All Things Financial Planning Blog

Nearly half of all U.S. couples and a third worldwide reported they argued more during last year’s financial crisis and money was the top reason why American couples had disagreements. In fact, nearly 15 percent of American couples split up partly due to financial issues according to PayPal’s third Annual Can’t Buy Me Love global survey, released last February. That was in early in the recession, so it will be interesting to see the results of the next survey, usually released near Valentine’s Day.

Even financial planners like me and other colleagues have had tense money moments with spouses. FPA member Joe Pitzl, CFP®, of Apple Valley, Minn.’s Mindful Asset Planning got married last year. He and his wife merged their finances prior to the wedding.

“Each of us managed our cash flow very effectively prior to coming together, but we learned that we both have very different styles and preferences about the way we spend money. I rarely purchase anything unless it is on sale, but will spend on hobbies like playing golf or attending sporting events. My wife is exactly the opposite,” he explains. “Differing money personalities created occasional disagreements that seemed to reoccur every few months.”

In my January 4, 2010 blog, I wrote about our First Step approach to helping clients manage their personal finances, an approach many financial planners use at work and at home. For my wife Laura and I, this approach has become the framework from which we have our conversations about money including the mutual goals we want to pursue, our own day to day standard of living, our fun money, etc. 

With First Step we allocate money in at least three accounts. The first is our static account. This is the 30-day money, or money past account that covers monthly household expenses. The second is the control account, our seven-day money present spending for today or within the next week including lifestyle expenses as dining, recreation, hobbies, groceries and gas. And, the third account is the dynamic account that funds the future including holiday gifts or vacation, cars, education and retirement.

“This approach really benefits couples,” notes Amy N. Mullen, vice president of the non-profit Money Quotient, a training organization for financial planners. “When you are talking about future goals to work towards, you are not focusing on mistakes the couple has made in the past. This takes the whole placing blame completely out and focuses on where are we right now and where do we want to go in the future.”

“The system is simple and flexible, and takes into account the couple’s needs, wants and lifestyles so money is available for both spouses. They don’t’ have to be accountable to the other.”      

Couples can establish individual sub-accounts within the control and dynamic accounts which reflect each spouse’s money style and priorities. For example, I had a particular purchase I wanted to make so I set up an automated savings program for that goal. I was able to buy the item I wanted and enjoy it without experiencing any guilt or conflict with my wife because we both knew we had saved the cash for that specific purpose and that was the intent. 

I have two clients, I’ll call them John and Jane Doe of Iowa. They each have a discretionary account where they set aside, “a little ‘me’ money each pay period for us. We have fewer arguments about money issues,” Jane says.

“The First Step approach gives us the tools to build the life we wanted while being able to openly discuss money with the ability to achieve a mutual goal. It has not changed the quality of our lives; it has only enhanced the quality we get out of our lives.”

Like John and Jane Doe, Pitzl and his wife each have their own personal spending accounts. There is nothing wrong with separate accounts and the number of spouses worldwide with such accounts is growing. But the key is open and honest communication about those finances and the understanding of how those separate accounts fit in with your financial future.

By Eric Kies, CFP^®
Special to FPA