The Smart Cookies' Guide to Couples and Money: Earn More, Argue Less, Achieve the Life You Want . . . Together

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9780307357991: The Smart Cookies' Guide to Couples and Money: Earn More, Argue Less, Achieve the Life You Want . . . Together

This hip and accessible guide addresses all of the nagging money questions and thorny situations that come up when you're in a relationship, whether you're just starting to get serious or you're already married.

This book gives couples the perfect excuse to break the silence and start talking about... money! Staying on top of your finances when you're single can be tough enough - add another person to the mix and it can seem downright daunting. Even if you've got your own finances in order, there are inevitable money issues that come up when you're part of a couple, not just because one of you may be in better shape financially than the other, but because you may each have very different perspectives on money and how to manage it.

The principles the Cookies set out in their first book about the basics of life planning and investing can work for couples, too, and this guide offers simple techniques that will help readers with everything from dealing with "money baggage" to getting out of debt to planning for retirement. Again they draw practical advice and meaty anecdotes from their own financial escapades, as well as readers' queries and the personal experiences of five focus couples.
From the Hardcover edition.

"synopsis" may belong to another edition of this title.

About the Author:

ANDREA BAXTER is the Debt Buster, ANGELA SELF is the Money Magnet, KATIE DUNSWORTH is the Number Cruncher, ROBYN GUNN is the cash counselor and SANDRA HANNA is the Savvy Spender. Just a few years ago, they were all drowning in consumer debt. Inspired by an episode of The Oprah Winfrey Show on personal finance, they formed a money group to developed strategies for turning their finances around. Just one year later, they had dramatically improved their financial situations — and had made major advances in their careers, relationships, and life goals. This is their second book. JENNIFER BARRETT also co-wrote The Smart Cookies' Guide to Making More Dough and Getting Out of Debt.
From the Hardcover edition.

Excerpt. Reprinted by permission. All rights reserved.:

Chapter One
The Other “M” Word
Why Money Is So Hard to Talk About

 
Admit it. It’s been on your mind since you realized you might be falling in love, even if you wouldn’t dare say it out loud: Is he (or she) in good financial shape? Will we be able to build a future together? Forget about marriage, money is the real “M” word.
 
No matter how often we tell ourselves that money doesn’t matter when we’re in love, we know it does. Love can bring us joy and companionship. But as the Motown song made famous by the Beatles goes, “Your loving gives me such a thrill, but your loving don’t pay my bill[s]!” To actually build a life together as a couple, you need more than love. You need a financial plan.
 
But here’s the good news: Being in a long-term relationship can be as good for your wallet as it is for your heart. With a plan in place, you have the potential to achieve your financial goals a lot sooner as a couple than you could on your own.
 
Pool your savings, for example, and you can buy a home much sooner than with only one income — not to mention a bigger one. Together, you may also be able to qualify for lower mortgage rates or interest rates on a car or bank loan, saving you thousands of dollars in interest. And by combining your savings into one account, you are more likely to meet the high minimum balance required to qualify for some of the best-yielding money market accounts.
 
You can cut costs in other ways, too. How about a date night in? Cook something yummy for dinner or share some cheap takeout and snuggle on the couch with a movie — it can be just as enjoyable as an evening out, and a lot less expensive! All of this translates into more money for both of you. If you and your partner already live together, you know that you can also dramatically cut your expenses by splitting the rent or mortgage and the bills, and maybe even by selling one of your cars and sharing the other. Katie and her husband, Nick, have done both, and saved thousands of dollars in the process.
 
Being part of a couple can also mean you’ve got another source of financial support if you need some short-term help, and someone who won’t charge you interest on a loan. (At least, we hope not!) And over time, your incomes are likely to fluctuate and there will be periods when one of you has to lean on the other. Being able to do that can actually help you reach your goals even faster than you could on your own. Robyn helped her former husband out financially when he went back to school, and then he returned the favour when she started a graduate degree program and cut down her shifts at work. With his help, she was able to take additional classes and get her degree much sooner than she would have otherwise. That also meant that she was able to increase her income faster, now that she qualified for higher-paying jobs with the additional degree.
 
When Angela and a former boyfriend moved in together and decided to combine their finances, he had double the debt that she did from school. Nonetheless, they consolidated their balances and worked together to pay the debt off faster. Then, when she graduated and took a freelance position that offered her the chance to hone her skills but without a steady paycheque, he helped support her financially between projects so she could get the experience she needed to land a more stable, better-paying job.
 
There are less tangible advantages to being in a committed relationship, too: It often forces you to take a hard look at your own financial habits. When you know that your actions affect your partner, too, you’re more likely to pay attention to what you’re doing with your money. And you’ve got extra motivation to set aside money for future goals if you know your partner is doing the same.
 
When Sandra and her boyfriend, Jason, began dating, they often surprised each other with gifts and extravagant dates: tickets to a hockey playoff game or a concert, or a day of spa treatments. For a while, Sandra didn’t worry about how much they were spending on each other, since she enjoyed spoiling her boyfriend and he was happy to return the favour. Plus, they were both making good money, and neither was depending on a credit card. But as they became more serious, Sandra began to worry that they wouldn’t be able to keep up those kinds of splurges without dipping into their savings. By this point, they’d talked about their future together and she knew that if they spent too much now, they would pay for it later. So when they started talking about taking a trip to Hawaii, she saw it as an opportunity for both of them to rein in their spending a little. Sandra calculated how much it would cost and then they discussed how much they’d each have to set aside if they wanted to take the trip within the next six months. Once they had a tangible goal and put it in perspective, they knew that in order to save enough money they’d have to start eating in more often, plan less expensive outings together, and skip some of their habitual Starbucks runs. But each of them thought it was worth the trade-off. All it took was a little incentive, and in the end it helped both of them get into the habit of saving money each month for their future goals.
 
These kinds of behavioural changes that happen when you’re in a serious relationship may help to explain why those who are married tend to increase their personal wealth at a much faster rate than those who are single. One 15-year study by Ohio State University (published in the Journal of Sociology in 2005) found that those who stay married are able to accumulate nearly double the wealth of those who remain single. The study’s author, research scientist Jay Zagorsky, attributed the difference to the benefits couples get by splitting expenses and combining their savings, as well as the new attitude many of them develop about money. He noted that the realization among married participants that their actions now had consequences for at least one other person — and maybe children, too — prompted many to adopt better financial habits and put more money away rather than spend it.
 
The U.S. census, which also tracks wealth, seems to support these findings. They found that the average net worth of all households headed by married couples is nearly $102,000, while single men have an average net worth of $23,700 and single women have an average net worth of just $20,217. In this case, if you split the total net worth in half for married couples, each spouse has a net worth that’s more than double that of their single counterparts. That’s a big difference.
 
The Canadian census tracks earnings, not net worth. But it found that childless couples have an average combined income of $59,834, while couples with kids earn nearly $83,000 combined. Meanwhile, the average income for singles living on their own is just $24,808. Even if you divide the income in half for couples with at least one kid at home, that means each partner is still making nearly 68 percent more on average than their single counterparts. True, age may be a factor here: More singles are in their 20s or 30s, so their earnings won’t be as high as those who are more established in their careers — but that’s not enough to account for the whole difference. It’s likely that being in a committed relationship, especially if you have a family to support, can also provide a powerful impetus to work harder, or to seek a better-paying job or additional sources of income.
 
Of course, if you want to enjoy all the financial advantages of being part of a couple, you need to keep an open line of communication about money and always work together to plan your financial future. Once you know exactly how much you need to earn or save to reach your goals, you’ll be more motivated to earn enough to stay on track — especially if you know your partner is doing his or her part. (We’ll give you some ideas on easy ways to earn extra income in Chapter Six.) Which is one of the reasons why we don’t just want to help you identify your goals, but encourage you to put a price tag on them as soon as possible so you know exactly what you need to achieve them.
 
Working through your finances as a couple and planning your future together won’t just improve your finances: It can actually improve your relationship, too. Working together to achieve the things that you both want can be a fun process, once you’re both on the same page. Katie and her husband say they’ve actually come to look forward to their monthly “money dates,” a time they set aside to talk about investment ideas, monitor the progress they’ve made towards their financial goals, celebrate their successes, and help each other tackle any challenges that have come up. Talking about money has become so habitual that the once-taboo topic often drifts into their daily discussions too, whether they’re sharing news on a deal they got that day or discussing the pros and cons of an investing tip or strategy they read about in the financial news.
 
Still, that doesn’t mean that bringing up the topic the first time is easy. Even Katie admits that getting to that level of comfort took a lot of practice and there were some uncomfortable, even emotional, conversations over money in the beginning of their relationship. Maybe that’s why so many of us try to avoid the topic for so long. Sure, we’ll talk with each other about the things we want in life. But we often put off discussing the one thing we need in order to have them: money. We manage to talk about how we’ll split the bills for the wedding or the utilities and rent, but dance around the bigger questions of how we’ll merge our money or save enough for the life we each envision. Too often, we just assume that piece will fall right into place on its own: As challenges come up, we figure, we’ll deal with them then. If we get along well, we should have no problem sorting out the financial stuff down the road, right?
 
Maybe not. Beneath the surface, you could each have wildly different expectations about how much money you need to live the life you want — and you’re not likely to know unless you talk about it. Yes, you can still find a compromise that works for both of you. But to do so, you need to know how each of you envisions your life together, how you’ll pay for it, and who’s responsible for what. Ideally, you should have that discussion well before you walk down the aisle or co-sign a lease on an apartment together. But if you haven’t, you’re certainly not alone.
 
 
Money Talks
A poll conducted for the Bank of Montreal in 2008 ranked money as the most sensitive topic of conversation among Canadians — ahead of religion, politics, and even weight. So it shouldn’t be a surprise that in the U.K., the Financial Services Authority found nearly three-quarters of couples have a tough time talking about money: One-third of the nearly 1,500 people it surveyed said they’d rather discuss sex or a previous relationship with their boyfriend or partner.
 
The bottom line is if you don’t talk about your financial concerns and expectations with your partner there is a good chance that any assumptions you have made could turn out to be wrong. You might believe that the man you’re with is financially successful because he has a hip wardrobe and almost always picks up the tab when you go out, for example, or simply because he works in a high-paying industry (even though you may have no idea what he’s actually earning). You might think that since he rarely uses a credit card around you, he’s got little or no debt. And when he talks about wanting to start a family, you’re sure that means he’s got money saved up. Unless there are obvious signs indicating otherwise — maybe you overhear a call from a collection agency or you’re there when the landlord shows up to demand overdue rent — it’s easy to assume that your boyfriend, or partner, will be able to contribute at least as much as you are financially to the relationship, if not more, right?
 
So you put off the money conversation until you’re absolutely forced to have it. Maybe one of you loses a job and the other is stuck covering the bills because you don’t have savings. Maybe you decide to buy a home together, only to discover that your partner’s credit score is so low that you can’t get a mortgage. Or you get pregnant and all of a sudden have to figure out how you’re going to cover all the additional day-to-day expenses of having a baby — not to mention, child care or the bigger place you might need to accommodate a child. Of course, this is not the best time to realize that you and your partner are not on the same page financially. By then it could be too late, and you may find that both your finances and your relationship are in serious trouble.
 
We know this from experience. Each of the five of us can recall a relationship in which we put off talking about our finances and made assumptions that turned out to be wrong — and regretted doing so. From varying expectations about who was responsible for what, to different approaches regarding making and managing money to coping with opposing financial priorities, we know how bad it can get. Had we discussed these issues with our partners sooner, we might have been able to reach a compromise we were both happy with. But the longer we waited, the harder it was to bridge the disparity in our habits and attitudes.
 
It may seem hard to believe that couples who are close in every other regard can be so vastly different when it comes to money, but researchers say it’s more common than you might think — even among married couples. One study published in the Journal of Socio-Economics found that spouses disagreed on everything from how much income and wealth they had to how much debt they carried. “Most husbands and wives do not share similar views of the family’s finances,” the research scientist concluded. Even worse, they often didn’t realize it, which means they might assume their finances are in better shape than they actually are and behave accordingly. That’s not good for their relationship or their finances.
 
When it comes to what’s important to each person financially, couples don’t score much better. In a 2006 Money magazine survey of 1,000 spouses, about a quarter of the men surveyed said they thought their wives believed that having the right investments was very important. The actual number was nearly twice that. Likewise, only 45 percent of men said that having cash stashed for emergencies was very important to their wives but, in fact, more than two-thirds of the wives said it was crucial. Meanwhile, women believed their husbands cared more about paying off debt and saving for big purchases than men actually said they did. Husbands and wives, the survey concluded, “just aren’t getting through to each other about financial goals, priorities and worries.” No kidding.
 
Having more money doesn’t necessarily result in more conversations about it either. While 70 percent of wealthy wives said they shared the financial decision-making responsibilities with their spouses in a 2005 survey by PNC Advisors, fewer...

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