This article is part of our 52 week journey through Bill’s latest book, The Graduate’s Guide to Life and Money. Each week, a full excerpt from his book will be presented from beginning to end. To get your copy of his book, visit www.TheGraduatesGuide.com.
Be Prepared, Opposites do Attract
So what’s the difference between how men and women spend their money? That is a tough question to answer since not everyone behaves the same way. We can make generalizations about the two sexes and compare.
Most people like to get straight to the bottom line. Do men or women spend more? Different studies will give you different results, but it is safe to say that women generally spend more often, but it is a toss-up to decide who spends more money. What do I mean by women spend more often? Generally women shop more. They will buy that cute new “thing” that would look great on the mantle. Then they will purchase hand towels for the bathroom that can’t be used, but are only for looks. They will also want that new blouse that looks great even though the whole reason they are at the store was to purchase planting soil for the flower garden. All said, we are looking at an extra $50 – $75 in this shopping trip. Multiply that by 52 weeks per year and you can see where your money goes.
What about the men? What do they do? Most men who are going to get potting soil, get potting soil. Thus, they spend $0 extra. But when that new drill set comes out for just $160, they need it. What about the 50-inch television set? There goes another $2,000. Of course we don’t even need to talk about the sports car, pick-up truck or fishing boat purchases because we already see where this is going.
When men make a purchase, it is usually a large purchase. Women generally make many smaller purchases. Depending on the person and the relationship, it may be very hard to determine off-hand who spends more, but keeping score makes your relationship seem more like a game. And with games, only one person can win, but both end up lonely.
The best way to battle the tug-of-war in your finances is to establish a realistic spending plan. Ideally, the two of you would each have an “allowance.” Basically each person has their own set amount of money they can spend every month, without being held accountable to it by their partner. This is not the same thing as having two separate accounts. While everybody knows some couple that has successfully kept two separate accounts, generally it only leads to divorce. It is very rare to find a successfully fulfilling marriage where the two partners have separate accounts.
It’s hard to believe money could have such an affect on marriage, but it really is a major part of any relationship. Financial matters should not be taken lightly when you are combining two individual lives into one commingled relationship. The way the two of you handle money, as a couple, is a reflection on how you will handle the other aspects of your marriage. If someone is carefree and haphazard with their money, even though they know their actions affect two people, you can be assured they will be haphazard about other aspects of the relationship (for example, they may forget to call you when they are going to be late for dinner). If someone hides certain money issues from their spouse or “cheats” by hiding income and spending on themselves, they may be inclined to cheat in other ways too. The list of similarities goes on, but I think you get the picture.
Ultimately, if you have two people in a relationship, you will have two personalities, and at times those personalities will conflict. What both of you have to keep in mind is that you are working as a team, you both have strengths and weaknesses, and you should work together to make the most of each. Nothing is more formidable than a strong marriage between two people who have learned to work together towards a common goal.
Use Each of Your Strengths to Maximize your Finances
Is your wife a whiz at math? Does your husband enjoy looking for coupons? Do you both enjoy yard sales? Find out what each of you enjoy, and what each of you can handle and divide the responsibilities up accordingly. In my household, I take care of the finances (making sure the bills get paid, handling insurance and investments issues, etc.), while my wife usually takes care of the coupons and the pets (making appointments with the vet, etc.).
It does not really matter who does what in terms of taking care of the finances as long as neither one of you resents what the other is doing. If both spouses really want to handle all of the finances, or perhaps neither of you does, then you can try doing them together. If you can make that work, you will truly be among a very rare and elite group of couples. Another approach is to rotate. Perhaps you could take turns every six months. Whatever approach you take to handling your money issues, be sure you are open with each other and you keep each other informed. In many marriages, especially those in the upper-middle to upper-income brackets, one spouse tends to hide money from the other. This is a dangerous habit to begin, and it may be indicative of other trust issues within the marriage.
Remember, once you are married, your money habits, including whether you pay your bills on time, affect two people (or more if you have children). You have to remember you are responsible for multiple people now. In fact, the money habits you bring into the marriage will affect both of you, especially if you have a bad credit history. It could affect whether or not you can get a car loan or a mortgage. Don’t get too caught up on this issue. As long as you were upfront with your spouse from the beginning (as I mentioned at the beginning of the chapter), there will be no negative surprises.
Let’s assume a young married couple, we’ll call them Bob and Sally, are each making $40,000 per year after just a few years into their marriage. They have a nice car, but not the SUV Sally wants or the cool sporty looking convertible for Bob. On top of that, they have extra money every month so they decide to go ahead and buy a home. Because of their income, they qualify for a bigger home than first imagined, and they are able to get all kinds of furniture on credit (after all, it’s a new home so they need new furniture).
Now, let’s suppose Sally gets pregnant. Perhaps it was planned, or perhaps not. Either way, have they decided what you are going to do? What if, after six months, the doctor insists Sally must go on bed rest during the last trimester? What if Bob and Sally decide they really want one of them to stay home to raise their child, especially after realizing day care will cost them almost $12,000 per year. Maybe it is not even a money issue, but they simply want to raise their child and not use daycare. Either way do you see the problem? They are not in a position to go from $80,000 per year to $40,000.
The point here is that a young married couple should try to base their financial spending decisions on one income, especially once they decide to start a family. At the very least, before getting a mortgage, the couple must consider what they will do once their income is reduced. In this scenario, if Bob was making $60,000 and Sally was making $20,000 and she was going to stay home, the situation would not be as severe. In fact, Sally’s salary is so close to the cost of daycare that it really would not make much sense for her to continue working (as a financial decision) once the baby is born.
Ideally, after just a few years of marriage (or perhaps a few months in some cases), a couple will be able to live off of one income while saving the other towards an emergency fund, then a down payment for a home or a car, and then just to save. In the above scenario, if Bob and Sally saved half of their take-home pay, not only would they be able to easily adjust to one income after the baby arrives, but they could have saved such a large amount of money towards their down payment that their monthly mortgage payment could be much lower. Plus, they would have some extra savings to get them through all of the unexpected child expenses such as diapers, babysitters, etc.
Do not allow yourself to be cornered into making bad decisions for your family because of your own financial decisions early in your marriage. While we may be living in a two-income world, it is possible to thrive on just one income if you plan right from the beginning and if you are willing to focus on just your priorities and make some short-term sacrifices.
Your assignment, if you are married or engaged to be married, is to create two budgets, one based on your combined salaries the other based on a single salary. Look at what you would have to do if forced to live off of one income for a while (such as a job loss, etc.). Now, determine what your future plans are in terms of having children, caring for them, leaving the workplace, and returning to work (if desired) once your child starts school. Use these decisions to guide you as you make big financial decisions over the next couple of years. By planning ahead now, you could avoid possible future disasters, and you may be able to enjoy your pregnancy more when the time comes.
Your assignment, if you are single, is to plan the next five years of your life, financially. Look at when you may be married, if and when you will have children, what type of home you will want, what your career will look like, etc. Create a plan now that incorporates your future goals. Perhaps it will indicate you should save more now, reduce your expectations, or maybe just marry someone very wealthy. Take advantage of the fact that you have not yet put yourself into the financial corner that so many married couples find themselves.
Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and The Graduate’s Guide to Life and Money. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership, and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.com or www.TheGraduatesGuide.com.