How about the happy couple in the picture? – they look so content, right?
This year might have seen an adjustment in our international travel plans, but there are still plenty of similar pictures doing the rounds. These images might show individuals or couples laughing and smiling against the backdrop of a mountain or sunset. This is often how we might see our friends, family members, colleagues, or other connections on social media.
It is hard to look at any such picture – even of a family holiday or a girl’s trip out in town – and imagine that all those smiling faces might be less than delighted. Behind every great photo op there was nearly certainly a conversation about money. And if we’ve ever been on a group text or email conversation about planning a holiday, we know it may not always be “sunshine and rainbows”. Especially when it comes to couples, what we do not see in such pictures is the conversations they might have had about buying that photography equipment, or the van they drove to their campsite and the backpacking gear they purchased to tramp their way to view spots like this one.
Even if we were a fly on the wall during the couple’s prior conversation about money, all the events stemming back to each person’s childhood that have shaped the way they might think about money has led them to that moment.
No matter how much wealth we do or don’t have, our upbringing plays a massive role in how we feel about wealth and money. The stigmas and experiences we’ve had with money throughout our lives can result in conversations about it feeling awkward, uncomfortable, or worse when talking about money at all with our peers – and even with our spouse.
Here are seven tips to help break down the barriers and avoid fighting over funds.
1. Be a grown up
Whatever our childhood experiences with money, it is crucial we think of, talk about, and act logically with our hard-earned funds. Putting any preconceived childhood or other ideas behind us is a big step towards building our financial futures.
This is at least partly because everything we know about money may be wrong, or could at least be outdated. Many of our parents drove a message into our heads that “debt is bad” – which was about right in the 1980’s when NZ mortgage interest rates peaked around 25 percent. Back then, the cost of the debt made repaying debt a top priority! These days, mortgage interest rates are in the range of two-or-three percent and are likely to remain there for some time. In many cases, this means that borrowing to invest is a lot more viable than it has been in years gone by – perhaps to invest in a small business or investment property.
2. If arguing is unavoidable, do it constructively
Whether it is arguing about money or arguing over who forgot to take out the rubbish, nobody enjoys:
intentionally or unintentionally evading the issue and/or getting side-tracked,
bringing up the past,
focussing on issues or problems rather than what can be done to rectify them, or
any number of other common argument mistakes.
Instead, we need to make a genuine effort to solve the problem and arrive at a financial solution that we both can implement.
If possible, we can support this constructive approach by using relevant external research or evidence to help keep the emotion out of the conversations. This might be an indicative budget to help resolve differing thoughts over how much might be reasonable to spend on a given thing, or perhaps a retirement income calculator or financial planner (such as one from Milestone Direct!) to determine how much is needed to invest to reach or maintain our major life goals. This is expanded in point #5, below.
3. Honesty is the only policy
Honesty is a virtue.
First and foremost, we need to be honest with the person in the mirror – ourselves! Whatever the issue, we need to avoid blaming others, admit our error or mistake to ourselves, then stay focussed on what can be done to keep moving forwards.
After that, being honest with someone close to us should be straightforward.
4. Resolving conflict about equality of financial contributions
Especially early-on in a relationship, attaining a degree of comfort with splitting bills is a really important step. Settling on common financial aims first can give us a starting point to work-backwards from – as once the big targets are prioritised and funding allocated towards achieving them, splitting bills should become a lot easier.
There’s no easy way for us to totally settle all matters though, as many areas can be a source of contention.
From student loans to car debt, credit cards to gambling habits, most of us enter a relationship with some sort of financial baggage. This can be an issue, especially if one of us has entered the relationship with significantly more than the other.
Keeping finances partially or totally separate works for many couples. A drawback is that this may divide spending power, eliminating much of the financial value of being in a relationship, as well as the ability to plan for long-term goals, such as buying a home or securing our retirement. At worst, it can lead to such relationship-ruining behaviour as financial infidelity, when one spouse hides money from the other. (Surprisingly enough, the team at Milestone Direct commonly see a small number of people, even aged in their 70’s and 80’s who have been married for many years and who successfully operate totally independent finances. There is nothing to say couples – even when married – need to totally “join at the hip” financially, so it is wise to arrive at solutions that work for us and our own personal situations. To avoid being caught out by NZ’s generous relationship property laws, checking this with a lawyer experienced in relationship property matters is also a wise step!).
Common issues can arise when:
One spouse has a paid job, and the other doesn't – this includes stay at home parents, or when both partners would like to be working but one is unemployed,
One earns considerably more than the other, and
One partner comes from a family that has money and the other doesn't.
Whatever the situation, the common thread is that we always need to work as a team with our spouse, co-operating in an open-minded way.
Also, be mindful that while joint bank accounts might offer greater transparency and access, it is not in itself a solution to an unbalanced power/money dynamic in a marriage.
It’s not all about money either, one UK study indicated that eight out of ten women did more housework than their husbands – NZ research in the area is hard to come by, but there’s no reason to think the result would be noticeably different.
5. Financial planning
Sound financial planning can give us the confidence to:
Splash out every now and again. How so? – if as a couple we are both tracking on-or-ahead of schedule, and are working to the same plan, we’ll be a lot more comfortable having a little (or big!) splurge every so often. This might include a regular allowance for each of us, so guilt-free individual spending can occur on whatever each of us may desire.
Invest in a way that suits us. A relationship where one of us is saving in the bank, terrified of investing, while the other is a free-wheeling business owner or entrepreneur who’s pouring funds into shares or property developments is more common than we might think. Such a combination isn’t necessarily a recipe for disaster – this is where compromises might have to be made and a workable middle-ground reached.
Usually, the first question we might overcome as a couple is whether or not to have children. This is a major financial choice in itself, as in NZ the average cost of raising a child is about $16,000 each year.
Of course, raising a family isn't just about the cost. If one of us in a relationship cuts back working hours, works from home, or leaves a career to raise children, we should address how that changes marriage dynamics, assumptions about retirement – perhaps delaying retirement, lifestyle, and more. It’s not just childhood either.
The rising cost of living and recession has seen many adult children moving back with mum and dad as ‘boomerang kids’ – who return home like a boomerang, or who may not even leave home in the first place! In some cases, this support to grown children can have an impact on our own retirement plans.
7. Extended family
The typical Kiwi family of a heterosexual married couple and two or three children is no longer the norm.
Culturally diverse families or couples is just one of seven characteristics of changing NZ families. Different cultures and religions have different family values, and attitudes toward many areas including childrearing, wealth, and customs.
While respecting our different backgrounds, in any inter-ethnic family, we need to agree on financial matters upfront. Common areas to watch out for might be immigrants to NZ who are too cautious (perhaps coming from less-regulated nations), or many cultures believing in family generosity to a level that many Westerners would consider extreme.
The bottom line – avoiding money arguments
Good (and sometimes painfully honest) communication can dull the blow of bad financial news and lead to honest exchanges about our money anxieties, habits, skeletons in the closet, and expectations.
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