By Dr. Rikki Racela, WCI Columnist
Meredith, my wife, and I are not on the same financial page. Not being on the same financial page has caused numerous fights and disagreements regarding money. Yet we have worked through it, and despite not being on the same financial page, we aim to at least be on the same financial chapter. Dr. Jim Dahle has already given great tips on the topic, which was phenomenally helpful in guiding us as we created and implemented our written financial plan.
Today, I am going to add some other advice that we discovered as we moved through our financial journey.
But first, why should this problem exist in the first place?
I find it easier to step back for a second and analyze the source of financial disagreement. It shouldn't be too surprising that you and your spouse aren't on the same financial page. You're two individual people, and you've probably disagreed with each other on plenty of other issues, correct? You may have many things in common, but chances are that you have more things not in common.
Meredith and I were raised by parental figures with contrasting views on money. That old platitude that opposites attract makes sense, as it is your spouse’s individuality and dichotomy from yourself that makes them so interesting. So, you fall in love and marry. Therein lies the solution for us. We love and understand each other, and that includes understanding the foundation of our money beliefs and the money script that follows. Despite differing money views, we share the same roof, the same kids, and the same financial goals.
How, you may ask? Let’s dive into my money relationship and that of my wife—two diametrically opposed people in regard to finances—and how we align our pages to at least be within the same financial chapter.
More information here:
Actual Money Fights We’ve Had (and How We Solved Them)
#1 Know Where Your Spouse’s Money Beliefs Come From
My wife did not have the easiest childhood, financial and otherwise, leading to different money beliefs than mine. Unfortunately, her experience early in life encouraged an innate reflex to spend. She never knew her father. She was raised by her uncle because her mother was too sick to care for her. Unfortunately, her uncle had lung cancer which was eating at him slowly throughout the years. His hacking coughs were an incessant nightly occurrence which became a driving force to encourage my wife to become a physician. Her uncle’s medical condition also precluded gainful employment, so the only money coming in was in the form of SSI/disability.
My wife never knew when her uncle would pass away and when the disability checks would stop. Compounding the insecurity of any stable income was the fact that her uncle, knowing his days were numbered, actually opened as much credit debt as he could from any bank that was willing to lend to him. We say you only live once, and for my wife and her social father, that could have been only one more day. My wife tells stories of him binge-purchasing on QVC (for those who are too young to remember, that's a TV channel for buying displayed items with credit cards), knowing that the possibility of him dying with thousands of dollars of credit card debt would be a money win. A morbid money win but a money win nonetheless, because that debt would disappear upon his death.
Since her uncle and her mother were both on disability income, they could not afford a regular house or apartment. Their living space was a tiny apartment on the top floor of a tiny house. But by a very random twist, her poor living conditions were located a few blocks away from the New Jersey shore. If you know anything about New Jersey, many towns are overpriced and opulent, especially houses and lifestyles near the shore. Billy Joel’s house was the next town over (and shaped like a piano!). This contrast of poverty amid the surroundings of extreme wealth does not mold healthy money beliefs. My wife, ashamed of growing up in squalor compared to her peers, never let her friends ever visit her home. She saw medicine as a way to medically care for sick mothers and uncles like her own and as a conduit to attain money to escape her dire past.
This epiphany about my better half is what bridges understanding of where she is coming from when she spends, when we budget, and when we form financial goals.
#2 Know Where Your Money Beliefs Come From
Believe it or not, this may be phenomenally difficult. In Daniel Kahneman’s Thinking Fast and Slow, he mentions that it is much easier to recognize other’s mistakes than our own. As Morgan Housel mentioned in an interview on the Afford Anything podcast:
“We look at other’s money decisions through the lens of their actions and can say this was a bad decision because of x or y. But if you examine your own decisions, the mistakes can be justified through an internal narrative. You can say to yourself, ‘Yes, this is a bad decision, but I did it because of x or y.' You can rationalize your own financial flaws. You are great at telling yourself a story to gloss over your mistakes.”
Well, the following is an objective look at my financial mistakes—without the internal narrative justification—and how they shaped my money beliefs.
My money story starts when I got into college. No joke, when I got into Princeton, my mom's exact words were, “Baby, we won the lottery!” I interpreted this in two ways. Yes, getting into the (usually) No. 1 ranked college in the country is a very lucky circumstance given the competitive applicant pool. But my mom was also alluding to the illusion that getting into a higher-ranked school is correlated to how rich you will be in the future. And Princeton, (usually) No. 1 on the US News and World Report college rankings, meant I would be, at least to my mom, one of the richest people in the world and would never have to worry about money.
The false idea that I would be well on my way to vast riches was only reinforced when I got into medical school. That’s how Ivy League students eventually become rich, right? They all become doctors or lawyers, right?
This sort of conclusion seems ridiculous. But when you think from the perspective of my Filipino parents, an understanding emerges. There is a mentality in Asian culture where coming to America and having your offspring attend the best colleges and become a “rich” doctor or lawyer is an automatic golden ticket to riches. As Americans, we have all heard the stereotype of the rich doctor or lawyer. In the minds of Asian parents, that stereotype is exponentially increased! First-generation Asian-Americans dream of coming to this country and having their son or daughter become a rich doctor or lawyer.
It is difficult to imagine how this stereotype is so ingrained if you are not a foreigner from a poor country. With the stark contrast of poverty, this is how the rich doctor stereotype can be amplified. My mother grew up in a third-world country in a one-room house in Leyte—one of the outer islands in the Philippines—which she shared with her five brothers. There was clothing and food, but those clothes were T-shirts and shorts and that food came without utensils to eat it.
My mom would relate a story where she and her friends would go to the home of the only rich person in town who had a TV, and they would peer through the window so they could catch a glimpse. Who owned that big house with the TV? A doctor, of course. And what would be on TV? American images of beautiful clothing and American movies featuring tables of extravagant food that poor Filipinos could only dream of.
In Filipino culture, education is highly valued and is the door to move up the wealth ranks. In the eyes of my mother, the variables and the equation were simple. America = rich. Best education = rich. Doctor = rich. So America + No. 1 college + doctor = Rikki is going to be very rich and never have to worry about money ever and can even support his two parents and disabled brother and then still buy Porsches, houses, etc.
Yes, my mother’s money beliefs were seeded into my mind as I grew up, and her money beliefs became mine. She encouraged me to be a doctor not just to help people like my handicapped brother but to be rich. Very rich. And for a while, it seemed our false money beliefs were reinforced. Meredith and I, upon making big-time physician incomes, ate out nightly, traveled extensively through the Caribbean and Europe, paid $80,000 for a wedding and honeymooned at $12,000, leased two Mercedes, and bought a $1.26 million house with yearly property taxes of $24,000 (we were also being screwed into paying $28,000 in yearly whole life premiums). Yep, we were living the dream!
Then, Mia was born. Yes, my second child was the straw that broke the camel’s back. My wife and I were suddenly in $31,000 of credit card debt. Everything I learned about money was a lie. My mom was wrong! I was wrong! I responded by getting as financially literate as possible through The White Coat Investor, but financial literacy has not fully quelled the new money belief in me: doctors, especially this one, are terrible at money.
As a doctor, I have to penny-pinch in order to survive, because if I didn’t, I would be in $31,000 of credit card debt again. Going to Princeton and being a doctor was a false sense of financial security, and my emotional reaction when that security was broken was financial insecurity. I have adopted a scarcity mindset. Logically, I know these money beliefs are not true. But emotionally, they eat at me. I thought I never had to worry about money, and when that thought became such a spectacular failure in real life, I was in danger of hoarding money and becoming the richest guy in the grave. Coming from this angle, knowing this about myself, helps guide discussions regarding money with Meredith.
So, my money beliefs really clash with my wife’s. She would rather spend every dime now since she learned growing up you may never live to see tomorrow. And that money should be spent on things that will show you’ve made it. Forget spending to keep up with the Joneses; my wife spends to prove she is not that poor nobody Jersey girl. At the same time, I feel I can’t spend money because I am only a doctor, and doctors are stupid at money and my losing $50,000 to whole life insurance is proof that the rich doctor crap that society embeds in us is a lie.
Now, let’s see how we, as a couple, talk about money and goals given these different money beliefs.
More information here:
Yes, Risk Tolerance Can Be Modified: You Just Have to Rewire Your Brain
A Candid Conversation with My Physician Spouse About Burnout, Guilt, and Resentment
#3 Know How to Communicate with Your Spouse
Financial advisor Justin Harvey on episode 163 of his podcast, APM Success, mentioned three ways to talk to your spouse. These involve:
- Gathering the data
- Letting the data speak for itself
- Choose your language (no pointing fingers) with words like “we” and not “you”
This is sage advice, and knowing your and your spouse’s money beliefs helps through this process. The data-gathering Justin was referring to involved the hard numbers of how much a couple has, how much they spend, etc. Knowing each other’s money beliefs is also part of data-gathering. I like his second point, where you don’t dictate a financial conclusion to your spouse, but let him/her make it. Nobody really likes being told what to do, spouses included. But having a more eureka moment of whether you can afford to spend on something is reinforcing instead of offputting. With his last point, it is almost universal—not just with money—to not be accusatory in any way.
An example of using Justin’s communication advice would be our recent decision to send our kids to summer camp for $15,000, despite us already having a full-time nanny and having every dollar in our budget accounted for. I know I am the one writing this article, but my wife, being the one who wanted to spend money on such an expensive proposition, knows very well how to communicate spending to attain my approval:
Meredith: “Hey Rik, you know this camp is fantastic and teaches kids all sorts of outdoor skills that they’re not learning now. I think we should really consider this next summer. Look at these reviews on the website! Look at these pics! It is kind of expensive at $7,500 per kid.” (She did some great data gathering!)
Me: “Mer, are you serious, though? We are paying our nanny already to look after the kids and do activities with them. This might be kind of a waste!”
Meredith: “But look at these reviews, and the memories these kids rave about! And we didn’t go to Turks this year so that money can cover this next summer.” (She’s letting the data speak for itself!)
More Meredith: “I know we are trying to save and budget, but we want our kids to do things that we never had the chance to do, right?” (I appreciate that she didn’t say, “YOU are trying to save and budget” or, like in the past, “You are so damn cheap.”)
Me: “Mer, you're right. Let’s do this.”
If she had presented this differently, there was a very high likelihood that I would kick/scream/fight paying a five-figure amount for this camp, on top of paying our nanny. But her communication was key. As we have become more financially literate, better communication has been a real boon.
#4 Realize You Don’t Know What Will Make You Happy
A few years ago, I was totally against getting a desktop computer despite my wife’s persistence that we buy one. “But why?” I would ask her. “We have two perfectly good laptop computers, one for each of us.” Being the cheap guy that I am (see above), I didn't see the utility of the happiness return a new desktop computer would bring us. My wife, who usually does not like doing research on new technology or computers, kept asking me to look up a nice desktop to purchase. I kept resisting, and finally, she took matters into her own hands and bought a Dell desktop. Well, guess who uses the thing more than she does? In fact, take a guess which computer I am writing this post on? You got it: me. This desktop has a beautiful monitor twice as big as our tiny laptops, the speakers that are currently cranking out Winger’s “Miles Away” sounds phenomenally crisp compared to the laptop, and I type without my neck feeling strained. This desktop has made me plenty happy.
This type of financial misperception, not knowing whether a purchased item will bring you happiness in the future, is known as poor “affective forecasting.” As Belsky and Gilovich comment on the phenomena in their book, Why Smart People Make Big Money Mistakes:
“Studies show that, in many ways, people are not adept at forecasting their future levels of satisfaction, joy, or contentment. These ‘affective forecasting' errors exist in part because . . . we often don’t know what’s making us happy or sad today, but also because we underestimate our ability to adapt to life challenges and overestimate the improvement in mood or satisfaction that imagined riches or better circumstances will bring. As a result, we let fear or greed dictate our financial decision . . .”
Which brings me to an insightful point when aligning your goals with your spouse. It is very possible your spouse is a better affective forecaster than you are. Yes, the person that you have promised to share your life with is not subject to the biased poor affective forecasting of the self, and, in fact, likely knows more about you than you know about yourself. Maybe that financial goal your spouse has, despite not being one you think will make you happy, might actually end up being the most worthwhile and fulfilling goal to you in the end. Happiness research has, time and time again, shown that, as humans, we have poor insight into what makes us happy—usually to one’s financial detriment. We buy material things thinking it will bring us long-term happiness. Yet that sort of “thinking” is actually a System 1 brain reaction responding to a dopamine hit in the nucleus accumbens. Realize that your spouse’s goals, even if you don’t think they'll bring you happiness, oftentimes will. Your spouse (assuming a happy marriage) would not choose a financial goal that would make you unhappy but instead has made a calculated decision that he/she believes will make you BOTH happy.
Taking the desktop computer lesson to the next level, WE have a goal now of putting a swimming pool in the backyard complete with lush landscaping. The price tag for such a project: $300,000! And that is only an estimate. Given my money-scarcity-mindset-rich-doctor-is-a-lie mentality, I balk at the price tag. But I know my wife’s money beliefs, I know mine, and we talk about it. We have a plan to attain this goal financially. The discussion was similar to the summer camp decision mentioned above. We gathered the data of cost vs. how much joy we might get from the purchase, let the numbers speak for themselves, and didn’t point fingers as to who is spending too much or who is the cheapskate. Despite my doubts, this purchase might really bring a lot of joy to the entire family.
More information here:
My Financial Plan Calls for Me . . . Being Hung by My Fingernails????
To Summarize with a Little Neurology
I hope that these additional insights help you and your spouse get on the same financial page, or at least be on the same financial chapter. And I hope the personal stories of Meredith and me drive home these points.
As always, being a neurologist, I have to talk about the brain. Stories always have a way of searing into your mind. In fact, the stock market media does it all the time. The story starts in your visual cortex as you read the words of this article. Take what I just mentioned about Meredith. As you learn about my wife, different parts of your brain activate as the story fills in. She is a woman doctor, activating temporal areas where lexicons exist identifying these words. She is from the Jersey shore, activating the parietal lobe which is the seat of spatial processing. Growing up impoverished will activate emotions that are a frontal lobe function. Heck, even using her name takes the processing from some nebulous fairy tale to one of real life. The same goes for when you read about my money beliefs. Now you have all parts of your brain etching information into your temporal lobes for memory processing, that knowing your money beliefs and that of your spouse’s are essential, that communicating financially must be done in a sensitive way, and realizing that your spouse’s goals might make you happier than you think.
All these are crucial skills in getting on the same financial chapter and attaining your goals. Together.
What do you think? Do you know your and/or your spouse’s money beliefs? Has this helped to get on the same financial page? Do you think your spouse knows more about what will make you happy than you? Comment below!