Ten Things You and Your Spouse Need to Discuss — Especially Newlyweds
These are keys my wife and I have tried to follow. While we do have disagreements, it has almost never been about money. Please use these as you will, you have to figure what works for you. It’s vital to agree – Have a few agreements you can live with and don’t change them unless you both agree.
#1 – Need it, Use it, or Don’t Buy it!
If you don’t need it and will never use it, don’t buy it. At an early stage of marriage this will keep you from wasting money. One of you will likely think this is normal, the other will likely think this is too constraining. Just ask the question before spending – Do we need it, will we use it? Wants can come later in life, delayed gratification is doing what is in your long term best interest.
#2 – Debt
It’s the bomb that will explode at exactly the wrong moment. Do anything and everything to get out of any current debts. Debt is an unseen burden and makes you work for your money rather than having your money work for you. If at all possible, don’t borrow except for things that appreciate in value. Never, ever go into debt without both of you agreeing and knowing what is required to pay it off. Don’t use credit cards, don’t buy on credit, don’t do “90 days same as cash.” If you truly need something, it can likely wait until you have the money to buy it, or it really isn’t something you truly need.
#3 – Giving
If you want a happy life that sees the best return on your money, plan to give at least 10% of whatever you make away. This breaks the grip of greed/materialism, a destroyer of unimaginable power. It improves the lives of those in the community you give to and even if done in secret, it will improve your own life. We reap what we sow, we only reap what we sow and we reap more than we sow. Research shows those who give consistently are happier, healthier and in the end wealthier. It takes faith to do this, but I’ve never seen someone who follows this principle out begging.
#4 – Savings
Pay yourself first. Put at least 10% of everything you make into savings. It will grow faster than you ever expect and it builds a cushion in your life for the inevitable and unexpected essential expenses that come along. Farmers don’t consume every seed they have so they can plant the next year. This builds margin in your life that you will be so thankful for over the years. To steal a phrase, “Just Do It!”
#5 – Spending
I have tried to live on a maximum of 80% of what I make. Again, this builds margin. If you can’t do this, then you need to cut expenses or increase income. This spending should be done joyfully and with no reservations, it is yours to spend how you will, but the 80% is based on your earnings. Don’t rely on savings, borrowing or gifts to make this 80% work. If you do, you have no margin and you may be setting yourselves up for disaster. Use savings, borrowing or gifts for extraordinary items, not your daily pattern of living.
#6 – Budget
I’ve never met a budget I didn’t violate, and then felt like a failure. That is why I came up with the 80/10/10 approach. If I can pay all my bills on time with 80% of my income, then what does a budget matter? However, if you don’t know each other’s spending habits, then take a month for each of you to write a journal of everything you spend. Put them into categories, ie Transportation, food, clothing, shelter, fun, etc. Prioritize and set certain money aside for those priorities first. There are lots of good apps available to help you organize this.
#7 – Investing
Only invest what you can afford to lose or what you aren’t planning to use for 5 or more years. Build a nest egg of 1 then 3 then 6 months of the amount you live on. This is margin. Once you have it, look to invest all but 1 or 2 months of your reserve. Returns on investments vary based on risk, but you must understand that risk is different for each person. Read my book 7 Timeless Principles of Investing to get to know yourselves and what you are comfortable with. You will have to determine your goals for the money before you invest. You may want growth of the money, income generation on the money, or tax avoidance. You may have a combination of items. Owning your own business is the best, but most risky, investment for creating great wealth. Partial ownership in others’ businesses is second best. Homes are for living in, not an investment. Rental properties are an investment. Commodities, like gold and silver, produce no income and are a loser’s game. Lending money (buying bonds) is a good way to help protect a portion of your money from the fluctuations in business ownership and receive income at the same time.
#8 – Lending Money, Co-Signing, Etc. DON’T
I know of no better way to destroy a relationship than to lend money to someone. It makes the other person a slave to you and they grow to resent it. Lending is a business transaction, if you ever get to the point where you would lend to someone, have a contract and hold them to it. Don’t consider yourself a friend anymore. If you know someone who needs money and you can help, it is ok to give them the money, but don’t expect to get it back no matter what they say. Make it a gift and then there are no strings attached. If you have to have the money in the near future, you shouldn’t lend it. Remember, if someone else needs to borrow money from you, it’s probably because they aren’t reliable enough to get it from normal channels. What does that tell you?
#9 – Poor Choices
We all make them from time to time. Take responsibility and make it right. Admit a mistake and figure out how to avoid it in the future. Don’t spend the time and energy harassing each other about it or bringing it up over and over again. Money will be ultra important to one of you (compared to the other) and not so much to the other. Use your talents/gifts wisely, let the one who is better suited take care of the bills/money. Keep each other informed and always let each other know of any impending financial problems. You will be surprised how you two will be able to figure something out where you were stuck on your own.
#10 – My Money, Your Money… Decide This Up Front
You can each have your own accounts which you can use for anything you feel like. My wife and I have a monthly allowance that goes into these accounts, no strings attached. However, it is wise to have a joint account for all the daily living expenses and bills. This needs to be open to both of you, no secrets. I put our investments, home etc. in joint name with rights of survivor-ship. Make sure the joint account is “or” not “and” your names. Otherwise you both have to sign every check.
“In all your getting, get understanding” Proverbs 4:7
I remember the quote “In all your getting, get understanding.” God has promised to take care of His children. We are not slaves, He calls us friends and He says we don’t have because we don’t ask. So don’t be shy about asking God for wisdom or for what you need and even want. He says he loves giving good gifts to his children.
Jesus spoke a whole lot about money and one of my favorite quotes is “For where your treasure is, there your heart will be also.” Remember, you can’t take it with you but you can send it ahead, do lay up your treasures in heaven.
Money is neither good nor evil. It is the love of money that is the root of all kinds of evil. Get rich schemes are almost always in that category. Also, if it seems too good to be true, then 99.99% of the time it is. My son Matt mentioned to me that money reveals what is already in our character and more money just exposes our weaknesses. Remember, it’s just money, you can always get more in time, don’t get too worked up about it.
Poverty is a state of mind and it is not about your income or money in the bank. You can be poor, but not impoverished. There is no shame in being poor, there is in thinking you have to stay there, that you can do nothing to change your situation. You have a choice, it is ok to choose to be poor or for circumstances to push you into this from time to time. It’s your choice to stay this way. If you follow my suggestions above, it’s not likely you’ll stay there for long.
Jimmy Siebert said this about finances, “Work diligently, live simply and give generously.” If you both agree on this you are likely to have a happier and more prosperous marriage.
Barry James is the President /CEO of James Investment research, Inc., and published author of 7 Timeless Principles of Investing.