Don't Let Money Come Between You and Your Spouse

According to a study by The American Psychological Association, nearly one in three couples cite money as a major source of conflict in their relationship. Whether it’s budgeting, debt, or how much to save versus spend, money has a unique ability to stir up tension. In fact, relationships that frequently argue over finances, are a strong predictor in divorce. However, its also very normal to have disagreements in finance and investments and many couples today have strong differences in investment suitability. Perhaps while not a primary contributor to divorce, the differences in money minds with a lack of communication and planning inevitably lead to distrust and resentment. The misalignment on finances may come to a boiling point once a catastrophic life event occurs and an insurance claim or high medical expense surfaces. Understanding a 'best practices' style for finances and communication with a spouse will help lead to better outcomes and improve life.

Key Drivers of Arguments & Different Possible Solutions

The Large Purchase

Its great when you have some spare cash saved up and you decide to get a brand new deck installed, after all, you just met a contractor at Home Depot who was offering deals and had seen them before and knew of their reputation. Perhaps it was $800, or maybe $8,000; its not a normal every day purchase and sometimes making these deals lock you into a change of lifestyle. Best to communicate and share the dream. There can still be a disagreement but Say something, its respectful.

Differences in Debt Treatment

While the debt might not be shared, the emotions will be. Perhaps while keeping things separate, its easy to control the conversation but changes in communication alone aren't enough. In fact, its good to treat important debt ratios such as Debt-To-Income ratio the same you would if you were single. Suppose one partner in the relationship earns significantly less but purchased a brand new car worth their annual income. They have a five year note, the monthly payment doesn't feel too high for a dual income household; however, later on you both apply to refinance a home and find yourselves unqualified for a specific lower rate because of one partners excessively high debt to income ratio. The challenges can arrive unexpectedly and create tension. There is an easy solution and similar to our Large Purchase example, having clear communication is important, having a shared goal is incredible, but having a well talked through plan and setting the expectations of the risks is A+.

Having differences of opinion on Investments

A common problem among couples is always differences in objectives and risk tolerances of their shared accounts. Suppose you have the polar opposite tolerances of aggressive growth and staunch capital preservation, the news of a market correction could be interpreted in dramatically different ways. If the money was needed for an upcoming purchase, how would it look to your partner whose investment preferences could have preserved the assets? As always, there are solutions and the best one here is to actually keep accounts distinctly separate for purposes of allocation. When funds are shared then so too must the investment and a compromise needs to be made by both partners.

Mitigate Financial Arguments Head-On

A financial advisor can be a neutral and informed third party, helping you both articulate your goals, understand each other’s perspectives. There are many different private offices that engage in advice and who specialize in understanding their clients psychology and comfort with investments and finance. Where questions need to be answered, they are on call to understand your context and work in your best interests. The process of engaging with a financial advisor together with your spouse can help reveal differences of opinions and provide a forum to work through those differences. Additional engagements with an advisor will be to help monitor and promote commitment to the agreed upon plan. The cost is not on a per hour basis, its caveated by the assets under management, as is with private wealth management firms. See our pricing here.

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