I would never forget the first time Mr Wow and I clashed over how money should be managed. It happened a few weeks after our wedding and neither of us saw it coming. From a normal conversation about utility bills, we ended up arguing and giving each other the silent treatment for two days.
Despite being very compatible in numerous ways, our money values were quite different then. We have come a long way since. I’m happy to say that our financial goals are completely aligned today and we have absolute faith in each other’s money management skills.
Conflicts over financial issues rank high among married couples. After all, money is a highly emotive topic and we are talking about two unique individuals from different backgrounds. Your upbringing has a huge influence on how you perceive and react to money and your significant other may not share your views.
Don’t let money matters sow disunity in your relationship. As a couple, you can learn to resolve your differences and work towards common financial goals. Here are six money management tips to put you on the right track:
- Understand that Everyone Has Different Money Values
- Be Transparent
- Create a Budget Together
- Decide How You Should Split Your Bills
- Set Financial Goals
- Have Regular Money Meetings
1. Understand that Everyone Has Different Money Values
I think everyone will agree that having open discussions about money is the first step towards creating a successful financial future as a couple. If two people truly want to spend the rest of their lives with each other, they should be able to talk about their needs and wants freely. Unfortunately, problems arise when they start judging each other based on their own beliefs.
All of us have different money values, so it’s important to show empathy when dealing with financial matters. For instance, if you like to splurge on gourmet meals a few times a month, you may feel irritated if your spouse keeps telling you to cut back on these meals to save money. Your displeasure is understandable as it’s a lifestyle you enjoy after all. However, your spouse’s constant nagging could be due to the fact that his/her efforts to save for a better future seem to have gone unnoticed and unappreciated. To work out a compromise, the both of you must first acknowledge each other’s feelings and look at the issue through the other person’s eyes.
Check out: The Compulsive Consumer vs the Austere Saver
2. Be Transparent
Does any of the following describe you?
- You have debts that your spouse doesn’t know about.
- You under declare your income to your spouse.
- You hide money from your spouse (e.g. a bank account he/she doesn’t know about).
- You hide purchases/shopping bags from your spouse.
- You don’t know your spouse’s net worth, and vice versa.
I’m not a marriage counsellor, but I do remember what I learnt in my marriage preparation course more than 20 years ago — always be transparent about money to avoid feelings of shock, distrust and resentment down the road. I think the advice still applies.
Financial transparency in a marriage is a form of accountability. As a team, you should lay out all your financial cards and be honest with each other about your income, debt, spending habits, retirement goals and financial obligations.
Financial transparency in a marriage is a form of accountability.
If you have other sources of income besides your salary, declare them. If you need to support your parents after their retirement, make sure your spouse is aware of it. If there’s something holding you back and preventing you from being totally transparent, it’s a problem and you need to address it.
3. Create a Budget Together
A budget helps to establish financial stability, so coming up with one for your household should be a top priority. To create a realistic budget, you should track both your spending for a few months. This not only enables you to identify your ongoing and discretionary expenses, but also gives you an insight into each other’s spending habits. (Refer to my household expense categories if you need help.)
Tracking your expenses gives you an insight into each other’s spending habits.
Once you have a good idea of where your money is going every month, you can begin to finalise your budget. Rank your priorities and mutually agree on what expenditure to axe, trim and keep. Remember: everyone is different, so be reasonable and consider your spouse’s needs when setting spending limits on discretionary items like clothes, gadgets and restaurant meals.
4. Decide How You Should Split Your Bills
Most couples I know separate their money but maintain a joint bank account for their household expenses. They usually split their bills using one of the following methods:
- Equal share, i.e. 50-50 split
- Income-based, i.e. whoever earns more pays more
- Item-based, e.g. one pays for groceries while the other pays for utilities
Each option has its own challenges. For example, splitting expenses equally seems like a good idea when there isn’t a huge discrepancy in earnings. Nevertheless, if the income gap between you and your spouse widens over time, it may no longer seem fair. Mr Wow and I grappled with this issue in the early years of our marriage.
Some couples may eventually decide to merge their finances completely. I know many people will say that it’s a terrible idea. Well, Mr Wow and I did just that about 10 years ago and we think it’s one of the best money decisions we have ever made. Read ‘How We Resolve Our Money Differences as a Couple‘ to find out more.
5. Set Financial Goals
Having a budget that you stick to is a sign of good financial management. But to prosper as a couple, you need to set some concrete goals.
For a start, setting aside an emergency fund to cover at least six months’ worth of living expenses should be your first goal regardless of your financial situation. Your emergency fund should be highly liquid. It’s NOT for shopping, entertainment or vacation. You should only use it for urgent expenses such as unforeseen home repairs and medical bills for sudden illnesses.
You will also need to identify other goals that you want to achieve together. List them according to their time horizon, i.e. short-term, mid-term and long-term. How much money do you want to save in the next one year? Do you want to upgrade your home in the near future? When do you want to retire and what’s your dream retirement lifestyle?
Remember to keep an open mind when listening to your spouse’s expectations, concerns and suggestions. It’s advisable that you make joint financial decisions as both parties will bear the consequences. It should not be a case of whoever makes more money has more say. Marriage is a lifelong partnership, so the both of you should have equal say in your finances and other important issues.
It’s advisable that you make joint financial decisions as both parties will bear the consequences.
6. Have Regular Money Meetings
You won’t achieve anything if you only have a one-off money conversation. It’s recommended that you have regular meetings to discuss your finances (e.g. upcoming expenses) and review the status of your goals. Our priorities and goals tend to shift when we age or enter a new stage of life (e.g. parenthood), so these regular meetings will help to ensure that you and your spouse stay on the same financial page even as your plans evolve.
Some couples are really not comfortable talking about money. When they do talk about it, it’s usually because there’s a crisis. Far too often, husband and wife end up finger-pointing and yelling at each other instead of reacting to the situation rationally. Could this be avoided if they were more prepared through regular conversations?
Money and marriage go hand in hand. Although there isn’t a one-size-fits-all approach to financial management in a marriage, every couple can take steps to align their financial goals and work out an arrangement that is mutually beneficial to them. Tying the knot doesn’t mean you will face knotty money problems.
Did you know that there are 7 levels of wealth? Financial independence, where Mr Wow and I are at, is Level 5. Which level would you and your spouse like to reach?
To assess your overall financial health, here’s a checklist for your reference.