Lessons From My Father, Part I: Money Harmony With Your Spouse

When my father passed away six years ago, my mom was left in a financial crisis. Not the kind of crisis you are probably envisioning. My father left her with plenty of money. Probably more money than her thrifty self will know what to do with for the rest of her lifetime. For her, the crisis was that she had no idea WHERE their money was kept. Aside from their checking account, the money could have been kept in a Swiss bank account for all that she knew.

My dad had a talent for investing money and ran his own finance-related company. Handling money was his strength, so my mom let him make all of their financial decisions. The months after my dad's death were a real-life treasure hunt to recover all of their accounts. It took over a year and a few expensive lawyers to track down all of the money. My mom felt grateful to be financially independent, but equally terrified at the prospect of managing this money for the first time. I think she also felt vulnerable and alone. And for good reason. She suddenly had lots of "friends" more than willing to help her with her finances. She didn't know who she could trust.

I am really proud of her. My mom took a financial management class and read lots of books on wealth management. She found a great financial management team using the knowledge she had acquired and learned to trust her instincts. For my mom, a 19-year old bride and a 44-year old widow, it was a great first lesson on learning to live independently.

I learned an important lesson through watching and supporting my mom through all of this.... it is REALLY important to keep a constant dialogue about money running in your relationship. Not just in case one of you dies unexpectedly, but for the sake of marital harmony.

I feel like DH and I are in a good place with our money. We're always wishing there was MORE of it... but we act as good stewards over what we have, communicate well and generally avoid money-related fights. Here are five rules we live by:

1. Define Financial Responsibilities. In our house, DH keeps the checkbook balanced and up-to-date and I handle our investments. I like to think strategy and he prefers details, so it works well for us. It doesn't matter who does what...but only that it is established, so the work gets done.

2. Keep Each Other In-The-Know. Being an MBA geek and a generally anal person, I instituted formal financial meetings in our house so that DH and I could stay on top of our finances. When I discovered that DH had tucked the sports page under my carefully prepared meeting agenda, I decided on a more informal approach to our financial discussions. Now we just have quick chats over dinner or before bed. The main principle here is to meet periodically and have an open discussion with your spouse about your finances. Such a meeting might include updating each other on changes to your accounts, setting and tracking specific financial goals, and making any other financial-related decisions TOGETHER.

3. Set and Track Financial Goals. Working together to reach financial goals is extremely rewarding in a marriage. I can still remember the feeling of sending off DH's final student loan payment and realizing that we were completely debt free. We did a happy dance in the streets of Queens that day!

Essentially, when you get married, you are entering into a financial partnership. You and your spouse can grow your very own empire through saving and investing your money. Obviously, this isn't the most important work you will do in your marriage, but having a financial plan will help you accomplish a lot of these more important things you will do together.

Sit down and make a list of short-term (within five years) and long-term financial goals with your spouse. Short-term goals may include buying a new car or home, starting a business, that post-baby boob job (sorry to tease, DH, I really meant to say lasik surgery), or a taking a big vacation. Long term goals might include sending kids to college and on missions, retirement and travel. Next, make a reasonable plan to reach these goals. Obviously, you aren't going to be able to save for everything at the same time, so prioritize.

Saving for your retirement, however, should be your first priority (I will cover this in more detail in Part II). This is because it is going to take a hell of a lot more money than people our age realize to have a comfortable retirement and also because you can take part of your tax-deferred retirement savings to help finance a first home or even your children's college education.

4. Understand Each Other's Relationship with Money. Are you a spender or a saver? What is your spouse? Really, any combination of spenders and savers can present problems in a marriage. Two spenders in a marriage can create out-of-control debt. Two savers may make life very boring. And having one of each in a marriage may create conflict. The key is to try and understand your spouse's relationship with money (it can usually be traced back to their childhood), openly communicate, and set limits/compromises with each other to avoid debt or conflict....or boredom.

DH and I are "Savers" with a couple of exceptions. He has a weakness for books and music. I love clothes and cool gadgets for my bike. Establishing personal allowances has help us minimize conflict in our own relationship. We get to spend a little cash on ourselves each month without guilt. It works for us. DH no longer has to hear me whine about a thing called the "LIBRARY" where books are "FREE" and I no longer have to hide shopping bags.

5. Set a Spending Limit. This will save you from countless fights over money. For big purchases, set a spending limit, such as $200. If you or your partner go over that limit, make it a rule that you need to discuss the purchase with your spouse before buying.

What other money rules have worked in your own relationships? I'd be eager to hear more ideas.

Coming soon:
Part 2: A Quick Primer to Financial Management and
Part 3: Helping your Children Become Financially Responsible Adults