How to sidestep a fight concerning money
Everybody has their own unique relationship with money. Some people are good savers while others find it hard to stop spending. Some people are keen to take risks with money to get a better return while others prefer to keep their money safe.
There is no right or wrong when it comes to a person’s relationship with money. There are just differences. These differences stem frommany factors such as childhood circumstances, past experiences, personality, age and financial literacy. Together, these factors determine your money personality.
When two people get together, their financial affairs inevitably become intertwined. At the start of a relationship, any differences in money personality 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.
Typical scenariosmight include one partner preferring to keep all their savings tucked safely in the bank, while the other wants to invest in a range of different investments to get a better return.
There are some basic principles that help in resolving money differences. First, keep in mind that there is no right and wrong, just differences. Each partner needs to have their differences acknowledged and respected.
Then it’s a matter of agreeing some boundaries around how money will be spent, saved, borrowed or invested so that each partner’s needs are met to an acceptable level.
Resolving conflicts startswith both parties getting to the core of the beliefs or feelings that are causing the difference of opinion.
Understanding each other’s perspective can help find the middle ground.
Good communication is essential to a harmonious relationship and money issues need to be discussed on a regular basis. Amonthly catch up is often enough to keep things on track, but if you set up a system to manage your money automatically through direct debits, direct credits and automatic transfers, you should be able to review your finances quarterly without things getting out of hand.
Amoney management system which sets an agreed balance between spending and saving and deals with both long-term and short-term saving will eliminate most money conflicts.
Differences in attitudes towards investment risk are often due to a lack of understanding of risk and the ways in which risk can bemanaged.
Risk-takers are less concerned about the possibility of financial loss than those who are riskaverse 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.
An investorwith a responsible attitude to risk will use techniques such as diversification and matching of investment strategy to investment time frame to manage risk. Without these tools, risk-takers become gamblers.
Attitudes towards debt can be a deal-breaker in a relationship. 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.
Differences in attitudes to risk can be overcome by agreeing on a portion of wealth to be held in safe investments. That way, if risky investments fail, all is not lost. Ideally, debt should only be incurred to purchase assets such as property and businesses and there should be an agreed limit on debt.
Managing money in a relationship requires transparency – that is, full disclosure of financial information by each person. There should be no financial secrets in a close relationship, and there should be equalitywhen it comes to making key decisions and both parties fully participating in financial decisions.
Planning ahead, budgeting and regularly talking about money will help avoid financial crises which are triggers for conflict. Less conflict means a better relationship and ultimately more enjoyment of life.