How many times have you had an innocent money conversation with your spouse that didn't go so well? The infamous money argument comes out of left field and you're left reeling, wondering what went wrong. According to the 2010 American Express Spending and Savings Tracker, discussions on household finances lead to arguments among 72 percent of young professionals.
Two things further intensify these challenges for the training physician – lack of time and money. Heck, you’re hard pressed to see your spouse much less talk money with them. You are in a position where you must be disciplined with your time and money otherwise things can go south in a hurry.
As a financial planner, I am certainly not immune to these struggles. Today, I would describe my wife and I as financially happy. But we have had our fair share of struggles. I love my family more than anything and that’s never changed – it’s just that this finance stuff is hard. Through my experiences in my own relationship and dealing with my clients’ personal finance challenges, I have learned a few simple habits and practices that work and I would love to share.
Family Financial Roadmap
Do you and your spouse have value clarity? Do you know where you are going, why and how you will get there? Can you point out where you are on the map and how close you are to the destination? Have you set up guardrails to keep you on track? Are you and your spouse working off the same map? Many people – very smart people – are lost.
Clarifying values and developing your family's financial roadmap (or Financial Plan) is crucial. If your map is outdated or non existent, carve out time to have an open and honest conversation with your partner. The conversation should involve defining what the two of you value most. Clarify what is most important for your family in this life and why. Identify your destination – short and long term, where would you like to end up financially? Determine how you are going to get there. Set specific short term goals that will propel you in the right direction.
My wife and I work through this exercise annually. The meeting consists of us working through answers to the following questions:
- What does our current financial picture look like (summary of net worth, expenses, tax planning, cash flow, insurances, investments, estate plan, etc)?
- How did we do last year with our goals?
- Have our values and/or short & long term plans changed?
- What are our goals for the coming year?
The Ultimate Partnership
Remember, “until death do us part”. Great couples function as one unit. It's not my money or your money, it's our money. When financial challenges creep up, there is no need to assign blame. Instead focus on coming up with ideas together on how to improve. The next time a money problem pops up, even if you're absolutely certain it's the other person's fault, don't point fingers. Take 5 seconds to mentally prepare before the conversation. Approach it with love and consideration. This small effort will make a big difference.
Developing an understanding of each of your strengths and weaknesses will help you work better together. It’s very difficult to self-diagnose weaknesses. Encourage your spouse to point them out and listen with an open mind. Own your weaknesses instead of denying them.
Define Roles & Responsibilities
You must be clear on who is going to do what. Figure out who is going to be managing and paying the bills, performing monthly reporting, managing assets and liabilities, completing paperwork and handling the big picture planning. Whomever is handling each respective task should keep the other in the loop and bring them in when bigger decisions come along. In our case, I handle insurances, investments, other planning, paperwork, and tracking while my wife handles daily cash transactions like paying the bills, bank transactions and depositing checks.
Transparency Is Freeing
Great relationships are built on trust. Marriage is the ultimate partnership – a lifelong relationship. Does your spouse know absolutely everything about you financially or are you hiding certain things? If you are hiding certain things, you have likely convinced yourself it’s for the better. Trust me, it’s not. Pure transparency is the necessary foundation for a trusting relationship.
If you’re a money nerd and tend to handle most of your family’s personal finances, don't keep your spouse in the dark. Involve them as much as possible. If they are slow to jump on board, give them time.
Time Is Precious
According to the AICPA 2012 Finances Causing Rifts for American Couples Report, 55% of people married or living with a partner said they do not set aside time on a regular basis to talk about financial issues. It should be no surprise money is a big problem in many relationships.
Everybody is busy. Many medical residents and fellows – particularly those with spouses also in training – take this to new levels. Consider time your most precious resource in maintaining a happy marriage. Kim Blackham, a licensed marriage therapist specializing in working with medical marriages, does a great job expanding upon this in her blog post “Surviving Residency and Making Medical Marriages Work“. She says, “Time together is worth more than anything. Guard it, protect it, and buy it when possible.”
The busier you are, the more intentional you must be. Schedule regular times to prepare for and have money talks with your significant other – literally add it to the calendar. Otherwise the money conversations will be random, off the cuff and often unproductive.
Here is my agenda for the repeating monthly financial review meeting I schedule with myself:
- Update family net worth tracker
- Update prior month cash flow tracker
- Dig into expenses (only if necessary)
- Review investments & insurances
- Complete paperwork & other tasks
- Send my wife email summary
- Schedule time to discuss with my wife
Communication Is King
Talking about money alone doesn’t fix anything, and in many cases makes it worse. It must be the the right type of communication to become king. Every conversation you have about money has the chance of becoming emotional. Try listening to understand instead of listening to judge or evaluate.
Intentionally work on having loving, empathetic conversations. Work to be on common ground with your spouse. Both parties must have an equal vote. Know your spouse – men and women are different! I learned from John Gray in his book Men Are from Mars, Women Are from Venus that women generally want empathy, and men typically want solutions. Cater to your spouse's needs above your own.
Sometimes great communication simply involves getting started on the right foot. I send my wife an email each month after I compile our prior month numbers to tee up the conversation. She always responds favorably and ultimately our conversation gets started on the right foot. It's setup like this:
Subject: Personal Finances Update
I just completed last month’s numbers and as always wanted to keep you in the loop.
Last month we had $$ total cash at the beginning of the month and $$ at the end. Total inflows were $$ and outflows $$. Our target spending was $$ and we went (over or under) by $$.
Our goal was ____ and we did ____.
We/You did really well with ___.
I think I/we could improve ___.
Some things I wanted to discuss with you are ____.
Can we discuss this more (time/date)?
Control Your Money
Control your money, otherwise it will control you. Having control over your money requires spending and values awareness. I believe Carl Richards coined the term “Values-Based Spending” to describe this idea. He wrote a great book called The One-Page Financial Plan that explores and simplifies the behavioral side of financial planning. This values/spending awareness allows for better alignment. Values and spending alignment produces greater happiness and reduced stress. Alternatively, stress builds as spending and values deviate from each other. Awareness of how this looks in your life is the critical starting point.
How do you increase awareness of your spending and values alignment? Well, first you must have value clarity which we already covered. Assuming that’s clear, it’s all about viewing your personal finances through the value lens. You want to learn to measure your finances based on what's most important to you. It's not about net worth, growth rate, or how much you spend. Although those things are important, I am telling you to measure your finances based on what's most important to you.
Here is how my wife and I do it. Our personal finance systems are designed to help us accomplish the following (in the least amount of time possible):
- Measure what we think we are spending vs. what is actually spent each month
- Keep a pulse on trends with cash reserves primarily and net worth secondarily
- Generally understand expenses without having to analyze every single month
- Audit expenses every so often or when #1 is off
When we “audit” expenses, it’s from the lens of our values. This process shines the light on our values and spending alignment. We do this by going through the following steps:
Gather and categorize transactions for the calendar month under review (We go old school and pull bank and credit card paper statements for all accounts used during the period to provide the data. I advocate simplicity – we use 1 checking account and 1 credit card so this isn’t too painful, although as noted, we prefer to avoid it.)
- Go through each spending category and ask the following three questions:
- Does this expense align with our values today? (Yes or no – maybe not allowed)
- What is the value it aligns with?
- Is there a substitute that might cost less?
- Where could we redirect the cost savings to best align with our values?
- Use the results of #2 to make a couple of positive changes that improve value/spending alignment. This makes expense reduction exciting.
This process provides us with a regular checkup of how our values and spending align. It's never perfect and in some cases surprisingly misaligned. The resulting awareness is key. It either motivates us to bring our spending back into alignment with our values or it reassures us that our spending is aligned with what's most important in our lives. It helps us keep control over our money. Managing finances by itself is pretty lame (except for nerds like me). On the other hand, values are motivating and something you should really be excited about.
What's most important is that you take action. I challenge you and your spouse to get clear on what's most important in your life. Start small and take one step that propels you toward your definition of a better marriage financially.
What do you think? What strategies have you used to maintain a financially happy relationship with your partner? What are you planning to try to improve? What struggles have you had? Comment below!
[Editor's Note: Daniel Wrenne, CLU, ChFC, CFP, is a financial planner and the owner of Wrenne Financial Planning. Wrenne Financial Planning is a paid advertiser and a WCI Recommended Financial Advisor, however, this is not a sponsored post. This article was submitted and approved according to our Guest Post Policy.]