Managing your money is difficult and navigating relationships can also be incredibly difficult at times. So it’s no wonder that finances can create a major strain on relationships. In this article we’ll share with you our advice for how to manage money in relationships, but keep in mind that every relationship is unique so you may need to make a few tweaks for your own relationship. If you are currently struggling with financial conflict in your relationship, try walking through these eight steps to improve both your finances and your relationship.
Our first piece of advice is get on the same page. It’s best for both people to come to an agreement on their current financial goals. When setting your shared goals, it’s not enough to just understand what the other person wants. You need to work through your differences and agree on one primary goal and one or two secondary goals that you will pursue right now. Even though one person may feel more strongly about one of your goals, the other person must also fully support that goal once he or she agrees to it. If you both cannot agree on the goals you are currently working towards in your finances, you will surely run into big problems later.
Setting your financial goals is a great start, but this is not enough to keep you from running into problems down the road. For example, maybe you both agree that you want to save $400 every month for retirement and, after a few months go by, you realize that depositing the extra $400 each month into your retirement accounts is causing you to fall into credit card debt to keep up with all of your expenses. So how do you decide what to do next? It’s easy to blame your partner for spending too much on eating out while he is quick to point out the online purchases you’ve made lately. To avoid situations like this, you really need to plan out where your money will go ahead of time. Yes, I’m talking about making a budget. Unless you and your partner can get on the same page with how you will use your money for the everyday purchases you make, you will routinely experience friction and even resentment towards one another for each other’s spending habits.
It’s easier to avoid making a budget in the short term. Creating a budget with another person can be quite challenging. Inevitably there will be some give and take involved. But the longer you avoid making a budget, the longer you will struggle with financial issues in your relationship. Putting in the effort to work through your differences by creating a joint budget will enable you to enjoy much less conflict in the future. And creating a budget doesn’t have to be too difficult. Let me share with you a strategy you can use to minimize conflict when creating a joint budget.
If you would like help in creating a budget that enables you to accomplish your financial goals, check out the Money Managed Method.
When creating your budget, you must ensure both you and your partner take the time to go over every budget item together so both of you can be fully engaged in supporting the budget. There are three reasons you both need to play an active and equal role in creating your budget.
First, you need to work through your differing perspectives on certain things. You may disagree which expenses are necessary and which savings items are most important. If one of you does not accept the budget as it is written, chances are slim that the budget will be successful.
Second, you both need to feel a sense of ownership over your budget. If you create the budget by yourself, your partner may think it is unfair or feel resentment toward you when you tell him that a certain purchase is not allowed. He may get discouraged and give up on the budget since he feels no sense of ownership.
Third, both of you need to understand what you can afford and what you cannot afford. People usually don’t realize they are spending more than they earn until after their credit card debt starts piling up. And even when they do recognize they have a problem, they often don’t know how they can fix it. But when you both see where your money is actually going, you can both understand what changes are needed to get your finances on track. Some people won’t start to make the necessary changes until they can see for themselves how all their expenses are adding up.
Okay, let’s say you and your partner sit down together to create your budget next week and it isn’t going quite as smoothly as either of you hoped. Your minimum monthly debt payment is $300 and you want to allocate an extra $200 to pay off your loans more aggressively. Meanwhile your partner wants to allocate that extra $200 towards eating out instead. So how do you move forward and find a solution? You could compromise by splitting the amount of money that you disagree on, allocating $100 toward debts and the other $100 towards eating out. That could work sometimes, but still both people may feel disappointed or restrained. Often times there is a more creative solution that may allow both people feel more excited about the compromise.
In our marriage, we found ourselves in quite a few budget disagreements, and we have learned to take a two-step approach towards finding a solution that enables us both to feel like we get what we want. The first step is to identify which option is more financially responsible. In this example, paying down debt early will provide greater overall benefits to your finances, so this is the more financially responsible option. The second step is to take the financial benefits of the first step and agree to allocate even more money into the other option at a set date in the future. In this case you could agree to allocate $150/month towards paying off your debts and $50 towards eating out right now. And you also agree that, when you become debt-free one year from now, you will increase the eating out budget to $400 per month. (Remember, you will no longer have to pay the $300 minimum debt payments plus the original $200 that you couldn’t agree on, a total of $500. Therefore, even after allocating $400 to your eating out budget later, you also have another $100 to budget somewhere else!). This way both people can get excited about the solution! You are happy because your debts are paid off significantly sooner and, even though your partner must wait a year, he ends up with double the eating out budget he was wanting!
Coming up with agreements like this is not always easy. It may take some brainstorming and multiple conversations before you find the right solution. But it’s worth it if both of you can become more unified in your budget. Of course, we encourage you not to view your budget as a negotiation. Remember all the reasons you love the other person and why you joined your finances together in the first place! If you really cannot come to an agreement, you may need to seek advice from a relationship counselor or a financial advisor. Yes, all this sounds like work, but your relationship and your finances are worth it! It’s better to deal with your differences now rather than kick the can down the road and be forced to deal with new issues again and again.
Okay, so what do you do if you both agreed on a budget and, after several months, you find that you are struggling in a couple categories? You could be having trouble keeping your budget for a variety of reasons. Maybe you didn’t even realize that you were overspending in a certain category. This is why you need to identify the budget items that are hard for you to keep and begin to track your expenses as you make them. For us, we track our spending on fun money and on gifts. It’s really easy; we just add any new purchases for the day onto a list so we know how much we have left in our budget. Another reason you may not stick to your budget is because you are over-allocating money towards a few specific categories and trying to only spend the bare minimum on everything else. You’ll probably find that this is not sustainable and you will need to balance out your budget. Probably the most common reason people struggle with keeping their budget is because they’ve developed unhealthy financial habits over the years and still need to find the right way to overcome them.
The Money Managed Method provides strategies for overcoming years of unhealthy financial habits and learning to spend within your budget.
If you are able to stick to the budget but your partner is consistently struggling with certain areas, this may understandably be very frustrating for you. You’ll be tempted to get upset and criticize your partner, but don’t do that. Be patient and gracious toward your them, trying to understand why it is so hard for them. If your partner struggles with undoing years of unhealthy financial habits, they will need your loving support to overcome their bad habits. Also, be willing to ask yourself whether the budget is really fair to your partner. Try to understand how difficult it is for them and, if there really is wiggle room in your budget, be open to modifying your budget or finding a creative solution like we described earlier in step 4.
What should you do if your partner is totally uncooperative and refuses to participate in creating a budget or making the necessary changes to get your finances on track? A natural response is to get upset, start a fight, or give up on trying to improve your finances altogether. Don’t do that! Start by calmly and kindly asking your partner why they do not want to participate. Maybe they’re feeling some resentment or a lack of support in another area of life and need to feel your support in that area before they are willing to support you as you seek to improve your finances. What if your partner is feeling bitter because they’ve been wanting to spend some money on something but you haven’t allowed them to? Even though your intentions are good because you are trying to cut back on spending, they may view your desire to make a budget as another way to restrict them. Consider allowing them to buy that one thing on the condition that they will try to stick to a budget for at least one year after that. Even though that expense may not be a good financial decision in the right now, getting your partner on board is worth the investment in the long run. Your partner’s reason for not wanting to participate may not always be a good one or feel fair, but it is worth it to consider whether addressing it will benefit your family in the long run.
Finally, when you run into financial problems in your relationship, you need to ask yourself what is more important: money or the relationship. Yes, you should seek to make wise financial decisions and try to convince your partner that this is the right thing to do. But when the relationship starts to suffer because of fights and resentment over money, it’s time to re-evaluate your strategy and try something new. This doesn’t mean being okay with unhealthy financial habits. What it does mean that you refuse to perpetuate a fight. Instead, you try to be patient and support your partner in finding a more effective way to develop good financial habits.
If your partner is totally unwilling to participate in improving your finances together or if the two of you cannot agree on how to move forward, then there is probably a serious underlying issue that you both need to work through. Try meeting with a counselor or spiritual leader to work through your differences. If your partner won’t do that, we encourage you to meet with someone who can help, even on your own. Relationship issues can be very difficult, but we encourage you to seek help and not give up.
You are reading this blog because you want to improve your finances, and you probably want to limit your expenses right now. But investing just $200 in professional help could make many thousands of dollars of difference in the long run, not to mention drastically reducing your relational conflict and stress around finances. You may benefit from the Money Managed Method, an online program created to help people accomplish their financial goals. In the Money Managed Method, you and your partner will create quality financial goals, establish a budget that supports your goals, build good financial habits, create a comprehensive plan for getting out of debt as quickly as possible, create a long-term plan for building wealth and preparing for retirement, and summarize everything you learn with a custom money management plan. Everything is done online for a one-time fee that is about as much as you would pay a financial coach for just one meeting. It even comes with a full money-back guarantee if you are unsatisfied! Click here to learn more about the Money Managed Method!
Debt sucks doesn’t it? People get into debt for many reasons and not all of them are bad. However, some people take on debt so they can live the lifestyle they want but cannot afford, buying their dream cars and dream houses, going on shopping sprees with credit cards, or not wanting to feel left out when their friends go out on the weekends. Regardless of how you got into debt, we want to ask you one simple question: Are you on track to get out of debt as quickly as possible?
We really encourage you to try to get out of debt as soon as possible. If you aren’t already doing that, we want to spend some time explaining just how costly debt is.
Here are our top 10 problems created by debt. The first 5 problems are financial problems and the next 5 are non-financial problems.
Problem 1: Interest – Everyone understands the basic concept of interest: the lender will only give the borrower money if the borrower agrees to pay back more than the amount borrowed. But have you ever stopped to calculate exactly how much interest you are paying each year?
So if you have $30,000 of credit card debt at a 20% interest rate, you are paying $6,000 every year just for interest!
How much do you pay in interest each year? How about toward your debts in total? Imagine what you could do with that money when your debts are paid off!
Problem 2: Poor credit score – When you carry large balances on your credit cards, make your debt payments late, or just have a lot of debt in general, your credit score is negatively impacted. Having a low credit score affects you in so many ways. For one, your interest rates on any new debt will be higher. You may also be denied loans you really need, like when you want to buy a house or you need a new car. Landlords almost always run credit checks on potential new tenants. It can even limit your future employment options because some employers run credit checks for certain positions.
Problem 3: Debt can quickly grow out of control – Being in debt may create an unhealthy mindset where you say “I’m already in debt so I’ll continue to add some more charges on my credit card. A little more debt isn’t a big deal.” Or you could even be trying to contain your debt problem but somehow it keeps growing anyway. We call this the fire effect – where the debt problem quickly spreads and does a lot of damage. As with any fire, you need to put it out as quickly as possible. The longer you let it grow, the harder your life will be later as you deal with the financial consequences of your debt.
Problem 4: As long as you are in debt, you will be playing catch up with your finances – There are so many ways you are limited when you have debt. Right now you might just be struggling to pay your bills each month. But if your car breaks down you may not be able to afford to fix it. And whenever you have a large, unexpected expense, where will you get the money to pay for it? You may be forced to go into even more debt which worsens your debt problem. When you want to buy a house or a new car, it will take you much longer to save up the down payment you need. And, until you get out of debt, you won’t be able to save much for retirement. Eventually, because you started saving for retirement later in life, you may find yourself again struggling to make ends meet even in retirement. The point we are trying to make is that the longer you are in debt, the more your finances will suffer. Every new expense will weigh on you. And even after you have finally managed to pay it off, you will find yourself behind on saving for important things like buying a house or retirement.
Problem 5: If you default on your debts, you could lose a lot – You may default on your debt payments if you lose your job or cannot work because you get sick or injured. This will put you in a very dangerous situation which could result in losing your house, losing your car, losing your savings, ruining your credit, filing for bankruptcy, or all of the above. Imagine how difficult it would be to have to push the reset button on your life like that. The longer you remain in debt, the higher chance that something like this may happen.
Problem 6: Unhealthy emotions – First off, being in debt can create in people an array of negative emotions. They can feel:
We hope you don’t feel all of these things, but chances are that you’ve felt at least a couple of them before because of your debt. There may also be someone in your family struggling with other feelings that you do not have because of your debt problem.
Problem 7: Your life may feel ruled by money or your debts – You may feel severely constrained by your lack of financial flexibility. You may be missing out on things that are very important to you. Because you have to make your debt payments every month, you could be forced to say no to a family vacation, going out with your friends on the weekend, giving your child the birthday gift he or she wanted, or even something simple like taking your family out for ice cream. Debt can prevent us from living life to the fullest. For some people, the sooner they get out of debt, the sooner they can take back control of not only your finances, but also their very life.
Problem 8: Debt can create conflict in relationships – Agreeing on how to approach paying off your debts and deciding where you need to cut back to make ends meet is one of the most difficult and stressful issues that couples face. Once you are able to eliminate your debt and have some more flexibility in your finances, you will probably face less conflicts in your relationship.
Problem 9: Many unhealthy habits in life can develop from problems in another area of life – We just gave the relationship example of how relational problems can arise from financial problems. But there are so many other areas in life that can be affected as well. Are you gaining weight because you are stress eating? Or do you try to escape from your debt problem by turning to an addiction of some kind? Of course, debt is not necessarily the cause of these other life problems. But chances are that if you feel burdened by your debt, you are using something as an outlet or an escape from these negative feelings.
Problem 10: Your children learn bad habits from your example – As you already know, your children are always learning from you and often imitate your actions. If you cannot say no to something you really want, they will probably never develop the ability to say no to their own wants either. When they become adults, they could find themselves in debt just like you. But here’s the good news. Even if you previously modeled a lifestyle of poor financial decisions, you can always start to teach your children good financial habits by explaining to them how you got into debt and then showing them how you are making those tough decisions to get out of debt.
As you can see, there are many ways that debt can impact your life and we’re sure you can relate to at least a few of the things we mentioned. We hope that we’ve convinced you that it is worth it to pay off your debts as quickly as you can so that you can move past the problems that debt creates in your life.
If you are feeling overwhelmed by your debt problem, we want to offer you some encouragement. Do you know what all debt has in common? It is temporary! This may be a difficult period of time in your life, but you will get through it! Rather than struggle under debt for a long period of time, try to tighten up your budget for a much shorter time so that you can become debt-free sooner and get on with your life without the burden of debt.
So, if you haven’t yet, use Money Managed's personalized debt payoff planning tool to create your own debt payoff plan. We will show you:
You can even give us a target date for when you want to be debt-free and we will show you what it will take for you to get there!
You can learn more about our personalized debt payoff planning tool here or, better yet, look into the Money Managed Method which we created to help you take control of your finances. It includes our debt payoff planning tool as well as our personalized budget, expense tracking, savings, and retirement tools. Everything is integrated into a 10-week program to help you get your finances on track!
To pay off your debts quickly, yes, you will have to pay more each month than you are currently paying. But when you know the exact date you will become debt-free, managing your debt suddenly becomes easier. Also, keep in mind that we do recommend leaving some space in your budget for a few things that you enjoy spending your money on. It’s important to maintain a hobby, take your family on a small vacation, and/or occasionally do something special for yourself. The Money Managed Method will show you how to do all of these things while you pay off your debts fast. As you build good financial habits, the things you celebrate and enjoy in life will become even sweeter to you!
We hope that we were able to convince you that it will be worth it to aggressively pay off your debts so that you can experience the freedom of being debt-free! All of the financial and non-financial problems created by debt are a real burden to carry and the sooner you can lift that burden, the better off you’ll be!
Click here to learn more about our debt payoff planning tool and the Money Managed Method.