How to Manage Money-Together
by Ginita Wall, CPA, CFP

Ten things you and your partner can do to foster good money management habits and get your savings on track

"When people argue over money, the argument is likely to have little to do with money. It almost always has to do with issues of control, security, self-esteem, and, above all, love."

--Grace Weinstein, author

In our lives, we are pulled in many directions. We both desire and fear the power of money, and most of us have problems harnessing the positive power of money through regular saving and investing. But that doesn’t have to hold you back.

Here are ten things you and your partner can do to foster good money management habits and get your savings on track.

1. Decide together what you want.

Many people live from day to day. Unfortunately, they also spend from day to day and build no financial nest egg to see them through. To make progress in saving for the future, approach the future one step at a time.

Begin by establishing some short-term financial goals: a vacation next summer, or a new car the year after that.

A desirable short-term goal can be the carrot-on-a-stick encouragement you need to start a savings plan and take additional steps toward financial security.

2. Build for your future together.

As children, we learned about Cinderella, Snow White, and Sleeping Beauty, who were saved from peril by their charming princes and lived happily ever after. As adults, we all entertain the fantasy of financial rescue at some point in our lives. That’s why lotteries are so compelling, despite the odds.

Although the fantasy of financial rescue is entertaining, it can become a barrier to accomplishment.

Take serious steps toward providing for your own financial future, beginning right now to create goals based on your current income and financial situation.

If your fantasy comes true, so much the better, but if it doesn’t, the two of you will have done what was needed to take care of yourselves financially.

3. Make a financial commitment to each other and your marriage.

Many people tell themselves that they will begin to save when their income rises, but few ever do. Unless you put yourself first, when you make more, your expenses will inevitably rise to meet your income and nothing will be left for you.

Persuade yourself that you deserve to keep a portion of your income for you and your future. Once you truly believe that, make a commitment to set aside 5 or 10 percent of all the money you receive in a special account that’s just for you.

Just as some people tithe to church or charity, so should you tithe to yourself. You’re worth it.

4. Learn about your finances together.

Most people learn little at home or in school about money, investment, and personal finance, and those people rarely seek formal training in finance as adults.

Begin by learning about your personal income and expenses.  Find out where your money goes by tracking last year’s expenses, and then decide where to trim.

Here are some spending guidelines:

• 35 to 40 percent of your take-home pay is probably spent on housing costs
• 10 to 15 percent goes for food
• Your car payments shouldn’t exceed 10 to 15 percent of your income
• Another 15 to 20 percent might be spent on variable expenses, such as household repair, recreation, and clothing
• 5 to 10 percent of your budget should go for insurance premiums and property taxes
• 5 to 10 percent of your income should be deposited to your savings.

5. Start right now.

Procrastinators put off saving, or go on spending binges as soon as they accumulate much of a nest egg.

To overcome financial procrastination, begin by setting some minor goals, such as reading one article or newspaper column a week on financial maters, then add more substantial goals, such as devoting three hours to preparing a budget and an hour or two a month to monitoring spending.

Work together to develop financial knowledge and confidence, and soon you will find yourself gliding painlessly into the world of finance, and you will be ready to begin your savings plan.

6. Explore your money issues together.

Carefully examine your early teachings about money to see if you can find clues that are sabotaging you financially.

• As a child, were you taught not to envy those who were better off?
• Did you family teach you that money is the root of all evil?
• Was money used to reward or punish in your family?
• Did you have enough, or were you constantly afraid?

As you work to build a financial future together, it is important that you each understand your deep-rooted attitudes toward money, and the attitudes of your partner.

That will reduce conflicts over money matters, and help you succeed financially.

7. Balance the financial power in your relationship.

Women are sometimes balanced between wanting the right to control their own lives and make their own choices, and the need to rely on others and be comforted and loved, and to provide a nurturing environment for their families.

Men are confused as well. They have been raised to show love and affection through providing financial support. If a woman does not need financial support, some men are in a quandary: What do women want from them?

Yet if their partner wants to quit her job to take care of the family, they are afraid she’ll become too dependent on him, and he’ll sacrifice his freedom.

Discuss together the roles that each of you will play in earning, managing and spending money. Talk about how you each feel in the roles you choose, and how money affects your relationship.

Don’t shy away from discussing the power and freedom that money brings. Discussing money matters openly will help foster a healthy relationship you both can cherish.

8. Take action, one step at a time.

Some people have no interest in dealing with their personal finances. They know little about money, and find the subject uninteresting and boring. To deal with money matters when you haven’t the time or interest, break your financial tasks into manageable portions.

For example:

if your goal is to amass $1 million, it may seem overwhelming at first. But though $1 million sounds like a lot, it’s really just $1,000 multiplied by 1,000. If you could save $1,000 a thousand times, you’d be a millionaire, and it is even easier than that, because money begets more money through compounding. As you seek out ways to create your nest egg $1,000 at a time, you will become more familiar with the world of money, and that will make it more interesting as well.

9. Understand the risks and rewards of the Money Game.

Did you play Monopoly as a child? The grown-up money game, Working-Investing-and-Retirement, is a lot like Monopoly, but the stakes are higher.

Most people play the real-life money game too conservatively, even if they were risk-takers in juvenile games. Others are too aggressive in real life, investing in outlandish get-rich-quick schemes. Risks and reward work in tandem: the greater the risk, the greater the potential reward.

Assess your personal risk tolerance and follow your intuitions. By learning about investment risk and reward, and combining that knowledge with basic intuitive skills, you can invest wisely for your financial future.

10. Accept your imperfections, and those of your partner.

Some people want to pin down every detail before making any decision about money. But perfectionism delays financial success. Emphasize action: Don’t wait until you are fully educated in finance to start saving, or you will never begin. Begin saving now, then start an investment program using mutual funds.

Making financial decisions creates the possibility of mistakes, it is true. But fortunately, in most financial situations, there are a wide range of right decision and only a narrow band of decisions that are decidedly wrong.

You don’t need to know how to pick the exact right investment, only how to avoid those that don’t suit your financial needs.