Time and money decisions help couples tap their deepest emotional issues about work-life balance: values, dreams, and philosophies of life. In our last newsletter, we helped Brian and Jen, a dual career couple with high powered jobs and overwhelmed lives, get on the same page with their time management choices. This quarter we will use the same model for helping them with their money issues.

Who's in Charge Here?

In American culture, time and money are often talked about in similar money terms, how each is spent, saved, invested, or wasted. Arguments about time and money raise questions of power and control for most couples, namely, who gets to decide how those precious resources are being allocated. Spouses marry with the expectation that they will be able to determine their time and money decisions and then seem surprised when their partner has a similar idea about self-determination. A challenge of creating an Extraordinary Marriage is to find ways to maximize individual control of resources such as time and money while eliminating arguments about which spouse is the control freak.

Getting on the Same Page

Common sense might predict that money decisions are more objective that other couple decisions because the results are measured in objective terms, i.e. dollars and cents. Common sense is wrong. We all are more irrational about money than we would like to like to admit. Psychologist Daniel Kahneman, the winner of the 2002 Nobel Prize for economics, found that people suffered far lower happiness levels when they lost $100 in a lab investment experiment than they gained in happiness when they won $100. Yup, you read right; the figures of loss/gain are the same but the fear of loss is perceived as more salient than the promise of gain.

In Your Money or Your Brain, Jason Zweig, editor of Money magazine explains the findings from the field of neuroeconomics that show that investment decisions are driven by brain patterns. For example, people who are about to make money in a lab experiment have brain scans similar to the arousal patterns of cocaine addicts. He concludes that knowing how money decisions are affected by your brain and emotions will help you become a wiser money manager. Likewise, as one half of a couple, knowing your individual hot buttons will help you both be better money partners. We applied the following steps to help Brian and Jen look at the big picture about their money choices.

1. Write down a description of your ideal life regarding earnings, savings, and spendings. Do this exercise alone with each of you generating your own thoughts and values. Ask: how many hours do we each want to work, what size house is the right size for our needs, what proportion of salary goes to our mortgage, how many and what type vacations do we want, what are the items of our spending plan, how much do we want to save, and for what purposes?
2. Compare answers and ask: What would it take to bring the two visions closer together? A related question is how can both people get most of what they want in their ideal life. For example, Jen wanted to save all monies after basic bills for their retirement at which point she planned to start traveling while Brian wanted to save less and travel now. They talked about how to do both by allocating a percentage of their income towards retirement and a percentage towards current travel.
3. Strategize what needs to be done to bring the answers together. Jen and Brian also decided to travel on a bigger vacation like to Europe or the Islands every other year and making a trip to the local mountains or beach the other year.
4. Action plan. They used the retirement vehicles at their jobs for the maximum contribution, plus an IRA that could change in percentage of contributions if they had a good reason to do so, and an after tax savings accounts for travel. They arranged for direct deposits into each account so that they didn't have to think or track the decision each month. Money expert David Bach suggests that once couples set up automatic deposits they can achieve personal wealth without thinking too hard or constantly changing decisions.
5. Evaluate whether the plan is working and revise as needed. Once a year, Jen and Brian meet with their financial planner to review their goals. They also track their retirement vision with an online calculator like those provided by AARP and the major investment companies. They can vary assumptions about earnings, savings rates, and investment rates to see whether their retirement funds are staying on track.

Working with time and money issues has the potential to deepen a couple's intimacy by exploring what is most important to each. Accepting and accommodating your differences on these values will actually reduce conflicts.

Now or later.

Jen and Brian found the above solution by exploring the relative risks of their options. They asked: "What is the worst that could happen and how likely is that outcome?" Jen did not want to risk "being homeless" in the future in order to enjoy great vacations now, while Brian didn't want to be "too old" to enjoy the active travel they dreamed about. By working with a financial planner, they developed a plan to travel some now, save for retirement, and have the promise of more travel in their retirement years.

Scarcity versus abundance.

How you perceive your "money pot" can draw you into arguments about spending too much or too little. Assuming the money pot is unlimited does not even work for wealthy couples who still worry that they don't have enough. It really doesn't work with the realities of middle class couples. On the other hand, thinking the pot is too small can put limits on your ability to be creative.

One of our money anxious couples liked to travel but worried they didn't have the money. We asked, "How could you travel on other people's money?" The husband realized that he could use his professional skills to consult nationally while employing his wife as an assistant doing legitimate support work for his business. His pay and destinations were better than anything they dreamed possible when they thought in narrow ways about paying for travel with only after tax, after bills money. What would it be like for you to follow a spending plan rather than a budget? Usually the first feels expansive and creative while the second feels restrictive and limiting.

Independence versus interdependence.

Some couples overdo togetherness, expecting agreement on all money allocations and worrying that any spending on personal interests will be selfish. A pro-marriage stance requires both people staying knowledgeable about joint finances, such as salaries, monthly expenses, and savings and then providing some autonomy in money decisions by allocating allowances for individual spending.

Recommendation:

Set an allowance amount that each partner can spend any way s/he wants as long as it does not adversely affect the marriage or the partner. Now that you're no longer arguing about hobby purchases like quilt fabrics and electronic equipment, you will have more time for fun.

References

Jason Zweig. "Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich."