3 Must-Have Ingredients for a (Financially) Strong Relationship

Some couples are completely aligned on money from day one. They married their perfect financial partner. They’re both savers, have no debt, started socking away money for retirement from an early age and will live in financial harmony ever after. Congratulations to them – what about the rest of us? How do you get on the same page with money if you have different habits, different wants, different skills, and, above all, different levels of how much you care?

The short answer is it requires three key ingredients:

1. Collective Goals
2. Individual Freedoms
3. Shared Control
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Before diving in, let me be clear. This is hard. Money is hard. Marriage is hard. None of these suggestions will happen immediately or last forever. It takes time and (sometimes painful) repeated conversations.

Here’s how you do it:

Collective Goals

There are six big decisions in relationships that impact money. It’s important to be aligned on these throughout your relationship. Here’s how to work through each:

1. Strategy: Should you buy a home, payoff debt, have children, take vacations? How do you prioritize? Follow a plan. Don’t make these decisions independently or based on emotions. There are tons of existing programs from Dave Ramsey to Suzy Orman. I suggest the 7-Tank System (because we wrote it and it works), but any written system will do as long as you both agree. Review where you are annually. More on that later.
2. Housing: Keep your mortgage payment (including taxes and insurance) at less than 30% of your take home pay. If you collectively bring home $5,000 per month, you can afford $1,500 for your mortgage payment. Ideally you can make a solid down payment and avoid PMI. However, the most important number is keeping the payments below 30%. This discipline will create room in your budget and help you avoid debates on all the other categories.
3. Debt: You both own it now. Pay it off as part of your strategy. It doesn’t matter whose debt it was before you got married. It doesn’t matter who makes more. Quite frankly, it doesn’t matter how you got into debt (although marriage counselors may disagree). It’s both of yours now and it’s critical to pay it off. Being OK with debt is not a financial strategy. Prioritize paying it down. And, if you’re the spouse that brought the debt into the relationship, be extra diligent in destroying it.
4. Children (and school): Kids cost money. Lots of money. More kids cost even more money. Wanting more children because you came from a big family is fine. Not being able to afford them is not fine. Consider the following expenses with each child: daycare ($1,000/month), food ($250/month), entertainment ($100/month), cell phone (eventually) ($80/month), medical ($100/month), etc. These estimates are per child. These do not include private schools, extra seats on flights, and so much more. It adds up. Let money be one factor as you think about children. It’s better to leave fewer children with more than becoming dependent on them in the future.
5. Retirement: Contribute up to the match in each person’s employer’s retirement plan. That’s free money. Both of you should prioritize free money. After that, follow your strategy. In the 7-Tank System, you’ll contribute to the match in Tank #1 and work towards contributing 20% of your gross income Tank #5. It’s easier to discuss investments, your dream retirement, when you want to retire, etc. when you have money. Be open to each other’s ideas as you both focus on saving money.
6. Vacations: Set a budget and timeline. For example, we will spend $2,400 on vacations this year and take 3 trips. This means we’ll need to set aside $200/month ($2,400/12) in your budget (and make tradeoffs). If you can’t afford $200/month, you can’t afford $2,400, so adjust the numbers. Vacations are necessary. Going into debt for them is not necessary. Google “how to save on vacations” to help your budget stretch.

Your perspectives on each of these will change over time. So will your finances. Evolve and adjust as you go. Even if you discussed each before you got married, review them each year.

Individual Freedoms

You don’t have all the same wants. You were individuals before coming into the relationship and you each had things you liked to do. Relationships evolve your tastes, but you still need the freedom to be you.

So, how do you spend on your wants while in a relationship? You do it the same way you did before. Here’s how it works:

1. Agree on budgets for joint items (e.g. mortgage, food, utilities, gas, etc.)
2. Don’t set budgets for discretionary items such as entertainment, clothing and fun money
3. Instead, set a budget for each person to spend on what they want (e.g., Tom gets $200, Betty gets $200)
4. Don’t ask each other where they spent their money — that’s their business
5. If you go out together, go dutch!

Spend less time debating on what you spend your money on and more time agreeing on how much. You won’t change your partner’s wants. Instead, embrace them and help one another get the things you love. Be their advocate and let them be yours — just stay within your numbers.

Shared Control

In most relationships, one person manages the finances. It’s easy. You love doing it. It’s not that you don’t have confidence in your spouse. It’s just that you’re good at it and it reduces stress. It’s your contribution to the relationship and family. Unfortunately, this is not ideal.

What happens if the relationship doesn’t work out? What happens if one person passes unexpectedly? These are difficult scenarios to imagine but are very real. It’s critical that both of you can manage the family finances independently. Here are two ways you can move towards shared control over your money.

The CEO/CFO Switch

Each person should take one of the following roles for 6 months, CFO and CEO. The CFO manages the finances. They control the checking/savings accounts, pay bills, and set the budget each month. The CEO makes final decisions and plans the path forward. They make the final call on the budget. They plan the vacation and come up with options for all key purchases. They review insurance, estate documents (e.g.your will) and your credit report. Then, switch roles after 6 months. Now you’re working together.

Annual Meeting

Every year, take a few days to evaluate last year and discuss financial goals for the upcoming year. Set targets for debt, savings, income and expenses. Discuss key purchases or major upcoming expenses (e.g., daycare, vacations, house, car, changing jobs). Make this fun. Have a glass of wine or take a short trip. Come prepared. If you have a financial coach, get their input. Write down what you’ve agreed upon on one page. Post it somewhere both of you can see. Again, you’re working together.

Money roles in relationships will never be fully equal. Still, it’s important to equip each other with the skills to manage the family finances. If you generally lead, be patient while teaching your spouse. If this is a new skill for you, take it seriously and put effort into improving. Ultimately, shared control will ensure that no outside party will control your money.

Wrapping Up

You and your spouse can get aligned on money. You can avoid the conflict. It’s not about “she’s a spender”, “he’s cheap,” “she had a lot of debt,” or “he shouldn’t have bought that.” It’s definitely not about who makes more. Instead, it’s about the key behavior that leads to millions of successful relationships: communication. And, when you communicate, make sure to focus on the three key ingredients — collective goals, individual freedom and shared control.