Money magazine's most recent issue has two articles that fit our June theme on partnerships and money -- "What's in Your Spouse's Wallet?" and "Get a Financial Life in 7 Weeks." The premise behind the first article: Your marriage can only improve if there are no unpleasant surprises or disconnects regarding the financial picture. The premise behind the second article: Do one simple thing a week and your household finances will more or less run themselves after two months.
What I find interesting about both articles is the implicit assumption that married people merge their financial futures, period. The second thing that piqued my attention: the premise that you run your personal finances like you run any financial portfolio -- with an eye toward reducing operating costs and boosting the bottom line. It is the refreshing opposite to Lori Gottlieb's contention that "Marriage isn’t a passion-fest; it’s more like a partnership formed to run a very small, mundane, and often boring nonprofit business."
The third thing the two articles share: the unshakable conviction that married people need to set aside a dedicated period of time to talk about money, because doing so is vital to the partnership's longevity.
I only wish that one of the articles had included a sidebar on how to have these conversations, because I suspect that for many couples, the biggest impediment to discussing finances isn't a lack of time, but missing a vocabulary that doesn't set off emotional bombs. Money's archives aren't much help, what with the experts assuming that it's the menfolk who are more interested and advising them to "lay off the jargon and speak English" when discussing finances with the wife. I don't see why we can't compile our own tips on cultivating healthy financial dialogue.
Anyway. Because I'm fond of you, my readers, I've broken out all the useful information in the articles. Check after the jump.
Here's what you need to know about your spouse's financial picture from "What's in Your Spouse's Wallet?"
- How much money did your spouse make last year, including salary, bonuses, commissions and freelance pay?
- What's the last big purchase (more than $100) your spouse made, and how much did it cost?
- How much does your spouse owe, counting credit-card balances, car loans and any other debt, aside from your mortgage?
- What's the current value of your spouse's 401(k) or other principal retirement account?
- If your spouse passes away, how much will you collect in life insurance (counting both workplace and individual policies)?
- How much did the two of you report in joint income on your tax return last year?
The seven steps you'll take from "Get a Financial Life in 7 Weeks"
Week One: Talk about your financial goals. The article suggests that each party write their goals on index cards (one goal per card) and then you can shuffle, re-order and lay out your joint goals from that list.
Week Two: Set up the emergency fund. Here, the article suggests that you set up an automatic transfer from your checking account to a dedicated emergency account.
Week Three: Confirm that your life insurance policy will cover your loved ones when you're gone. The basic rule is that your benefits should equal 5-10x your salary.
Week Four: Put your bills on autopay. [My note: I'll do this when more banks and creditors stop charging for the privilege, but that's just me.]
Week Five: Simplify the mix of funds in your 401(k). Here, the article suggests sticking to three index funds: one total domestic stock market, one total foreign and one bond. [My note: I like to balance my portfolio between a more complex blend of large-cap, mid-cap and small-cap funds, some chosen for long-term value, some for growth. But if poring over fund returns makes you cranky or confused, Money's take is good advice.]
Week Six: Automate any other savings and investments. The article suggests that you set up recurring transfers from your checking account to any IRA, 529 or rainy-day funds you have, and that you do it on payday. Money you never see is money you never miss, right?
Week Seven: Pare back your credit cards to one, and make sure it's one that gives you a lot of benefits.
We have a state of the union every year. I took over duties as the CFO many years ago. My husband I didn't merge our finances for the first couple of years we were married but when we relocated across the country it was just easier to merge stuff. We have three accounts - Yours, Mine and Ours.
Then we have savings. It's pretty easy and the toughest conversation was the first we had when I was like 23 and laid bare my massive credit card debt, my student loan debt and gods only know what else. After that, it got much better and we talked quite literally about our attitudes about money.
Now it's just not a big issue. I don't think we've fought about money ever. In fact, our first fight about money is probably due - I want to do a lavish vacation in Europe and he wants to do something more modest.
Posted by: Alyssa | 2008.06.26 at 04:42
I think a good starter topic for couples is talking about how they were raised in regards to money -- how did your parents spend on gifts for Christmas? Did they take out loans for things or pay cash? Did you get an allowance? How much did you know about their finances? Do you wish you knew more or less? How did they spend when it came to consumer stuffs: clothing, cars, beauty, etc. How did they talk to you about setting up savings accounts and credit cards?
I know for us the root of our individual financial insecurities and blind spots is rooted in how our parents dealt with money and what they did or didn't teach us. A lot of our thoughts about money from childhood are just not very mature and are based on incomplete information -- it's pretty important to turn over these money myths and boogie-monsters and figure out what the truth is.
Posted by: amanda | 2008.06.29 at 10:17
I think a good starter topic for couples is talking about how they were raised in regards to money -- how did your parents spend on gifts for Christmas? Did they take out loans for things or pay cash? Did you get an allowance? How much did you know about their finances? Do you wish you knew more or less? How did they spend when it came to consumer stuffs: clothing, cars, beauty, etc. How did they talk to you about setting up savings accounts and credit cards?
I know for us the root of our individual financial insecurities and blind spots is rooted in how our parents dealt with money and what they did or didn't teach us. A lot of our thoughts about money from childhood are just not very mature and are based on incomplete information -- it's pretty important to turn over these money myths and boogie-monsters and figure out what the truth is.
Posted by: amanda | 2008.06.29 at 10:18