How often have you argued about money with your significant other?
It’s one of the most common relationship disagreements and can often lead to the downfall of the relationship. Studies from the University of Utah found that married couples who argue about money once a week or more were 30% more likely to divorce than those who did so less often.
72% of young professionals in the study had bickered about money, so what gives? From what we’ve observed, in most relationships there tends to be one partner who acts as the “accountant” while the other person is largely out of the financial loop.
What happens next? That person who is out of the loop will usually either spend with reckless abandon, leading to tension with their partner or they’ll take the opposite stance, where they’re afraid to spend anything. This can, of course lead to some resentment toward the “accountant” partner, so both of these perspectives are dysfunctional in a relationship.
What about those who seem to have the financial side sorted? It turns out that those in successful relationships tend to have a few habits when it comes to their finances that others may learn from:
#1. They communicate about money
Communication is hard. This is one of the reasons that money is an area so ripe for rifts in relationships. For starters, each person brings their own values about money into a relationship and those values won’t always be in sync with their partner.
It’s actually very common that each person will have a different view, usually shaped by how they were raised. This is absolutely fine - the most important thing is figuring out how to communicate honestly with each other when it comes to finances, because over time, you will become more in sync.
Figure out early in the relationship how to communicate openly about money matters
Couples who struggle tend to be those who put money conversations in the “too hard” basket. They know that talking about it may lead to an argument, so they let it sit and simmer instead. The problem with a simmering issue is that it will eventually reach a boiling point and may even lead to a more serious argument that otherwise might not have happened.
In another study on couples and money, Lauren Papp of University of Wisconsin, Madison followed 100 couples as they kept diary entries about their arguments over a 15-day period. While they commonly argued about chores or kids, it was the money arguments that were the most damaging.
Money arguments also tend to be more difficult to resolve.. “Partners walk away from these discussions thinking that this is an issue we can't handle, I feel very frustrated, I feel very devalued by my partner," Papp says.
Couples who manage financial discussions more successfully tend to get everything out on the table early and are able to agree on elements such as “yours, mine and ours.”
#2. They focus on goals and dreams
Couples who are successfully navigating the financial side of their relationship don’t necessarily share the same values or hang-ups around money, but by starting that conversation early, they find a way to work together. After all, if you’re in a relationship with someone, you probably share at least some of the same dreams, right?
Couples can often more naturally sync up about goals and dreams when it comes to managing money. Couples who do well usually look at things like:
What are our big goals for this year?
What are our big goals in the next 10 years?
What are our big goals beyond 10 years?
How can our money facilitate our path towards those goals?
While discussing how you manage your money is definitely important, talking about dreams is a much easier place to start than talking about who spent what yesterday. You can’t change what’s already happened, but if you can come together over what you need to do to facilitate your dreams, you can usually work out ways to stay on the same page in the future.
#3. They work on awareness
One of the biggest mistakes that all people (not just couples) make with money is that they really don’t know where it all goes. This can create anxiety because they aren’t sure about their spending, whereas they will tend to know exactly how much money they make.
For couples who manage finances well, they agree to move to that point of awareness together. They might simply start with today and notice what happened, then move on to where they spent their money last month to build up a bigger picture.
This is not always a simple task, especially if it involves laying out bank statements all over the table, but this is where a tool like Tiller can help. Tiller automatically adds financial transactions to a Google Sheet each day and allows you to build the bigger picture. Doing this successfully means you can see your cashflow, or how much you spent vs. how much you made and how much was left over.
For couples, it’s important to be able to make observations without it becoming a judgmental exercise. There shouldn’t be any shaming or accusations; “you spent how much on gear/shoes?”
Repeat the same exercise in a week and then again the week after that. The important thing here is that you build some muscle memory for talking about money and grow your awareness together of what you are spending and where.
#4. They sync their values
Once couples have built their awareness around finances, their behaviors tend to track along the same values. Those conversations around goals slowly help to sync their goals and values, while the conversations about spending will build context.
If you’ve nailed down those things, it makes it easier to develop a plan and budget together. Even without a formal plan, awareness means that behaviors will tend to naturally follow your goals. You’ll think twice about that new “toy” if purchasing it might set you back on a planned vacation together.
Notice that we’re saying you haven’t even made a formal budget at this point, yet you’re already making progress by coming together over goals and building awareness.
Another important factor around money values is that each partner understands where the other is coming from with the values they bring to the relationship. You might get frustrated over a partner who seems overly “tight” with money, but what if this comes from a fear of poverty? Often, there will be something in their background that has shaped their current values; for example, a childhood situation where there was little money around. It is important for each person to have awareness about situations in order to foster empathy and ensure a stronger relationship.
#5. They make a plan
Friends of Tiller, Derek and Carrie Olsen, wrote a book on money and marriage that we like; One Bed, One Bank Account: Conversations on Money and Marriage. A key point is that if you’re going to share a house, raise kids or take a vow together, then you can manage some or all of your money together.
You have to have a plan.
We feel that getting to the point of being able to put all of your finances together is ideal for creating alignment and avoiding any lack of transparency, but different people find different approaches that work for them.
For example, an approach offered by Rochester financial advisor, Kitty Bressington, advocates a mixture of joint and individual finances. Her recommendation is shown below:
Set up a joint account to cover the basic bills
Set up a plan with automatic contributions to a retirement account, college savings account and other long-term savings goals
Then, each partner in the couple should get a set amount of spending or "fun" money every month that's discretionary
You can work it out however it suits you -- there is no “right” way; however, you should find some good tools for facilitating collaborative financial management.
Tiller is currently the only program out there that is designed to make financial planning for couples a smooth experience. It is cloud-based and allows two people to collaborate together, even if logged on at the same time on different devices. From our perspective, a good way to manage with Tiller might look like this:
Knowing that one person tends to be the “accountant”, let them manage the sheets, build dashboards and be in charge of managing overall, as they probably have been already.
The other partner (who was probably previously in the dark) can log in regularly, categorize transactions and check in. This alone can create incredible awareness, which makes those money conversations easier.
One couple, who are early Tiller customers, is a great example of making this work. He’s an engineer and the “accountant”, while she was largely out of the loop when it came to finances. He created their first Tiller spreadsheet and invited her to collaborate, giving her a place to look and see exactly what was going on with their money. Now, when they sit down each week, she’s not starting from zero. She has some questions, ideas, and a context for talking about money. Suddenly it’s an informed collaboration!
Money has always been in the top five reasons that couples argue, but couples who navigate financial management successfully together tend to choose, first of all, to communicate meaningfully about money.
There may be all sorts of negative connotations associated with money that either partner may bring to the relationship, but awareness and shared goals are a great place to start with finding common ground.
Take a collaborative approach and build your “muscle” for money discussions and planning together over time. There’s no one “right” way to budget as a couple, as long as you are working together to meet your needs.