both of you as equal partners in the relationship regardless of who earns or owns what.
3. Have healthy money conversations
Be fully transparent with your expenditure and avoid keeping financial secrets from each other. It is virtually impossible to work towards a common set of goals if one person is bringing half-truths to the table. Achieving the goals that you have set out for yourselves as a couple will naturally require sacrifices by both partners. If one partner remains committed to those sacrifices while the other is secretly spending, resentment and mistrust are inevitable.
Beware: Keeping financial secrets from your partner is a form of infidelity and can be just as hurtful and heart breaking. Besides for putting your financial futures at unnecessary risk, keeping money secrets can have devastating effects on your relationship. Whether it’s the cost of a spray tan, a new golf club or secretly lending money to a friend, it’s the dishonesty that causes the hurt and not the size of it.
4. Work towards (the same) goals
Your financial planner will help you to set goals that you can work towards as a couple, although this may be more difficult than it sounds – particularly when it comes to prioritising goals. While you may both want to purchase a home, one partner may prioritise an overseas trip over buying a house. One partner may insist on private schooling for the children, whereas the other may prefer to use the extra money to boost retirement savings. One partner may have her heart set on buying a bigger house whereas the other might prefer to purchase a holiday home. An experienced advisor will provide neutral input and advice, at the same time guiding you through the goal-setting process to ensure that both parties’ needs are acknowledged, discussed and incorporated in the planning process.
Beware: Be honest about your financial goals upfront, even if they do not perfectly align with your partner’s. That’s where compromise and sacrifice come in. Your relationship is intended to last for the long-term, and if you don’t feel as though your dreams and goals have been accounted for in the process, you could be left feeling aggrieved and under-valued. If a holiday to the Great Barrier Reef is one of your life goals, let your partner know now rather than allow resentment to simmer.
5. Set up your financial mechanics
Work out the mechanics of your finances early on in your relationship. Details such as whether to hold joint or separate bank accounts, who is responsible for tracking expenses and which partner pays the bond, need to be ironed out upfront to avoid confusion. Many couples choose to hold a separate cheque account into which their respective salaries are paid, and to share a joint credit card. From a financial planning perspective, it makes sense for each partner to have a bank account in their own name from a credit score perspective. Further, if one spouse were to pass away and have his accounts frozen, the surviving spouse would continue to have access to the funds in her bank account. There is no right or wrong way of setting up the financial mechanics of your relationship, as long as you are both happy with the agreement and are committed to adhering it.
Beware: Be cautious of holding bank accounts in one partner’s name only. A well-managed bank account provides proof of a good credit record which is invaluable when it comes to borrowing money. Not operating a bank account in your own name can severely disadvantage you in the event of your spouse’s death or in the event of an acrimonious divorce.
6. Consider yourself equal partners
Regardless of who earns or owns more, consider yourselves as equal financial partners going into the marriage. Work out a division of labour that is right for your partnership and which ensures that both are involved. Even if you are not particularly interested in finance and money, make it your business to know what is going on. One of the worst mistakes you can make in a marriage is to allow one partner to take full control of the finances while the other remains blissfully ignorant. Not only does this upset the balance of power in a relationship that should be an equal one, it can leave the financially responsible spouse feeling unsupported, isolated and overwhelmed.
Beware: In general, women live longer than men and statistics show that 20% of women will find themselves solely responsible for the household’s finances at some point in their lives. The worst time to learn how to manage one’s finances is after a divorce or the death of your spouse, both of which are hugely traumatic events.
7. Set spending limits
Having to check-in with your partner every time you want to make a purchase, and vice versa, is unrealistic and impractical. What works in many marriages is to set a pre-determined spending limit which allows each partner to spend up to an agreed amount. Anything over the agreed spending limit should first be discussed with your partner. This method gives both parties freedom to spend while at the same time building trust and mutual respect.
Beware: The absence of an agreed spending limit might result in one partner feeling the need to micro-manage or police the other partner’s spending, which is never a healthy situation.
8. Set ground rules for family and friends
Lending money to family and friends can cause enormous stress and tension in a marriage and can even lead to divorce. Each partner comes into the marriage with his/her own set of circumstances which can include ex-spouses, children from a previous relationship, aged parents who are financially dependent, or friends who are inclined to ask for hand-outs. Helping out extended family and friends, or acquiescing to unrealistic financial demands from an ex-spouse, while at the same time trying to make ends meet at home is a recipe for relationship tension. The most practical way to avoid these situations is to lay down the ground rules at the outset of your relationship. Be clear on your position as a couple when it comes to lending money or helping out family. Having a joint, standard response will make it easier to stand your ground.
Beware: Avoid putting your own financial future at risk by lending to others. If your friend or family member cannot pay back a loan on time, you may end up with unplanned debt. Take care of your own family unit first. You cannot help others until your own financial future is secure.
9. Have some fun
Be sure to set some money aside every couple of months to have fun as a couple. Building ‘fun money’ into your budget makes financial management a little more exciting and gives you small milestones to work towards. Consider spending money on experiences that will allow you to build a bank of memories together.
Beware: If you don’t set aside some money to enjoy fun experiences you may end up with feelings of burn-out and lack of purpose. If all your money is channelled towards paying bills and investing for the future, you could feel resentful in the here and now. It takes time to achieve the fine balance between saving for the future and living contentedly in the present.
10. Keep records
Divorce or separation are always possibilities and it makes sense to keep a record of all large purchases, financial transactions and financial arrangements/agreements between you and your spouse. These records will help ensure that, in the event of divorce, your estates can be separated amicably and with the least amount of tension.
Beware: In the absence of a marriage contract, couples could find themselves unprotected by the law. Many people believe that if a couple cohabits for a long period of time, the same marital rights apply that spouses in a marriage enjoy, which is not the case. If you and your partner are co-habiting, it is best to draw up a cohabitation agreement at the outset of the living arrangement. This contract can include details of the assets, property and financial contributions each partner makes to the joint home.
11. Lean on each other in tough times
As a couple you are bound to experience periods of financial difficulty. Retrenchment, maternity leave, redundancy, failed business ventures, poor investment decisions and other financial setbacks can cause untold stress and tension in a marriage. As hard as it might be, it is during these times that you will need to lean on each other, make plans to overcome your obstacles and recalibrate your financial plan.
Beware: Financial difficulties that result from one partner continuously over-spending, being reckless with money, speculating on risky business ventures, failing to hold down a job, or even gambling, should prompt specialist intervention in order to break the cycle of destructive money habits.
12. Celebrate your successes
Take time out to reward yourselves for achieving your financial milestones, no matter how small. Whether it’s settling a student loan, paying off a vehicle or receiving a bonus, recognise the milestone for the success that it is and celebrate it together. Being part of a winning team that is achieving its goals is something worth celebrating.
Beware: Don’t be too hard on yourselves. You may experience financial setbacks along the way that prevent you from achieving the financial milestones you have set for yourselves. Re-calibrate and move on.
A carefully designed framework, well-communicated ground rules and the creation of an equal partnership are key foundations on which to build your financial future together. It makes sense to invest both in your marriage and for your future.