Five Simple Money Commitments Couples Need to Make

Here's a piece courtesy of Marotta Asset Management on how couples should make five basic money commitments:

No married couple wants a scandal, even if it is just financial in nature. Money problems can ruin the love affair with your spouse. The work of blending two lives in harmony requires certain basic commitments. Many families today are financially troubled. Most of these are in denial. The rest of them are looking for a quick fix. Even a financial planner can't help unless the couple is willing to make five simple commitments. You can always choose to find something to fight about. But if you are serious about removing the financial obstacles in your love life, you should commit to the following money management rules.

First, take the time to provide open accounting to your spouse. Most financial arguments are not about how to spend your money but about how money was actually spent. Just like every publicly traded company is required to give a public accounting of its finances, couples should do the same. In the public sector, it's considered a scandal when a corporation fails to provide its financial information in a timely fashion. The same rules should apply at home. Financial accountability, openness, and honesty are essential in marriage.

Next, make saving money savings your first priority. Pay yourself first. Couples should agree on a savings rate and should prioritize their savings above all other budget categories. Savings should be automated and protected from impulse spending habits.

I've come to believe that savings should even be prioritized above debt reduction. I've found that couples that are in debt cannot seem to get out of debt because they are using what should be going into savings. They are servicing to service their debt rather than adjusting their lifestyle so that they are spending less than they make.

Set a limit on what you can spend without first getting the approval of your spouse. Each spouse must sign off on spending that might be a budget buster. If you are young or your finances are in trouble, the amount should be fairly low. As you get more experience and your finances are in harmony, you can raise the amount. Any purchases above that amount should require the agreement of both spouses.

In the same way, any purchases beyond what was budgeted should require the agreement of both spouses as to which budget category is going to be reduced in order to make up the difference. If your spouse asks you to wait before making the purchase, lean toward waiting graciously. Ask what you would do if you did not have the money at all. Then, do that instead. Delaying a large purchase even by a month can significantly increase your financial health.

Set rules for the acceptable use of credit. In my experience, the easy use of credit cards ruins much financial harmony. It is better when the use of credit cards is limited to only certain required budget items. Using a credit card for groceries or gasoline may be harmless. But when credit cards are used for clothes or eating out, optional spending is unnecessarily inflated.

There are several advantages to using credit cards. But each of these advantages becomes powerful disadvantages for a family struggling to make ends meet. Credit allows couples to avoid asking the tough question about what they would do if they did not have the money. Credit makes spending easy and simplifies check-writing. These advantages are as helpful as giving an alcoholic a place to sleep in the back of the bar.

Either spouse should be able to veto the use of credit cards entirely. Only if both parties agree to the use of credit cards, should they be allowed - and then only within certain guidelines.

Credit should only be used for specific required monthly categories, and then only by the spouse who is less apt to make extra purchases on impulse. If you are struggling with your finances, stop using credit cards entirely.

Agree together that ignorance will not be used as an excuse. Both parties must be willing to learn. Just like a good love life, finances cannot be handled well by just one party. Many problems stem as much from ignorance and abdication by one party than spending by the other. If you don't have the time or the interest to be involved in the family's finances, then you may be the problem. Ask for help and start learning.

Comments

[plonkee]

I would draw a distinction between using credit and using credit cards. In any case, on any matter in a relationship, either party should have the right of veto, to me thats sort of how it works.

[Chris]

Having a preset dollar amount for spending before discussing it with your spouse can be tricky. A $100 new mp3 player need approval, but what about a $5 lunch out? Then a $25 pair of shoes, then a new DVD movie, and on.

I believe most of the budget breakers are not the big ticket items, people really do put more thought into those purchases whether they discuss them with their spouses or not. It's the small purchases that chip away at the excess cash and nickel and dime the budget to death.

I believe in a present % of income being funneled into equal spending accounts for each spouse, with their own account and debit card that they can spend as they see fit...but when the money runs out, they have to wait to save it back up again.

[Phil]

"Next, make saving money savings your first priority. Pay yourself first."
Um... I thought you were supposed to pay God first. Seriously. Shouldn't the couple first decide what % of the income entrusted to them will be given away?
Really what this boils down to is that rule number 1 should be - both will be involved in making a budget and sticking to it. Then comes your five simple commitments which have to do with agreeing on the priorities on the spend side of the budget - but charity is totally missing.
Oh, and credit can be used exclusively for all purchases - as long as it's the free 1-month float provided by credit card companies (i.e. paid off fully every month).

[FMF]

Phil --

The part in green above was written by Marotta, not me.