Marriage and Money - The Budget Meeting

Posted on September 6, 2007

What often happens in marriages with combined finances is that one person will assume control the finances. They pay the bills, watch the accounts, and retain all of the money know how. In our family that is me. Being the analytical numbers guy, I willingly take on that task. On of the pitfalls of combing finances is that one person often ends up with all the power. Power doesn’t have to just mean setting rules, but it can also mean bearing the financial stress and controlling information. The other spouse often becomes oblivious to the actual amounts and inner workings of the accounts, and with that they lose their ability to provide their input and insight. This can wreck havoc on a marriage, but seems to happen all to often. Most times it starts out as innocent ’sharing’ of duties, but ends in financial disaster.

Let’s look at one tool that helps couples handle their money and finances in marriage. For The Happy Rockette and I, we try to avoid that ugly path by having a monthly budget/finances meeting. It is not as scary as it sounds, what the meeting boils down to is laying all the financial cards on the table and talking about them. If you don’t have a budget, please don’t feel like you need one to talk about your finances.

You can vary the meeting frequency depending on the current state of the finances. If you are deep in debt and the stress is high, meet every week or every other week. If things are in cruise control skipping a month isn’t a big deal.

For us the meeting is usually scheduled for one of our many hour long car rides. To start the meeting, bring a current snapshot of the finances. I usually print the account summary page from Quicken or Microsoft Money. Bank and credit card statements or a spreadsheet print out would be perfect too. From there The Rockette will look things over, and make sure she is comfortable with everything. If she has ideas or questions, we will talk it through and come up with a plan together.

Subjects can vary from long term goals, to the budget for groceries, to 401k contributions, vacations, or whatever needs to be discussed related to money. Any actions that need to be taken are recorded and ‘assigned’ to one of us, so that they can be reviewed at the next meeting.

If there is a point of contention, we try to respect each others opinion and reschedule the discussion on the hot topic after we have had some time to think. We usually try to keep the meeting short, 15-30 minutes. If it runs longer than that, we will either follow up later, or wait until next month.

That’s a brief summary of what a monthly money meeting looks like. For us it has been a wonderful tool for handling our money together in marriage.

Here is a list of the benefits that it has brought to our marriage:

Openness/No Hiding
Valuable Communication
Multiple Viewpoints and Insights
Sharing of Financial Stress and Decisions
Diffusion of Power
Accountability
Unity

What tools are you using to strengthen your financial situation in your relationships?

» Filed Under About Me, Marriage, Marriage(Communication), Productivity(Financial)

Save Money On Your Wedding By Focusing On the Big Picture

Posted on June 5, 2007

Sorry to disappoint, but this isn’t your ‘how to save money on your photographer type post, or ‘how to cut wedding costs’. Just as what our cars mean to us can save us a bunch of money on car purchases, remembering this key tip can shave thousands off your wedding bill

The commitment of two adults choosing to share their lives together forever, is the BIG DEAL

The trend seems to be for weddings to become more and more lavish, even to the point couples are willing to take on $10,000+ in debt to live up to some external standard for what a good wedding should be. A wedding isn’t about the flowers, the dress, personalized gifts, or the DJ. It is about two people making a life-long commitment to one another. Our consumerist culture does play a big part in the spending trend, but so does the fact that weddings aren’t a big transition for a lot of people. In the days of live-in boyfriends and combined finances in dating, a wedding doesn’t signify a huge change in people’s lives. With the reduced significance for the wedding day, we like good Americans, try to imbue meaning into the event by spending.

For my wife and I, our values lead us to do things traditionally. Long courtship (2 years), long engagement (2 years), no living together, no sex, and no shared finances. Marriage represented a radical change to us. In the end we paid $10,000 cash for a beautiful catered wedding. The stress wasn’t too much and the celebration was significant and meaningful. While we planned the external events of the wedding, we also tried to pay attention to the internal journey that marriage represented. We devoted significant time to prepare internally for the change that we were embarking on. The celebration was awesome, but the act of getting married was much much better. It is hard to quantify, but I suspect that our financial and life circumstances, along with our values saved us thousands of dollars on our wedding. Our union was the big deal, not the chocolate fountain and amazing ice sculpture we could have had.

Inspired by an interview with Rebecca Mead.

» Filed Under Marriage, Marriage(Communication), Materialism, Weddings

What should our personal finance system “buy” us?

Posted on May 25, 2007

Before I post on how we are going to change our current system, I wanted to discuss what I am looking for in a good finance system. Note, I am using personal finance system to mean the accounts and tools that your money flow through from paycheck through payment and/or savings. As always, the purpose of analyzing this and the overall theme of The Happy Rock is to continually simplify our lives in order to create more freedom for the goals and people we truly value in life.

Here are five areas that should be analyzed when creating, tweaking, or assessing a personal finance system. A personal finance system should be :

Simple - First and foremost, I am convinced that a good system needs to be simple. If it is not simple, it can rob us of the motivation to use the system to our best advantage, or waste time that could be spent on other areas. Simplicity is a broad term, but here I am mostly talking about number of accounts. With each extra credit card, bank account, and savings account in the system, comes add complexity(even if the accounts themselves are ’simple’). Complexity breeds more rules to juggle, more points of failure, more time investment, and ultimately more stress. Complex schemes seem easy when everything is running smooth, but throw in a lost job, unfortunate death or injury, or even a mistake and the system can collapse. One late fee or bounced check can quickly wipe out all the benefits we thought we were receiving from our schemes.
Freedom is usually sacrificed as complexity increases. If you really feel that you ‘need’ added complexity, make sure that you get a premium for the extra time, stress, and complexity. For me, 40$ or even 100$ dollars a year in interest isn’t worth the negative side effects of too much complexity.
Finally, simplicity is crucial for facilitating good financial patterns in marriage. If one spouse creates a system that is inaccessible to the other, it creates an imbalance of power and destroys communication. The system should foster sharing of stress/responsibility, ideas, workload, and accountability. Without the ability for each spouse to ‘do their part’, the system loses the bulk of its effectiveness.

Working for you - The ability for the system to provide returns on the money you earn is a key component. It boils to down to more freedom. The more your system earns for you, the less you need to focus on earning. When drawn out over the years(retirement), the importance of this factor becomes even more apparent. Here the main components to look for: interest rates in your savings account and checking accounts, credit card rewards, and performance on retirement vehicles. Performance needs to always be balanced against risk. The higher the risk, the better return you need to earn. As a guideline line, savings should earn above 4%, checking above 2%, credit cards rewards from 1%-5%, and retirement performance would hopefully be 10% or more over for those with a long time before retirement.
- Fees/Rates - I also want to lump in fees, because they will detract from you earning power. Late payment fees, service charges, overdraft fees, mortgage rate, credit card rate, and ATM fees will effect your bottom line. For example, $20 a month on ATM withdrawal fees would probably warrant a close look at new options.
Easy to Use - Ease of use speaks to the complexity and convenience of the tools that the system offers you. Instead of breaking this into categories, I will throw out some questions that I think about are relevant: Is the website straightforward and easy to use? How hard is it to transfer money? Check card options? What does it take to deposit? Is customer service easy to contact, friendly, and efficient? Do I have access to branch services? Easy payment options? Do I have to wait in long lines? What happens when the internet is down? Good training materials? Remember, each person may have different requirements here, so balance the questions I posed with the particular questions you need to ask.

Provide Protection from Mistakes - The idea here is that when we inevitably make a mistake(and we will), how badly with the system penalize use? A large part of this requires doing business with companies with solid reputations that aren’t out to ‘get you’. Other than fee structure, this is based mostly on the experience of others. Research really helps, and the internet and blogosphere provide a plethora of relevant material. Most people bounce their first check, and don’t realize that they can call the bank and be given fee reductions. For example, the other day I emailed Wachovia to see if they could do anything about the Microsoft Money service fee. Although they couldn’t help long term, they did remove May’s $5.95 monthly fee.

Supports your Goals - Your whole financial system should be setup up to support your values and goals, but what does that really mean outside of helping me earn the most money. For me, I noticed that a college fund is noticeable absent from my system. Since my family is of the utmost important, I decided to pursue an ESA as part of our system. This support could even be more personal. If one of your values is earth friendliness, then maybe you would choose companies that are more environmentally aware. When a system aligns with your goals, using it will provide a sense of fulfillment that will help propel you forward. I know this may seem like overkill, but a little forethought and planning can go along way to creating success and achieving freedom from in your personal finances. So what does your financial system look like, and how does it stack up? Next post I will tie these criteria into the changes that we are making to our finance system.Does any one have any other criteria they use? Feel free to drop a note in the comments.