Arguably, money can be easier when you're single: There's no one but yourself to blame.
But when there are two of you, the going can get tougher, particularly if you and the love of your life aren't carbon copies when it comes to what to do with your money.
One 2011 study even suggests that opposite financial types tend to attract: Spendthrifts tend to fall for tightwads and vice versa, hoping their partner can moderate their financial habits. (Unfortunately, the vaster the difference between the spouses' money tendencies, the worse off it was for their marriage.)
Enter, your Dedicated Planner. Someone who can help you answer the big and little questions, so your money becomes a means of reaching your goals, not triggering fights.
To help you out, we compiled some of the thorniest financial questions couples often encounter as they work through the LearnVest Action Program. Then we enlisted David Blaylock, CFP® with LearnVest Planning Services, for his advice on how to tackle each one.
1. Deciding How to Combine Your Money
The dilemma: The first step of the Action Program involves connecting your financial accounts to the Money Center so you can keep track of your whole money picture. It sounds simple enough, but often getting organized makes couples realize just how many separate accounts they have to link. What if one partner wants to consolidate by keeping more money commingled, while the other wants to keep accounts separate? What should—or shouldn’t—be shared?
Blaylock's advice: Having a joint account for mutual expenses may be important, but Blaylock is also a fan of separate flexible spending accounts for costs like eating out and personal shopping. “Spending patterns between partners are not often the same, and flexible accounts create a judgment-free zone,” he says. “It’s like an allowance: Here’s some money, do with it what you want. It tends to encourage marital harmony.”
2. Creating a Budget Built for Two
The dilemma: Learning to budget so you can spend less than you earn is hard for one, let alone two. But if saving comes second nature to you and not so much to your impulse-buying significant other, how do you meet in the middle to stay on budget?
Blaylock's advice: “I recommend that couples start off with a dream budget, where each person crafts their ideal spending plan,” Blaylock suggests. “Then bring those together, and understand that in order to make the numbers work, both parties have to compromise. If your partner says he needs $800 for flexible spending, and you believe the budget allows only for $400, offer options rather than having an argument.” You should also consider trying to bake in a buffer in case you go over a little each month or week, if your budget allows for it.
The good news is that once you’ve agreed on a budget, the hardest part should be over. Just accept that it’ll take some trial and error to learn how to stick to the plan you’ve crafted together. “You know you’ve set a good budget when you don’t have to think about it. And don’t worry if it takes a few tries. You probably won’t get the budget right the first month. It takes some adjusting,” he says.
3. Knowing Where You Stand on Debt and Savings
The dilemma: Talking about how you’re covering basic financial security—that is, building an emergency fund, paying down credit card debt and saving for retirement—probably isn’t the sexiest conversation you’ll ever have, but it is arguably the most important. Resentment may arise when one partner is contributing more toward these goals than the other. For example, what if you're paying a good chunk of your partner's credit card debt? Or what if you’ve saved a lot for a rainy day or retirement, but he hasn’t—should the bigger earner try to cover both? Should the other partner play "catch-up"?
Blaylock's advice: Blaylock reminds us that when you get married, you’re also marrying your partner’s debt and savings—or lack thereof. “Ultimately it’s your shared future, and it would be great if everyone contributed fifty-fifty, but that’s not realistic,” he says. "You just need to do what you can do, and don't worry too much about the other person catching up."
Blaylock says it's common for tension to build when you're paying down debt that was accrued before you got married, or contributing a greater share to joint savings. But, "the frustration will not change anything, and it will likely only make the situation worse," he says. The recommended course of action? Just stay the course with the savings and debt repayment plans you've worked out with your Planner, because ultimately tackling those shared money goals will affect you both in the long run. And you may not think so now, but Blaylock believes good money habits will rub off on your partner.
If your partner's bad money habits really bother you, consider protecting yourself with a prenup or postnup, which could protect you from the other person's debt in the event of a divorce.
4. Which Goals to Focus on First
The dilemma: After you’ve conquered credit card debt, retirement and emergency savings, there’s probably a whole slew of next-in-line financial goals you’re aiming for. But what if, for example, you want to focus on sending your kids to college debt-free, while your partner wants to hurry up and pay off those private grad school loans? If only you always agreed on which goals to prioritize ....
Blaylock's advice: For starters, recognize that both partners have valid goals. But generally, doing the math can help you make the decision. “If you find it hard to compromise, let math be the bad guy,” Blaylock says. “There is always going to be something that takes precedence over another thing based on the numbers."
For example, in the instance of student loans versus paying for your child's college, it generally makes sense to tackle the student loans first—especially if they are private loans with fewer forgiveness and repayment options than federal loans. For example, if you can earn returns of 7% to 8% in a 529 college savings account, but your college debt is costing you 9% to 10% percent in interest, "Mr. Math says you better take care of that higher-interest-rate debt first,” he adds. Plus, your 529 savings is just a potential amount you may earn; your student loan interest is what you're paying now. Remember that your Planner has taken these factors into consideration in his or her recommendations for how much to put toward your various financial goals.
5. Knowing What Insurance You Need
The dilemma: Figuring out what kinds of life insurance policies you need to be adequately protected isn’t easy—especially when you and your partner can’t decide on a level of coverage.
Blaylock's advice: Blaylock had personal experience: "My wife, who's a nurse, doesn't care that much about finance," he says. "[I wanted to point out that] the number was not for her to feel comfortable. It was for me to feel comfortable if something happened to her.”
"One positive reason to recalibrate your finances is when one of you nabs a big raise."
And the larger takeaway is that insurance isn’t for you, it’s for whom you leave behind. “Think about not having any more paychecks from your partner. What would you need to feel protected?” Blaylock asks.
Of course your premiums should fit into your budget, but a sufficient amount of coverage should reflect as closely as possible the dollar amount you think you’d need to cover not only funeral or medical costs, but other costs your income would have contributed to. This could include college for the kids, paying off your mortgage and household expenses until your children are at least 18.
RELATED: How Much Life Insurance Do I Need?
6. You Have Different Investing Styles
The dilemma: Your investing personalities can be as different as your food preferences. What if one partner favors high risk for high reward, while the other is perfectly happy trading off potentially higher returns for safety? How do you meet in the middle?
Blaylock's advice: If you share a joint investment account, then you really have to compromise. “If one of you is conservative and the other is aggressive, chances are that with a little discussion, your portfolio will probably balance out where it needs to be,” Blaylock says. “More often than not, when you talk about your goals and where you want to be in a few decades, both of you will migrate to the middle.” If anything, let your joint time horizon be your guide, because how much risk you can afford to take will depend largely on how soon you want to access the money.
And remember that you still have individual retirement accounts that you can manage to reflect your personal risk tolerance. It’s really with joint investments where you need to consider each other’s goals. “My wife, for instance, wants to retire at 60. I want to die at my desk. So our risk tolerances for our retirement accounts are very different,” he adds. “We’ve managed our individual money accordingly, and I take her plans into consideration when we make decisions with our joint money.”
7. What to Do With More Money
The dilemma: One positive reason to recalibrate your finances is when one of you nabs a big raise. To one spouse, more take-home pay may mean more to spend and a boost in quality of life; the other may want to devote the added money to savings, rather than spend it. When you come to a financial crossroads like this, how do you decide which path is best?
Blaylock's advice: “Start with what you agree on, and you’ll find that will often help make the decision for you,” Blaylock says. That usually starts with making sure your primary financial goals—retirement, paying down credit card debt, and emergency savings—are still covered adequately.
“Then, if one of you wants to save for the dream house and the other one wants to increase your flexible spending, see if you can meet somewhere in the middle,” he says. “Look at your finances holistically. If you are already making progress in one area, you may discover you have room for some extra spending or saving elsewhere. It doesn’t have to be all or nothing.” One guideline to consider, though, is putting at least half of the "new" money toward your goals.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.