By Dr. Margaret Curtis, WCI Columnist
My husband and I recently celebrated our 20th wedding anniversary (although, now that I think about it, we didn’t observe the occasion with anything more than a “nice job, babe.” We need to learn to live a little). Twenty years, two medical careers, three kids, six dogs, and many, many conversations about money later, we don’t just have shared financial goals: we have learned how to think about money in the same way.
I agree with the standard advice that you should talk about finances early in a relationship, but I don’t necessarily agree that this will set you up for success later on. Since you don’t know what curves life will throw at you, you might not even know what questions to ask. It would not have occurred to me to ask my husband how much money he would throw at a backyard hockey rink, when his answer would have been, “How much is a Zamboni?” And no, we don’t have a Zamboni. We have a hot-water hose and one of these.
You can certainly see red flags early in a relationship—for instance, someone who is comfortable with credit card debt—but the biggest intangibles are harder to identify. My husband and I checked pretty much every box on financial compatibility when we met: neither of us carried credit card debt, we maxed out our retirement accounts every year, and we felt comfortable talking about money (refusing to talk about money would have been a huge red flag for me). We had similar cheapskate/New England hippie lifestyles. But we still had plenty to learn about money, as I will explain.
Here are some of the misconceptions we had about money and how we have evolved in our thinking. You don’t have to agree with any of our ways of thinking about money—or your spouse’s. There is room in a healthy relationship for different approaches. You might find that looking at your attitudes toward money sheds some light on other conflicts you and your partner have. Or you can use these topics as a conversation opener on a date and watch ‘em swoon.
Since marriage is a collaboration and not a competition and since I am hoping to make it another 20 years, I am not going to identify which of us brought these incorrect concepts into the marriage. We all have room to learn.
Save on the Small Stuff So You Can Spend on the Big Stuff
This is also called “penny wise, pound foolish.” Some people swear by scrimping on little, day-to-day stuff and, at the same time, spending on big extravagances. We no longer take this approach because:
- It doesn’t work. Yes, small sums add up—but on the scale of a physician’s salary, not that much. You can’t save enough on your cable bill to send your kids to college. You have to keep an eye on the big stuff too.
- Everyone has their own definition of “big” and “small.” It is easy to justify one’s own spending and criticize someone else’s.
- It’s a good way to drive everyone around you bonkers. I know someone whose mother used to tell the kids they couldn’t afford to stop for ice cream on the way home from their beach house. This person (who is not my husband) now has . . . issues around money.
Now we still save on (some) small stuff, because we enjoy doing so. But our financial plan is focused on the big picture.
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Saving Is Just a Matter of Discipline
I admit this one used to be me. My husband has always believed in the importance of socking money away in accounts that you can’t readily see and access, like retirement accounts. I thought I was too clever to need to do that. Then, I went to a talk by the excellent Sarah Catherine Guttierez, CFP, at WCICON22 about “the tax-efficient waterfall,” and she said there are actual studies that show most people can’t resist spending money that’s just sitting in their checking account. (This is why I am going to WCICON23, and I hope you will, too. It's fun, and you learn stuff.)
I am now a convert. We keep enough in our checking account to cover day-to-day expenses, but any excess gets quickly transferred to the brokerage account that we don’t check as often.
Tax Refunds Are Awesome and Tax Deductions Are Free Money
Lots of people knowingly overpay their taxes because they want a refund. A refund feels like a windfall, when really it is your own money that you have loaned to the government interest-free for as long as 16 months. Now, we aim for the most accurate deductions possible, with the goal of a small refund.
Tax deductions decrease your taxes, but they don’t actually put money in your pocket. If you spend $100,000 to start a business at the 30% tax bracket, you will decrease your taxes by $30,000 but you will still have spent $70,000. Same goes for charitable donations, mortgage interest, and anything else you can write off your taxes: they aren’t free, just discounted. We take every tax deduction we are entitled to, but we don’t get too excited about them.
The one big exception that I know of is depreciation on real estate for Real Estate Professionals (REPS). This is a “paper deduction” that decreases your taxable income without actually costing you money, and it's one of the reasons real estate investing is so popular among high-earning professionals.
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You Should Assign Your Money to Different ‘Buckets'
Some financial gurus recommend you think of your savings in “buckets”—or that you actually put money into different envelopes, with each one assigned to a different task: rent, groceries, gas, etc. We found this didn’t work well for us because
- You have to be really diligent so you remember which dollar bills have which job. And if you actually keep money in multiple accounts, it's way too much record-keeping.
- You don’t have much flexibility. You have to shuffle money around to meet needs.
Now we just treat money as fungible, which it is. It all goes into and out of one big pot.
You Need a ‘Money Guy'
We used to have a couple of different money guys. One worked on commission (nice guy, but we stopped using him pretty early on). One was a banker at a big-name institution with a really nice office. He was harder to give up, because that nice office gave a real sense of security.
But as we got more educated about personal finance, we realized that we were spending a ton in fees just to keep our money safe (the second guy was oriented toward capital preservation, not age-appropriate growth). We also realized we could manage our investments ourselves, which we now do.
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Is It Worth It?
We used to look at purchases in terms of whether they felt worth what they cost, as in “the plane tickets were pricey but totally worth it!” The problem with this mindset is that really expensive things are usually really nice. Flying first class, fancy cars, and luxury resorts: all of these are lovely and make you feel like you are getting what you paid for, but they don’t fit in most budgets. It is easy to justify all kinds of big expenditures as “totally worth it.”
Now, when we consider a big purchase, the first questions we ask are: Can we afford it? Is it part of the plan? Does it fit with our priorities? Only if the answer to these is “yes” do we ask if the price matches the value to us.
We are still not perfectly aligned in our attitudes toward money. One of us still gets really excited when we return deposit bottles and get a refund.
One of the most important lessons: not all spending has to be utilitarian or virtuous. Some of the things we are glad we splurged on over the past 20 years:
- Each one of the six dogs.
- Overnight summer camp for the kids. A luxury for sure, but I would pay for that kind of glorious, confidence-building experience for them twice over.
- An old VW camper van. Hours of adventures and hours of tinkering.
Speaking of which: if anyone out there hears of a cheap Zamboni for sale, let me know. Our 21st anniversary is coming up.
What do you think? Have you and a significant other ever had completely different concepts of finances? Did you fight about it? How did you solve the issues? Comment below!