This blog post comes from our friend and occasional contributor, Nick.
Big thanks to Jacob and Vanessa for letting me grace their awesome site with my own perspective on money and relationships. I have a lot to say about it and what better place than with the original Cash Cow Couple?
I guess the reason I have so much to say about it dates back to a critical summer day on the farm where I grew up. I was around 12 years old. My mom asked my brother and I to come into my older sister’s bedroom. This already was unprecedented! We put down our toys and shuffled in to see what was going on. Our dad was already there waiting.
“We wanted to tell you guys,” Mom began slowly and then stopped for a long pause. “That dad and I have decided to get a divorce.”
My brother was a bit too young to understand what this meant. My sister had already been told privately so was unsurprised. Myself? Utterly blindsided. I ran screaming from the room to my bed where I buried my head in pillow. My mom came in and stroked my hair and told me everything would be fine (lies!) and they both still loved us blah, blah, blah. I cried and cried.
They say traumatic moments physically rewire your brain and change how you interact with the world. That sounds right to me. This moment was the most emotionally painful moment of my life. The raw wound runs deep, covered over now with layers of psychological scar tissue.
I don’t dwell on that time. I’ve moved on, found my own path, learned to trust people. But my way of navigating through the world was certainly colored by that experience and the even worse days that were yet to come. I’ve read that children of divorce often go to extreme measures to avoid a breakup in their own lives. That could mean avoiding marriage altogether or simply staying in an unhappy relationship just to avoid that painful inflection point.
For me it was not getting married until I was in my 40s and being extremely careful to not let money become a stress point in the relationship (as much as possible, anyway.) It’s that part I wanted to share with you.
Money is pretty much always listed as a factor in divorce. Even when there is another, more proximal cause, money issues are often there, lurking under the surface. I don’t know to what extent money issues played a part in my own parents’ divorce, but I’m sure it was a significant factor. Although I suspect many couples who are in strife about money believe their problems revolve around not having enough of it, in reality I think it’s more likely a lack of a shared value system. If one is a saver and one is a spender, you have a natural recipe for conflict.
But there are also some practical things you can do to reduce financial conflict. I’m happy to share some of the ones that have worked best for me here in the hope they’ll be helpful to some of you. If anyone has additional thoughts on ways to prevent financial conflict in a relationship, I hope you’ll share them in the comments. So here it goes:
Money and Relationships – How to Make it Work
Talk about it
Yeah, I know, communication is the key and all that. But seriously, do it. Talk about your goals and approaches. If you can use reason and logic to work through your problems and come to a solution, you’ll have a lot less to fight about.
Keep your money separate
OK, this is optional. Not everyone is going to need or want to use this approach. But in situations like mine, where I was significantly older (and wealthier) than my mate, one could get the feeling the other party is taking advantage of you when lopsided amounts are going in and equal amounts are going out. I wouldn’t likely feel that way in my case, but it was a potential stress point so we removed it. It’s also a way to retain your own spending money so you have the freedom to spend as you like and to prevent you from worrying about what the other person is doing.
Boring, right? OK, not for me, but maybe for normal people. My wife and I have a few different Google spreadsheets that we share. Now obviously they’re handy for ensuring you’re on the same page as far as automatic transfers, etc., but they are more important than that. Spreadsheets that articulate your goals and plans keep you both honest. There’s no disputing who told who what. Check the sheet. They’re also great for inspiration and for seeing real progress. Rather than updating and erasing our goals as the years go by, I will use the line-out tool like this to cross off the completed goals.
This one is a little confusing. We have a budget — in a sense — to determine what amount to move for our various automatic deposits. But we do not have a budget in the sense of “we are allocating $300 to food this month. Why? Because if you use that approach, somebody is always being blamed for blowing it and it just creates conflict. The other reason budgets can be bad, is that if you only spent, say, $200 in a particular month, it creates the urge to splurge, which is always dangerous.
Have several bank accounts
This has actually gotten a little out-of-hand in our case, but the general approach is sound. Because we keep our finances separate for the most part, we needed a way to pay for things jointly. So the basic way it works is you set up a joint “bill-payer” account with an ATM card for each of you. You agree (in your spreadsheet) how much is to be transferred over each month (automatically). The difference is kept in your personal accounts to invest or whatever. We actually have two accounts like this. One is a completely automated checking account that pays the mortgage and life insurance (which require automated bank transfers instead of credit cards). We keep an extra month’s worth in that account just in case something goes haywire with our deposits (which actually did happen once).
Share a credit card strategy
Now if you’re actually using credit cards to buy things because you don’t have the money right now, you need to head back to remedial cash cow school. However if you’re using cards to track and automate your bills, great! For us, the right number of credit cards is three: One joint card with a relatively high limit for monthly bills, travel, etc., one personal card each for personal spending and personal bills. Depending on your relationship, you could also drop the personal cards, but I always felt better buying my personal items, gas for my car or the occasional lunch with friends with my own money. Why does it matter? Because if it’s MY money, I can go out for a few drinks with my buddies and no one can complain. Or she can buy herself new clothes without questions from me about what things cost. Now keep in mind, if you’re hoping to reach pretirement at a relatively young age, you’ll need to stop almost all luxury spending, but that’s where the shared spreadsheets and the talking come in.
By far the biggest cause of financial stress in any relationship is debt. Even if you think you’re fighting about who left the dishes in the sink, you’re probably really fighting about your debt. It’s insidious and destroys families. Kill. Your. Debt. Whether it’s credit card debt (probably the most common), ridiculous car payments (none of you would dare have a car payment, right?) or just too much mortgage, the strain of debt is massive. I recommend not getting married until you’re completely debt-free (mortgage and sometimes school loans excluded). If one of you has a car payment, the other one doesn’t and you’re planning to get married, those plans need to be put on hold until you’re both debt-free. Why? Because it’s a guaranteed driver of resentment.
Get a prenup
I’ve got one and so should you! These legal agreements are loaded with baggage and people have an immediate hostile reaction to either having one or not having one. My take on it was “if she doesn’t want to sign one, then she must be a gold-digger and I’m better off finding that out now.” (Did I mention I’m a child of divorce?) If someone asks YOU to sign one, take it as a way of proving it’s really about love. You should BOTH want to sign one because it protects you both.
Don’t waste your money on fancy weddings and rings
I hope at some point we come out of the era where people boast about how much money they’ve spent on their weddings. Unless you got in early at Facebook, you should keep costs to an absolute minimum. If it has five digits, you’ve spent way too much. My wife and I got married in Vegas when she was already down there on a business trip. We’d bought our rings in Mexico the winter before for $60 each. We didn’t tell anyone and had a great time. It was just for us and no one else. I know some people have a romantic vision in their head of the white dress and the big party, etc. But to me, the important thing should be the marriage, not the wedding. You know what’s romantic to me? Two wrinkled old hands clasped together on a park bench. Do what it takes to get there.
OK, I’ll get off my high horse now! How do you handle money and relationships? Please share your own ways of reducing financial stress in relationships in the comments section below!
Author Bio: Pretired Nick is a fellow money saving guru who will occasionally contribute to the Cash Cow Couple. Be sure to check out his oustanding blog on pretirement.
Editor’s Notes: It’s interesting to see how Nick and his wife have been so successful with their financial strategy. It’s very different from the Cash Cow Couple way. We share all bank accounts, share all our earned income, share our investment account, consult each other if we desire a new purchase, and definitely didn’t sign a prenup. Guess it goes to show that financial success results more from mindset than method. A big thanks to Nick for sharing his views on money and relationships!