Separate bank accounts for married couples? I believe in a mix of separate and joint accounts, but think again, says
Eric Tyson author of the new book
Let's Get Real About Money! Profit from the Habits of the Best Personal Finance Managers (FT Press, December 2007.
Tyson offers eight financial tips for marital bliss. Here are the tips from a news release. The tips about the importance of words and communtications (#1, #3 and #8) hit home with me.
"1. Start talking about money now. Most people are raised to believe that it's impolite and inappropriate to discuss money with others, and are taught that it's a private, personal, and confidential matter. The result is that most couples never seriously talk about money. While dating, they are in denial about the importance of all things financial, even though it's a huge issue looming on the horizon.
"If you avoided talking about money while you were dating—and chances are you did—don't keep putting money talks on the back burner now that you are married," says Tyson. "Take the risk to discuss your feelings, attitudes, and beliefs about money and be ready to respectfully listen to your partner's approach. Work at understanding your differences and decide on a process for negotiating agreements when conflicts inevitably arise. This will help minimize small problems mushrooming into big ones but, of course, doesn't guarantee a lifetime of trouble-free financial bliss."
2. Understand gender differences as they relate to money. Throughout his years of financial counseling, Tyson has observed that men and women often deal differently with money. "Women are more likely to ask for help and admit gaps in knowledge than are men," says Tyson. "Men's egos more often get in the way of seeking assistance and education. Men are much more likely to plow ahead, even when they lack sufficient information and background on a money topic.
"When it comes to investing, men are more willing to take risks," he adds. "That's not necessarily bad. Although they may get themselves into trouble by relying too heavily on the investment vehicles that occupy the highest ends of the risk/return spectrum or leveraging themselves with borrowed money, for example, men are more likely to take the necessary risks to generate healthy long-term returns. Being aware of these differences as a couple can help you when approaching how you should find solutions for your financial management problems."
3. Words matter when broaching money concerns. When discussing the spending habits of your spouse, it's important that you don't bring up the subject using an accusatory tone. A little tact and sensitivity can go a long way. "When concerns are raised, you dramatically increase the likelihood of your partner hearing, listening to, respecting, and positively responding to your point of view if you present it as your feelings on a topic rather than a criticism of the other person's financial habits," says Tyson.
"So, instead of saying, 'You're a reckless over-spender,' phrase the issue as, 'I'm concerned about having enough money saved for retirement so that I don't feel chained to my job,'" he advises.
"Try, 'I'm really stressed that we haven't been saving enough to buy a home. Having a place of our own is important to me. Can we talk about it?' not, 'It's time for you to grow up and act like a responsible adult.' Having one talk isn't going to solve your money problems, but it will get the ball rolling towards a more pleasant financial future, so make sure you plan how you are going to broach the subject."
4. Respect each other's differences. Finding it in yourself to appreciate the ways your partner's money personality differs from yours is vital. Try to think openly about the situation for a minute. If you're a penny-pincher and you'd married another miser, you'd likely never enjoy the fruits of your hard work! Yes, a miser/spender marriage may produce fireworks on financial issues, but with open minds and communication, such a pairing can also produce positive results, as both partners move away from their extreme polar behaviors to a more balanced and fulfilling position.
"Misers can learn that they can spend some money 'frivolously,' enjoy the experience, and not end up in financial ruin," says Tyson. "Chronic over-spenders can experience how good the sense of financial security feels that accompanies living more within one's means, paying down consumer debt, and beginning to see growing investment balances. The root of successfully and happily managing money as a couple is to compromise."
5. Share the money responsibilities. Because married couples have a seemingly endless supply of financial tasks to tackle, Tyson encourages open communication and shared responsibilities. (It's not fair for one person to bear the entire burden alone.) Take advantage of each partner's talents by matching tasks based upon interests and skills. Start by developing a list of responsibilities, such as paying bills, shopping for and managing insurance issues, and handling investments.
"Decide who will take care of each task, the level of consultation you're both comfortable with for that assignment, and how often the task will be performed," says Tyson. "Put it all on paper so that you both know who's supposed to do what and when and to minimize the potential for misunderstandings down the road."
6. Rethink your bank account structure. Is your money still in separate accounts, joint accounts, or a little of both? If for some reason you or your spouse has been holding out on getting a joint account, know this: State divorce laws generally treat a married couple's assets as pooled and divide them up upon divorce accordingly, even when they're in separately titled accounts. For many couples, pooling and sharing of accounts works fine, especially when communication is open and problems are productively addressed.
"Separate accounts and finances often lead to friction in marriages, especially if one person cuts back on work outside the home to be with the kids, or if wide pay differences exist between the partners," says Tyson. "I've also observed a tendency toward increased secrecy and related problems with separate accounts if spouses keep much of their spending habits private. That said, a combination of joint and separate accounts is a workable compromise for some couples. The key to making this arrangement work is setting a discretionary spending limit. For example, you must consult your spouse on purchases of more than say $50 or $100."
7. Educate yourself. The best thing you can do to improve your finances is to educate yourself about personal finance. Sign up for a personal finance course and pick up a few good books. You might also consider seeking financial advice, but be careful who you ask, says Tyson—some professionals aren't really qualified to give the right advice and others have a self-serving agenda.
"Attorneys generally lack the training and related perspective to adequately analyze your entire financial picture," says Tyson. "Most financial advisors sell products, not their time and service. Consulting with a good tax advisor is worthwhile in some cases, as there are a number of opportunities for married couples to save, particularly in regard to tax breaks that they may not be aware of."
8. Set some financial goals. The best way to save for the future without nickel and diming your way through the present is to work out a budget that you can both agree to. Analyze your past six months' worth of spending. How much of your income are you saving? Not enough? Now go through the various spending categories—dining (meals out), groceries (meals in), entertainment, taxes, car payments, and so forth—and set targets that cut your spending enough so that your rate of savings increases. That's what budgeting is all about.
"There is always some place to cut spending," says Tyson. "The most common problem couples run into is that those spouses who have difficulty saving money think of everything in the budget as a necessity. But try to be realistic: Starbucks every morning is not a necessity. All those channels on your cable bill aren't a necessity. Neither is a brand new luxury vehicle with all the bells and whistles. These are places you can cut that shouldn't cause too much pain. And remember that you can always budget in fun things—like the occasional weekend getaway—so that the spender in the relationship doesn't feel like the budget has zapped the fun out of everything in life."
"The biggest lesson to take away from all of this is that marriage and money can and should go together harmoniously," says Tyson. "So many couples simply try to ignore their problems or avoid dealing with them when they realize what's up with their newly joined finances. They just need to realize that just a few simple steps can get them on the right path. By taking care of their money problems, they can ensure a happier future together."
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Do you ever feel as if life is passing you by? Do you ever suspect that friends and co-workers know secrets about life and money that you don't?
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