Today I am kicking off my series on money in relationships. Many relationships and marriages end in turmoil because of money. Some do not even get off the ground. In this series we will be talking about how to best tackle money in your relationship.
In most relationships there is one person who is analytical and in many cases loves finance and one person who is carefree. This can make things very difficult when managing your money. One person wants to balance the checkbook and the other just wants to live life. So what ends up happening? The money nerd ends up managing the books and the other just assumes money will be there when they need it.
This can lead to several issues including over spending, miscommunication, and overall confusion. One of my fellow financial experts, Dave Ramsey, often tells the story about how he managed the books and his wife, Sharon, never questioned anything. This led them down a path of complete financial destruction and ultimately filed for bankruptcy. This was because he made poor financial decisions and his wife and partner in life, was not there to check and balance his financial decisions.
In an ideal world the two individuals will balance each other out. The analytical person might want to save every last dime and skip the family vacation this year. While the carefree person wants to go on an African Safari. Well, maybe going on a staycation is what is best for the family. When you have two extreme positions, often neither is the right one. However, together the two meet in the middle with the perfect solution.
So, when do you negotiate and discuss finances? Each month you and your husband or wife (and if you are open to it and they are old enough, your kids) should be sitting down together to discuss the budget. At this meeting of the minds, you will look back at how you did last month, look forward to next month, and discuss any major upcoming financial decisions.
The important items to discuss at this monthly meeting are:
- Did you go over budget or under budget in any categories? If so, dig into was it necessary or did you slip up and mindlessly swipe the credit card? Either way, discuss it and decide if your budget should be adjusted or if you have alternatives?
- Do you have any major payments coming up, such as a family vacation, birthday party, or a new car? How much should you spend on these? When should you begin putting money aside?
- Review your debts and continue to evaluate where you are financially.
- Discuss your retirement standings or investments.
This is a time where both of you will sit down so that you both are aware of what the current financial situation is and decide on what you need to do next. This will prevent overspending and also fighting about if you have money or not; you will both know.
In my household I am the analytical cheap one and my wife is the carefree one. Each month I prepare a spreadsheet of all our actual expenses and income from the previous month and a budget for the next month. Then my wife and I sit down and discuss the results. We hem and haw about how the budget is allocated, any overages, and any needed adjustments to the budget. Then after about 45 minutes we come out with a more thorough understanding of our financial situation and a budget for the following month.
After we started having these monthly meetings we noticed a change almost instantly. We were taking control of our finances as a family. Our relationship improved as did our finances. We were being held accountable by the other and were “all-in” on every financial decision. No more he said, she said or blaming the other for our debts. We were united in all our financial decisions.
Your Financial Freedom Partner,