By Dr. Jim Dahle, WCI FounderWhen a married couple isn't on the same page financially, life can become awfully difficult. If you have differing views on whether to save 10% or 20% for retirement or if you have varied opinions on the best way to save for college, that's one thing. But what if you have completely opposing views on more fundamental issues, like how much the family should spend or whether you should save for college at all? The divisions can feel much deeper.
One partner might be booking travel around the world, much to the chagrin of their spouse (because they still have a huge mortgage and hundreds of thousands of dollars in student loans). One partner might max out the credit card with trips to Costco and Target, even though they're spending more than the household actually earns.
Or as one emailer wrote me a few years ago:
“Finally, a recurring concept that both residents and colleagues constantly bring up is what do I do with my spouse's spending? Might be an interesting blog subject—maybe not so close to Mother’s or Father's Day, though.”
This is a serious issue for many physician families. Many times, the physician is the spendthrift. The truth is that this isn't really a financial problem. It's more of a relationship problem, and it cannot be fixed without fixing the relationship. There is a good chance that marital counseling is in order. But let's try to tackle it anyway.
The Ounce of Prevention
Marriage
As every physician knows, an ounce of prevention is worth a pound of cure. The best way to avoid having a spendthrift spouse is to avoid marrying a spendthrift. I'm serious about this. The six big conflicts in any marriage are money, sex, religion, in-laws, kids, and politics.
My wife and I “interviewed” each other while we were engaged. We talked about all this stuff to avoid being surprised later. Those few hours we spent having these very serious (although weird) discussions have prevented an unbelievable amount of frustration and fights over the last 25 years. Yes, people change, and no, you can't predict the future. But just because your crystal ball is a little cloudy doesn't mean you shouldn't look into it.
Aside from marrying someone who at least has some concept of frugality, there is more you can do to prevent the problem. First, make sure both of you have realistic expectations. Reading this blog and my book, visiting the Facebook Group, looking at the WCI Forum, etc., are great ways to understand that, while physicians absolutely do make a lot of money, it isn't a bottomless well of cash directly connected to Scrooge McDuck's diving board. It is possible to spend a physician's entire income (or more), and it's actually pretty easy to do.
Budget
Another way to prevent the problem is to address it regularly and continuously. My wife and I have spent about an hour per month on a budgeting process (that, these days, is really just tracking our spending). This hour mostly consists of me going through the checking account and the credit cards we use line by line while she cruises social media and explains why we spent $100 on this or that. Anything unusual, we discuss. Then, we total it up to see how we did. It's a rare month that we spend more than we earn.
It's kind of fun to go back and see some of those budgets and laugh at them. But you know what, I have hundreds of these Excel files, and I can pretty much tell you where every dollar we've made since we were married went. It doesn't take hundreds of repetitions of this exercise to fix spendthrift issues. I know how she feels about money, and she knows how I feel about it. We can both spend enough that we don't feel particularly deprived (when I originally wrote this post, we were about to spend our 15th anniversary in Paris, and for our 25th, I rented a $200,000 car for a few days). Yet, we still manage to save more than enough money to meet our financial goals.
Promises
Be careful about the promises you make to a spouse during the long years of medical school, residency, fellowship, and the first few years out of residency. You can promise your spouse that you will eventually be able to live a very comfortable life and spend a lot of money. But don't promise a new Audi right after residency graduation or a 7,000 square foot house or a credit card with no limits. The ability to live frugally early on will allow you to enjoy relaxing your spending constraints later that much more.
As Dr. Robert Doroghazi says, “I married a gold mine, my spouse is thrifty.” Neither my spouse nor I is what I would call “thrifty” anymore. But you know what, we were thrifty when we needed to be, and now we don't have to be. Now, we can use our money to increase our happiness and convenience.
More information here:
Dividing Responsibilities in Our Marriage to Accelerate Our Financial Independence
Financial Conversations to Set Your Marriage Up for Success
The Pound of Cure
Start Talking About Money
Unfortunately, your flux capacitor is busted, and the “ounce of prevention” approach isn't going to work for you. What can you do now? The first thing is to start talking about money. This is a delicate matter because any discussion that ends in an argument (or worse, a fight) is not helping matters. If the only thing wrong with your marriage is that one of you is a spendthrift, divorce is almost surely not the solution. Besides, a divorce not only cuts your income and assets in half, but it also puts both of you into higher tax brackets and increases your cost of living. A great financial solution it is not.
Create a Financial Plan Together
How do you talk about money? You have to depersonalize it. It's just a stack of Benjamins. It's not about you. It's not about your spouse. It's a plan for where you want to be in five, 10, and 20 years from now. Focus on your goals for the future, and then work your way back to what that means for your present. Your spouse isn't stupid. They know that if you spend everything you make, you can't pay off the mortgage, send the kids to college, or retire at 60. But sometimes it is hard to connect those fancy vacations or 100 pairs of shoes in the closet to the future.
This also cannot be a one-time discussion. Even if you don't want to be “constrained by a budget,” just start by tracking your spending. Try it for 1-3 months. Just the act of writing down where every dollar went will subconsciously decrease spending. Plus, if you actually have to justify your spending to the other each month, you won't be as likely to spend your money on stuff that doesn't really make you happy.
More information here:
The Importance of Spouses Being On The Same Financial Page
What Physician Specialties Have the Happiest Marriages?
Make Sure You Don't Have a Problem
You also want to make sure that the problem isn't with you. If you want to save 40% of your income for retirement but your spouse only wants to save 20%, the problem really isn't your spouse. Sometimes savers need to loosen up a little, lest they become miserly. Again, it comes down to shared goals. Likewise, make sure you're not using money in order to assert control. I often find that men, in particular, take inappropriate control of the family finances. It's not a financial problem, but it does have financial consequences.
Drastic Measures
Some people are addicted to spending money. It might be clothing. It might be vacations or restaurants. It might be an expensive hobby. Even a monthly, hour-long financial discussion doesn't help. Time to go to Plan B. What is Plan B? It's a cash budget with envelopes, a la Dave Ramsey.
Given the income level of most physicians, this can be quite a generous budget without affecting your ability to reach important financial goals. The key is that it puts an upper limit on spending. If you or your spouse (or both) find saving 20%+ of your income to be difficult, you probably shouldn't be using credit cards at all. When you get paid, put the money designated for your spouse to spend on whatever in an envelope. When it's gone, it's gone. It works for teenagers, and if a spouse cannot handle money better than a teenager, it will work.
Some people even appreciate having limits put on them because then they can spend up to the limit guilt-free. But if someone has a problem with alcohol, you don't keep alcohol in the house. If they have a problem with spending, then access to anything but the green stuff needs to be eliminated.
Personal finance is just that: personal. But if you want a strong marriage, personal goes away. You're sharing the same bed, bathroom, kitchen, and kids. You should be able to share the same financial plan.
Need to get your own financial plan in place? Check out the Fire Your Financial Advisor course! It's a step-by-step guide to creating your own path to financial freedom. Even better, we now have separate tracks for attendings, residents, and medical students. Try it risk-free today!
What do you think? Have you had a spendthrift spouse? Are you the spendthrift spouse? What have you done about it? Did it work?
[This updated post was originally published in 2014.]
Anecdotal but a CPA friend says he noticed if the breadwinner controls the finances, no matter how much he (usually) makes, expenses exceed income. Not so, he claims, when the non-working spouse is in charge of the budget.
Interesting observation.
If one partner is productive financially and the other is destructive there is no reason to assume any error.
The destructive partner is a user. A just divorce system should demand the user restore funds squandered and begin a single life wherein they support themselves.
Communication and expectations. We do the joint account for all expenses and ‘blow’ money every other week (maybe a Ramsey idea, I forget). $200 jeans? $1000 purses? Stupid to me but if she wants to spend (or save up) her ‘blow’ money on them its her call. We set the ‘blow’ money budget each year together and have to stick to it.
WCI is correct that sitting down and having this conversation is critical. I can’t tell you how many of my recently married friends look at me like I have a 3rd eye when I tell them that my fiancee and I had serious, long negotiations on
-kids
-religion
-in laws
-money
-travel
-priorities
-etc etc
We don’t 100% agree on everything but we came to compromises before we even started talking about rings.
Yes, people change, but if they go from “let’s retire at 50” to “I want to spend every dollar in our account on shoes” then that is just pure crazy not life development. I remember talking to another doc who had just gotten married. He was a devout Roman Catholic and his wife was a Jehovah’s Witness. Her family was so strict that they didn’t even know she was dating, let alone married to a Catholic. They were planning on springing it on her family after a few months (e.g. introducing him to her family). I asked them how they were going to raise kids and she just grinned, shrugged, and said “we’ll work that out when they come.” AAAAAAAAAAAAARGH!
In the military, young troops with their first steady paychecks have an obvious but misguided incentive to get married: they are given a food and housing allowance to live outside of spartan barracks and eat outside of dining facility on base. The tragedy is that most of them cannot budget good enough to see that a married life incurs expenses greater than the additional allowance (e.g. transportation and kids). As a solution, pre-marital counseling has been mandatory to discuss Jim’s and your list of “awkward topics”, which are a lot less awkward than in-law drama and divorce.
In Buddhism, the third eye, also known as the “wisdom eye,” is a metaphor for the capacity to see beyond ordinary perception and grasp the true nature of reality. It represents a state of enlightenment or awakened consciousness, allowing one to understand the underlying unity of all things and perceive truths beyond the limitations of physical sight. Therefore, young physicians and troops alike should strive to acquire a “third eye” for all the wisdom under heaven, or at least a complementary spouse who seeks the same.
A great idea to get the conversation going for fiancees or newlyweds is to read or listen to the book Smart Couples Finish Rich by David Bach. Getting the conversation going and learning to discuss money issues without emotion goes a long way toward financial success as a couple.
Great point.
My wife and I are on (almost) the same page. It’s the kids I’m worried about!!!
Do you like Dave Ramsey’s book for kids, or what?
There’s enough material for another blog post on this topic.
My kids do know that we are frugal, (“Daddy can I have this candy bar, oh never mind it’s not on sale”) but what I’m looking for is a way to get them to understand the value of a dollar.
We don’t give an allowance and their chores are minimal to nil (which I would like to change). What say you WCI?
I’m certainly no parenting expert (just ask my kids) but you might try the book called Silver Spoon Kids that I reviewed a while back:
https://www.whitecoatinvestor.com/silver-spoon-kids-a-review/
John,
Here’s my suggestion: work up an age-appropriate budget with them and give them an allowance that must last the month. That teaches them to make decisions (buy candy or save it for a special toy?) If the child spends everything the first week, he has to do without until the next month (which teaches patience). Revise the budget as necessary and, as they age, stretch the length of time out.
You can start teaching this way as early as age 3. The key, as always, is the parents. You have to be firm, non-emotional, and present a united front.
As for chores – very important. The most important quality that chores taught my boys way how to be good husbands and dads. They came into marriage knowing how to cook, manage their laundry, do all of the yard work, etc. (and, of course, how to work!)
I definitely like the allowance. Let them go broke and realize the error of their ways, but it becomes a challenge when they view the money as theirs and spend it on stuff you disapprove of. That goes for working teens, as well, though.
I am not a big fan of the term “chores,” though. We call it “just helping the family out.” It is an expectation that we all do it and share in it together. I don’t want it to be assigned drudgery, and I don’t like it being a la carte, “I need money, so I will do it.” Growing up on a farm helped with that ethos.
I just got Dave Ramsey’s new kid related book. Plan to plow through this weekend. I’ll let you all know what I think
Another great article, which I am going to recommend to clients, whether medical professionals or not, particularly those who are single.
In case you’re not ready to go full-tilt on the envelope method, it may be easier to get there gradually. We identify the two biggest trouble spots for a couple and set an envelope budget for those areas only. Once they have them under control, we add another envelope until they are better managing spending. Won’t work for everybody, but it does help couples who eat out every meal, overspend on clothes, etc.
You mention in the article that you have to depersonalize it, and yet in 14 years of working with clients I have to say that I haven’t really seen that approach work for more than a few months. Ultimately you have to see your spouse and partner and their history as the things that have gotten them to this point, and work from there and understanding that history to make real, meaningful change that can last for both of you. You have to talk about what money was like for each of you growing up to understand why sometimes being able to spend $5 on a cup of coffee isn’t just frivolous spending, it’s a sign of their independence or freedom. Or when you’re the spender and they’re the saver, understanding how when their dad lost their job when they were in 7th grade, how that has frightened them to their core and they’re always worried that their financial world could be turned upside down at a moment’s notice so they’re afraid to spend anything, and mad at you when you do.
The past always informs the future. Understand the past, own the story, and then you can write a new ending. If you run away from the story, you don’t get to write the ending, somebody else does.
+1
thumbs up
“like”
all that stufff
Jude – I agree with both you and WCI. If a couple is working with a financial planner, the best way to treat the disease is to understanding the cause (history). It’s a very fine line between planning and psychology, isn’t it? Registered Life Planners specialize in this technique (www.kinderinstitute.come) and, reading your website, I would guess you have life-planning training in your background (or just a ton of common sense). Either way, your clients are very fortunate to have you on their team.
BUT, for a couple trying to deal with money issues on their own, depersonalizing helps to take the emotion out of the equation and allow them to deal with the facts. If you can do that, you’ve won half the battle.
The depersonalization stage is like going to the ER — a problem has been identified and it needs to be triaged and you need a working plan.
But I absolutely agree that it is vital to understand why some of these differences exist.
One thing that bugged me while I was a student and resident was that my wife had an allergy to used or hand-me-down clothing for her or for the kids. I later came to understand that she grew up in a family where she almost never got a single piece of new clothing and was always dressed a year or three out of fashion. She would rather have a few things that were new than a larger wardrobe of something used. She is generally very frugal and I am blessed to have her.
I in turn drive her crazy because I obsess with financial planning and tax avoidance (legal) to a degree she finds strange. But again, here is the difference: my father was a rancher who had to be a shrewd businessman, had to provide for his own retirement, and for whom proper management of tax matters could be the difference between profit and loss for a year. He had to have enough of a cash reserve to run a fairly large operation for a year (and meet living expenses) with no income because of “acts of God.” He had to have cash on hand to pay the IRS every quarter. He went in his lifetime from having virtually nothing to being very well off by the time he retired, and is my hero. Achieving first security and then comfort and then wealth: that’s just part of my family’s ethos.
My wife’s father drew a paycheck every two weeks like clockwork at a government job for 20 years and then retired on a fixed benefit plan. His taxes were taken out in withholding. There was no need for financial matters to be discussed in her family, but it was an open topic in mine once we were old enough to understand and to keep our mouths shut about it.
It’s not that one is better and another worse, they are just different upbringing. Our lives ended up being more like my family’s than hers, so she defers to my judgment. I can depend on her to live within a budget that we agree on, since her family had a paycheck they always lived within.
The why’s are definitely important. Sometimes they might need a neutral third party to be there in the form of a marriage counselor, though.
One option that is out there that I’ve yet to see anyone try but would be interested to know how it goes is a financial therapist. Yes, they actually exist. Spending is no doubt an emotional issue. If that isn’t your cup of tea then see below.
My favorite way to solve this problem is the following:
1. Have the sit down talk about goals as everyone has mentioned. Figure out how much “fun” money each spouse should get given the goals.
2. Set up an additional checking account for each spouse with debit cards and each month have that figure from #1 automatically transferred to the “fun” account. Everyone knows how much they have in that account and that is all there is for “fun” money.
With credit cards or just one big checking/savings account people lose the ability to see the connection between purchases. Similar to the envelope system if you have accounts for each item/spouse you see very quickly and confidently how much can be spent. Keeping tracking of expenses and itemizing every month doesn’t work for most people so try and automate it.
Great article, as usual. I also learned some positive things from my spouse. One is to be willing to pay for quality. Before I met her, I’d always buy the cheapest option, which often didn’t work or needed to be replaced soon. She taught me to be willing to spend a bit more for something that worked and lasted. Second, be willing to buy in bulk. We belong to Costco now which saves us a ton on staples. Buying 100 rolls of toilet paper when it was on sale seemed crazy to me, but we use it up
One other thing is that it took us time to really merge our finances. We tried a joint checking account right after getting married, then went back to separate for a year or two. Now we are completely integrated and that seems normals
Your mileage may vary
I’m willing to pay for quality, just not easily convinced that something actually is quality worth a high price. My best purchases are cast off charity buys at a rich women’s club fund raisers. When I wear out this one awesome leather bag ($50 at the charity auction) I MIGHT be willing to pay $300 for a new version, but no doubt the company will now be farming out their work to incompetent underpaid workers (and different crappier materials) and I will toss it out broken after 8 months whereas this used one has hauled my laptop around the world a few years. And certainly no bag will ever be worth $800 to me (likely actual current price of this brand). Maybe when hamburgers cost $30 each.
Wish I had your wife’s apparent recognition of quality.
Another point to add is having a serious discussion about the future of physician income being on the decline. You can’t really ignore this even if the spendthrift spouse is controlling the budget.
Why not just not marry a stay a unemployed or underemployed significant other? I think the logical way to avoid worrying about your spouse spending your money is to make sure that they have a good paying job. Such as a nurse or an attorney, granted I am gay so there is no reason for my significant other to stay at home.
The Russell 2000 gets front-run and has other less than ideal characteristics for indexing. The Vanguard Small Cap Index fund tracked the Russell 2000 until 2003, then switched to the better MSCI US Small Cap 1750 Index until 2013 at which time it switched to the CRSP US Small Cap Index. The Russell 2000 is the worst of those for an index fund to track in my opinion.
That’s like the whole “don’t have kids because they’re a lousy investment” argument. If you live all of life to maximize your bottom line, it isn’t much of a life.
Sorry typo. I meant to say why not marry an unemployed or underemployed significant other?
Mint.com did a great job of following the monthly expenditures down to the dollar. You can even follow trends at each store. I find during the trend charts helps with keeping the family on budget.
My husband is a spendthrift and he kmows it. I handle all the money. He has packed lunches and a bumper sticker that says “Driver is married, carries no cash”. It cracks me up because it’s so true. I love him dearly and he’s very cute for a guy who can blow $50 on lunch just for himself. He is wonderful at keeping receipts too. My greatest fear is that I’ll die first and he’ll be broke 3 days later.
I took a zero Dollar budget approach with a dash of inspiration from WCI recently, and it is owing off dividends.
I’ve already believed that a married couple shares all accounts, but it does make budgeting a bit difficult with a spendthrift spouse.
The money was allocated and sent to carries retirement accounts and sink fund accounts and we agreed to live on the rest. But each month the account would get uncomfortably low. I do not want the spouse walking around with cash in envelopes, although willing to.
Our solution: open up a separate checking account that became the living expense account. Spouse is given free reign with a budgeted amount in all variable spending(gas, groceries, restaraunts, shopping, subscriptions, children expenses, health Care), and the other account i handle all the fixed costs (Mortgage, utilities, insurance, retirement accounts, sink funds, college savings). Anything left over gets divided equally to spend (or save).
Sink funds include repair fund (household and car), renovation/replacement, vacation, auto (make monthly payments on future cars), mortgage paydown, and charity (whenever someone in need shows up).
It seems to be working and there are no more “discussions” over decisions made in variable spending.
I believe $4 million blown, might quality my client as a spendthrift. Money for treatment, spouse support are not issues.
Children support is week knowing what parent has blown.
Can anyone just say. “ go to this hospital/clinic? That hospital/ clinic is expensive and it gets at best a 60% success rate!
It is an inherited trate /characteristic – mother -siblings-first cousins and all aunts are worse spendthrifts! No bank trust officer has been able to handle any of the related spent thrift- family deserves a clinical study!
What is your opinion about banking accounts? I know some couples have only 1 account, some have 2 accounts – one for each person, and then others who have 3 accounts – one for each person and then a joint account?
I’ve really never heard of having 3 accounts until recently. The people I know both put a certain amount of their paychecks into the joint account and that goes towards paying for “common” things like the mortgage, food, cable…. And the remainder of the money goes to their personal account so when she wanted to spend $XXX for a haircut, she was using her money and when he wanted to go to a football game with a buddy, he used “his” money for that… that way neither can complain about the other’s spending habits.
I feel like a couple should be on the same page so I would just have one account… What are your thoughts?
That depends on how well you communicate and agree on finances and budgets. And your relationship to money.
I have an account that paycheck enters via direct deposit.
Each month I review the previous month’s expense and allocate enough money to cover fixed expenses from deposit account.
I then calculate savings and sink funds and send funds to a seperate online bank.
I transfer a set amount to a separate checking account for all variable spending. Its a fixed amount regardless of amount of bonus. Debit card attached to it (we don’t like to use cash understanding that debit cards increase spending).
That spend account can be spent down, without guilt, and when you see the amount approaching zero spending slows down accordingly. We did not want to live with having to feel overly restricted.
When we got married we combined everything-debt, assets, income, bank accounts etc. I know some are successful not doing that, but it seems like an uphill battle to me managing separate accounts. We have enough accounts to manage already without his and hers checking. We did use to have allowances though, money we could spend without having to account to the other.
I did this (mine, theirs, ours checking) prior to marriage with live in partner. Would work for trusting room mates as well? Need a lot of trust, maybe family members both working age sharing home. Think after marriage as we moved only kept the one joint account, closed separate accounts at ‘local’ banks no longer so accessible to us (USAA is worldwide effectively).
Handy to trust money handler with just the right amount for joint bills, and to have automatic transfer, less having to remind to hand over the money or effectively loaning them money of still not really combining finances. Seems a bit odd after marriage, but if we both wrote a lot of checks it would be safer to have separate accounts- we ended up with me writing all the checks (and doing all ATM draws for cash) so we wouldn’t have errors due to balance lower than realised when not noted in same checkbook.
I did this (mine, theirs, ours checking) prior to marriage with live in partner. Would work for trusting room mates as well? Need a lot of trust, maybe family members both working age sharing home. Think after marriage as we moved only kept the one joint account, closed separate accounts at ‘local’ banks no longer so accessible to us (USAA is worldwide effectively).
Absolutely wonderful article: lots of practical points. Especially important is the monthly meeting to discuss budget, investment, appropriations,etc. Perfect time to educate the partner less interested in these issues.
I agree a monthly meeting goes a long way. After a decade or two of those you’re definitely on the same page though!
Another reason I recommend premarital counseling to couples!
Lots of very good ideas. Have also found that if the non-working spouse gets an agreed upon income into their own bank account and has their own CC with limit that is maybe 2 times the monthly income that they can use for their own discretionary items, and the working spouse cannot question any of that spending it saves a lot of “haggling” over expenses. Have been using that method for over 40 years. It is a little more complex if both work, in which case both have to put income into common budget.