How to prevent arguments about money
And minimise the need to talk about it at all
If you have arguments about money with your partner – or you sense an argument is brewing – this Insight is for you.
You might also find this Insight useful even if ‘money is no problem’ in your home (currently) or to share it to help others.
BBC’s Money Clinic
I was prompted to write this Insight after listening to a most curious BBC Radio Four Money Clinic programme (Saturday, Aug 17 2019) in which we heard from ‘Fay and Ben’.
The BBC describes this programme as eavesdropping on the conversations of couples as they talk honestly about their finances with a relationship counsellor. And we’re told that we will learn about:
- The people themselves
- Their relationship with the other person
- The financial issues coming between them
- Practical tips on how they can better manage their money and
- The emotional side of money too.
This sounds like an amazing programme for learning some essential life skills… until you realise that this is far too long a list of big issues to discuss meaningfully in half an hour of ‘light’ radio.
Well, not surprisingly (given the interviewer is a relationship counsellor rather than a financial planner or coach) the programme spent a lot of time talking about the emotions of the individuals (and the dynamics of their relationship) and very little time on the practical tips that might have helped them to actually solve their money challenges.
So, that’s what I want to tackle here.
Yes, emotions matter but…
Don’t get me wrong, I completely support the idea of understanding your emotions around money.
Indeed, in my book, ‘Who misleads you about money?’ I explain how your emotions are targeted, day in day out, by advertisers with multi-million-pound budgets – to get you spending your hard-earned money on stuff you don’t really need. And, how you can use those same emotions to fight back against those companies –to keep more of your money for those things that will really matter to you – in the long term.
You can learn more about those ideas in chapter 1 of my book which you can download for free just by signing up to my occasional newsletter here.
It’s also true that heightened emotions can lead you to put too much of your money into risky investments at extraordinarily high valuation levels – or to pull money out of investments when prices are depressed. We’ll come back to those challenges another time.
However, whilst these issues can contribute to money problems for couples, they’re seldom the biggest problem – as was illustrated in that BBC programme.
So, let’s focus on that and offer an effective way to fix it.
You don’t need a rocket (or relationship) scientist for this, any more than you do to fix an argument about who does the washing up.
Yes, our emotions are fascinating but if you focus on them to the exclusion of any meaningful (numbers based) discussions about money, you’re just leaving the core issues to fester. Doing that makes the problem worse and increases the risk that, eventually, it’ll blow up in your face.
Uncertainty on any issue is stressful and the best way to relieve the stress is to face into it – not to avoid it and talk about something else.
We can discuss (if we really must) how our childhood experiences might have influenced our financial habits or how they might trigger certain emotions around money, later on.
But when your house is on fire (with arguments about money) you need to put the fire out first. And you can do that by simply agreeing to some spending ground rules that are fair to you both.
Here’s my guidance
I assume here that both you and your partner have an income.
If only one of you has an income, then that person will have to pay for everything (net of any help you can get from the state or elsewhere)
First – get what you’re entitled to
Your first job, if your finances are stretched (which is the case for the vast majority, whether or not you have children) is to get all the financial help you’re entitled to.
Now the benefits system is too big a subject to get into here but the aptly named ‘Entitled to’ website is the best place to explore that. And you should talk to your employer to make sure you’re getting any financial or other help they can offer as well.
Second – create a shared budget
Your second job is to create a budget for your steady shared costs of living.
Items on this list should include your:
Rent / Mortgage payments, Electricity, Gas, Broadband, TV Licence, Water & Sewerage, Insurance (Home and Contents) and any shared car costs.
In fact, everything where the cost (and your agreed share) is ‘relatively’ stable over time.
For now, you can exclude your very variable shared costs from this list. These items – like the groceries or paying for ‘treats’ (holidays, short breaks, dinners, nights out etc) are where the cost (or your fair share of it) is more variable. And we’ll come back to these items in a minute.
Also, keep your steady shared cost list separate to your personal budget if you have one.
This exercise is about making sure that your shared costs are covered fairly between you as a couple. What you do with any money you have leftover after this is up to you.
Just be sure to pay for your own drinks 🙂
Once you’ve listed your steady shared costs, for each one note:
- Your estimated cost by month and year
- Your agreed percentage fair share to pay and
- Whose account the bill is to be paid from.
Then, at the end of an agreed period, say yearly, just add in the ‘actual’ amounts that were paid on those various items and reconcile the table (to see who owes who what) and settle up.
If all the bills are paid from one person’s account you might want to arrange a regular (say, monthly) transfer between you. This will avoid the bill payer finding themselves short of money in the near term and also avoid a shocking big bill for the other person at settling-up time.
Once you’ve sorted that out – you can run your steady shared budget to your agreed shares until you agree to change them – perhaps because one of you gets a pay rise or a new job, or loses or job or takes time off work to look after a child etc.
And when things do change, you just need to settle-up on your old budget to that date, set a new one and start again.
OK, but what’s a fair share on each item?
Well, that’s up to you.
As a starting point, if you both take home the same income, you might each pay half of the shared bills. Whereas if your take-home incomes are split say, 80/20 you might want to split those shared bills quite differently.
Also, if some of these steady shared costs are to pay for something that benefits one of you more than the other (a Sky Sports subscription springs to mind as an example) be sure to allocate a fair share of the costs onto the person who benefits.
Only you can decide what’s fair on your various shared bills. But provided you’re open and honest with each other when agreeing to fair shares – you’ll be just fine.
Surely, you need a joint account for this?
Well, no, contrary to the curious ‘slush’ fund idea that popped out of the BBC’s Money Clinic programme, just getting a joint account won’t stop arguments about money.
If you want to use a shared account to pay shared bills that’s fine. And if you don’t have one already, then getting one might be easy.
However, you still need to agree which bills will be paid out of the joint account, how much each of you will put into that account on a regular basis – to make things fair and…
… you’ll both need to be disciplined to avoid dipping into that joint account to buy other ‘nice things’ along the way.
It’s perfectly possible to run a home as a couple without a joint account. Each person simply pays certain shared bills out of their own account.
Either way, joint account or not, if you want to avoid arguments about money by operating a fair share of costs, you’ll need to settle-up on any big imbalances at regular, agreed intervals – say yearly.
Settling up sounds like a chore
Settling up might sound like a chore but if you’re organised and keep records of bills paid this will only take an hour or so once a year – and that’s a tiny fraction of the c.6,000 waking hours we all have every year.
Putting an end to hours of arguments about money – and possibly days of bad feelings – is certainly worth spending some time on, right? 😊
Arguments about money are not resolved by simply getting a joint bank account. They’re fixed by agreeing to a shared budget – that’s fair to you both – and managing your money in line with those shares – as far as you can.
Now, what about those very variable costs?
Earlier I mentioned this other class of shared costs where the cost (or your fair share of it) is likely to vary a lot from month to month.
I doubt you’ll have many cost categories on this list – your groceries and treats (holidays, short breaks, dinners, nights out etc) being the main ones.
The key is to agree on a fair share of these items as they arise – because it’s these regular but small costs that can seriously irritate one or both of you if you start to feel that the other is taking advantage.
So, for these items just pay your agreed shares as you go – or keep the receipts and settle up later – every month or quarter – whatever works best for you.
Again, the settling up won’t take much time and is worth it to remove all arguments about money from your life.
If one of you does all the shopping then you’ll need the other to pay their fair share of that.
If you agree to split the cost of going out 70/30 – then be sure to split it that way – unless one of you is treating the other.
Does this all sound too complicated?
Well, it really doesn’t have to be.
Yes, agreeing what’s ‘fair’ on those steady shared costs might take a bit of discussion upfront but I doubt you’ll have too many of those items so it shouldn’t take long.
Just remember to take account of your net pay in deciding what’s fair overall, pay more for those items where you benefit the most – the Sky Sports example refers…
… and please remember to pay for all the beer (or wine) if you’re the only one who drinks it!
Are you suggesting a spreadsheet?
Well, personal accounting is deadly dull to most people – me included. So, if you want to use this method – you’ll want to have your numbers in a spreadsheet to minimise the time you spend on this.
If neither of you is able to set up a basic number table, just ask someone who is. We all know someone who can do that – and they’ll be pleased to help. You don’t need to share your expenditure items – you just need a template table from them to record your expenses (estimated and actuals) and to allocate each line of costs in different shares to each of you.
It’s not that complicated.
Some people use simpler methods
Not everyone has arguments about money and some, having shared their feelings about their current arrangements, might not see a risk of arguments in the future either.
Some are perfectly happy with a much simpler, broader brush way of sharing the bills as a couple – with one paying the utility bills and the other paying for the groceries for example. And this can certainly work fine for those on higher incomes.
However, broad-brush cost shares don’t always leave both parties feeling so good when money is a bit tight. And, fuses can blow when money’s too tight to mention.
Sorry, but had to get that one in 😉
So, just be sure to talk about this, agree your fair shares and work to your agreement.
And treat each other – whenever you like
Whatever you agree as a ‘background’ share of your steady shared costs, you can still treat each other (to dinner, a day out etc) whenever you like.
Nothing here stops you from doing that.
Indeed, you might even feel more inclined to treat your partner more often once your budgets are clear and you know there’s no expectation on you to pay for a particular treat (like dinner out) every time.
As a couple, you should be able to enjoy the savings of sharing the costs on your home. And you really don’t want silly little arguments about money spoiling that.
So, go for this. Talk openly and agree fair shares of you shared costs. You’ll not only have very few arguments about money, you’ll have very little need to talk about money at all.
And that’s how most people would like it – they just don’t want to (or don’t know how to) have the necessary conversation upfront.
Good luck with this.
Feel free to comment on your own ideas below, let me know how you get on and
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