Rules of engagement
Don’t let money disputes ruin your relationship
When two people get together, their financial affairs inevitably become intertwined.
At the start of a relationship, any differences in the way partners manage money quickly become apparent. Without resolution, these differences can create arguments, stress and tension that cause ongoing relationship difficulties or, in the worst cases, cause the relationship to end.
Managing money is quite simple really. Your choices are to spend it, save it, invest it, borrow it, lend it, lose it, receive it or give it away. The decisions you make will be driven by your individual preferences and attitudes and that’s where the problems arise.
When it comes to spending and saving, there are two main areas of contention – how much should be spent and what it should be spent on. The balance between spending and saving is a very individual thing. Savers tend to be more concerned about long-term security, while for spenders, enjoyment of life here and now takes precedence over the future. Savers can feel insecure or threatened in a relationship with a spender, while spenders can feel restricted in their enjoyment of life in a relationship with a saver.
Some spenders are selfish – they command a greater share of joint finances for expensive hobbies, designer wardrobes or nights out on the town. Selfish spending by one partner can cause resentment in the other which becomes a destructive force in the relationship.
Agreeing the right balance between spending and saving is fundamental to financial success and a good relationship. However, saving leads to another set of problems – how to invest savings with the right balance between risk and return. When two partners have a different appetite for financial risk there is likely to be ongoing tension. How can there be enough financial security to please one partner while achieving a high enough investment return to please the other? Many a relationship has foundered on the reluctance of one partner to agree to invest in a high-risk business or property venture. Frustration, anger, resentment, feelings of insecurity or being threatened can all arise from a mismatch in risktaking.
Risk-takers are less concerned about financial loss than those who are risk-averse and while they don’t set out to lose money, they consider the risk of loss to be part of the process of building wealth. In the extreme, risk-takers become gamblers. For gamblers, the goal is not wealth creation but the emotional highs that come from a win. Significant financial loss, whether through gambling or poor judgement, is a key cause of relationship breakdown.
Attitudes towards debt can be a deal-breaker. Risk-takers and big spenders are less concerned about debt and use it to support their business ventures or lifestyles. For security-conscious people, debt represents risk, the threat of loss and financial stress. Their lack of willingness to take on debt, even for a well-researched investment opportunity, becomes a stumbling block and a source of resentment for risk-takers.
Receiving money unexpectedly through a lottery or inheritance can be a testing time for relationships. There is nothing like a large sum of money to bring out the differences between two people in terms of what they value and their goals in life. The receipt of inheritance by one person in a relationship raises a number of issues. Should the inheritance be shared?
Keeping it separate may require legal agreements to be signed. How will this affect the relationship? If the money is shared, who should determine whether it is spent, invested or used to pay off debt?
Decisions about giving or lending money to others can be another source of friction stemming from deep-seated money beliefs. People have a natural tendency to be either generous or selfish and research shows that where they fall on the generosity spectrum is determined, probably in childhood, by a number of complicated factors. To ungenerous people, the idea of giving things away can feel like a threatening loss to be feared and avoided.
However, people who are generous know that their lives are positively enhanced by giving to others. Disagreements can arise over how much is given or lent to children as well as to non-family members or charities.
The biggest mistake couples make in trying to resolve their differences over money issues is to believe that there is a right way and a wrong way to manage money. There is no right and wrong; there are only differences between people. Resolution comes from understanding and respecting each other’s points of view and finding some middle ground on which to build a solid relationship.
People have a natural tendency to be either generous or selfish.