Common wisdom says that opposites attract – but good chemistry only goes so far for couples with stark differences in how they approach money and their financial lives. Unless they can find common ground in some key areas, those differences could lead to tension, or worse – the kind of escalating money problems that can sour a solid relationship.
Couples with differing financial approaches are more common than you might expect. At some level, we are all a product of our upbringing. Children absorb the behavior modeled by their parents, which will eventually influence their own behavior. Some families are open about finances, but many are not. Some families freely spend, but many do not.
A couple’s divergent financial preferences tend to manifest in several key fundamental areas – areas where finding common ground can be critical to overall financial health. Among them:
Priorities. One person might prefer to focus their saving and spending on their bucket list, for example, while the other wants to prioritize saving for retirement and future health-care expenses. Or perhaps one person prefers to spend money on an extravagant wedding, while the other wants a simpler, less-expensive wedding so the couple can save more toward eventually purchasing a home. Neither is necessarily right or wrong; their priorities merely differ.
Investment mindset. Some people are comfortable taking on additional risks in how they invest their money and allocate their investment assets in order to access greater growth potential – what’s known as risk tolerance. Risk tolerance can diverge widely in a couple, with one being significantly more conservative than the other. Here again, it’s not necessarily that one person’s approach is “right,” and the other’s “wrong,” but they should try to find a joint approach to investing and asset allocation that works for them both, and that’s appropriate to their circumstances, goals, etc.
Spender versus saver. It’s a cliché that rings true for many couples: one person takes a live-for-today (and some might say reckless) approach to their money, spending most of what they earn from week to week and month to month, while the other prefers to set aside a portion of their earnings to fulfill long-term goals, like saving for a major purchase or expense (home, car, college education, etc.) or building a nest egg for retirement.
Debt. Some people are accustomed to, and comfortable with, carrying large credit-card balances from month to month. Others are adamant about paying their entire credit-card balance each month. A person’s record for paying down (or failing to pay down) debt in a timely fashion impacts his or her credit score, which in turn affects a couple’s ability to jointly obtain a line of credit or loan, as well as the terms tied to that line of credit or loan.
Following a budget/spending plan. The financial structure of keeping a detailed accounting of household income and expenses, and following a formal household budget or spending plan, appeals to some people. Others choose to manage their money more informally.
Finding common ground. Chances are, you and your partner diverge in at least one, and perhaps several, of these financial areas. If that’s the case, it’s time to find some common ground, before your differences become divisive or destructive to your relationship and to your financial well-being. Here are some suggestions to help you bridge the divide:
Be open-minded, nonjudgmental and willing to compromise. Financial issues are nuanced, often complex and sometimes emotionally charged – and there is rarely a clear playbook. Your challenge is to find a financial pathway that works for you, your partner and your unique circumstances. The more you can communicate about the issues, without letting emotions get the best of you, the better chance you have of finding the right pathway.
Give each other some breathing room. That means respecting your spouse or partner’s different approach to money and not nitpicking about minor things, so you can focus on finding common ground on more pressing issues. Figure out areas where it’s OK to be different. Allow each other to carve out some territory for yourselves, and don’t sweat the smaller stuff because it can distract you from what’s really important.
Stake out a middle ground. When a couple has a “saver” and a “spender,” they can work together by finding strategies that are acceptable to both. For example, they might agree that fixed expenses, such as a mortgage and retirement savings plans, are “required expenses” and must be addressed before spending money on “fun expenses.” Communicating on the non-negotiables should occur before deciding on what to spend for fun.
Involve an objective, expert third party. There may be times when a couple can’t find commonality on their own. Sometimes it takes an intermediary to come up with a creative solution that is acceptable to both sides. To find a financial planning professional in your area, check out the searchable national database at www.PlannerSearch.org.
Get a formal, big-picture financial plan. A formal financial plan developed by a financial professional – with your input – serves as a compass that keeps both of you on the pathway that connects your goals and priorities to your resources.
By recognizing where your financial personas differ and moving to bridge those divides through compromise, financial common ground is well within reach, even if you need some expert help.
JASON E. SIPERSTEIN, CFA, CFP, RMA, is the chairman of the Financial Planning Association of Rhode Island, program director for the CFA Society Providence and president of Eliot Rose Wealth Management. He can be reached by email at firstname.lastname@example.org.