Money and marriage
by Arnold Machel
“If I speak with human eloquence and angelic ecstasy but don’t love, I’m nothing but the creaking of a rusty gate.”
- 1 Cor 1:13
Valentine’s Day is around the corner. I’ve heard it said that the two most common reasons for marital break-ups are sex and money. While I’m really writing about the latter, here’s a tip that might help for both: communicate. Communication is the grease that makes just about everything, especially marriages, run smoother.
Over 25 years of meeting with couples on money matters, I’ve seen many with a lack of synchronicity in the way they manage money. I’ve seen spouses break into tears many times, because they and their loved one aren’t on the same page. Sometimes it’s because one is a saver and the other a spender. Sometimes one wants to pay down debt, but the other wants to invest. Or one wants to focus on saving for their children’s education (RESPs), while the other considers their own retirement more important and so wants to focus on RRSPs.
Almost always, communication is a large part of the problem. Almost always, if both spouses can set aside their point of view for just a minute and listen (and I mean really listen) to the other, it’s a simple matter of each giving in just a little. Somebody once said that a successful negotiation results in both parties being equally unhappy. Hopefully (especially in a marriage) we can raise the bar a little higher than that.
Here are a few ideas for those of you struggling with any of the above. For other issues, the solution may be different, but the pathway is the same. Start a conversation – seek first to understand, then to be understood. And then… negotiate for a win/win solution.
Spending vs. saving. First off, let’s not assume that the spender is wrong. Look objectively at your finances and your goals. Are you saving enough to get you where you want to go? If so, maybe the saver needs to lighten up a bit. Usually though it’s the other way around. The couple needs to save more. This is where the negotiations need to come in – and frankly, where a good financial planner can help. Look at what you are spending now. Compare that to what you will be able to spend in retirement. Is it enough? It’s critical that the “spender” be part of this discussion. They need to be engaged.
Decide together (negotiate) how much saving will happen and how much spending. Don’t be alarmed if you don’t get it nailed down right away. It may take many iterations As much as possible automate and/or control the stress points. Set up an automatic savings plan. If possible, do the same with spending. Try to identify where the bulk of the excess spending goes.
Determine an agreed-upon amount and stick to that limit. If you must, put the budgeted amount in cash in an envelope. Once it’s spent for the month, it’s spent. Revisions may be required. Multiple envelopes may be required. Don’t give up if it doesn’t work out right away.
Your relationship is more important than money. Keep talking about it and working at it until you are both at a point where you are okay.
Paying down debt vs. saving. For most of us, this isn’t an either/or issue – it’s and/both. The question is one of allocation. In many cases, it helps to have a third party review your debt and your investments. Their recommendation may be enough to remove any disagreements. For example, if you have a lot of credit card debt costing 12% and you are a very conservative investor, it’s a no brainer. Focus on debt pay down. On the other hand, if you are a 45 year-old growth-oriented investor and your only debt is a low-interest mortgage amortized over 2 years, investing will be your better bet. But for most people it’s not that cut and dried. Try something like this. For every dollar paid towards debt, a dollar goes to investments. Or maybe make sure the interest is paid first, so for every dollar of principal paid, a dollar goes into investments. Or make it a proportion. Talk about it. Come to an agreement. Make it happen. Agree to revisit the issue in a month or two or three, just to make sure it’s working for you both. Again, communication it the key.
Saving for retirement vs. saving for the kids. This is an easy one in most cases. You can have your cake and eat it too, by simply punting the decision down the road. One of the wonderful things about RESPs is their flexibility. This solution would depend somewhat on current and future expected income, but most likely you could maximize an RESP (requiring $36,000 over 18 years), which would also generate the free 20 percent available from the government. Plan to give the child the free $7,200 in grant money if they go to post secondary (it’s all free money anyway) and wait until then to decide whether to keep the capital and/or growth for your retirement or whether to give them some of it.
By listening (really listening) to one another, being flexible and accommodating – and getting good advice – you can make what is often a stressful topic one that is easy to mange. For your Valentine this year, consider giving the gift of really listening… and maybe even giving in a little.
Arnold Machel, CFP® lives, works and worships in the White Rock/South Surrey area where he attends Gracepoint Community Church. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. Questions and comments can be directed to him at firstname.lastname@example.org or through his website at www.visionvest.ca. Please note that all comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary are those of Arnold Machel and may not necessarily reflect those of IPC Investment Corporation. While every attempt is made to ensure accuracy, facts and figures are not guaranteed.