Financial balance is pretty important to me. I’ve had a lot of thinking to do here, during the months that me and my partner have spent searching for a new place, down to actually buying the place, signing agreements, and then going out and shopping, looking at furniture, and then agreeing on how much we would spend, and on what. We have our index funds, our other savings, and then we have the joint account for our shared expenses, and finally we each have our own personal accounts.
This is a relatively novel experience to me, since in the past I paid my own rent, bought my own furniture, and had a pretty much free reign to do as I pleased. When you don’t have to worry about the consequences on others, only on yourself, then you have a lot of freedom.
All of this changed when I purchased a place together with my significant other. Now I have to think of how my decisions will affect our common financial future together, and when it comes to furniture, other shared expenses, and investing strategy, we both need to agree and come to a common understanding together. These experiences have made me realize just how important it is to achieve financial balance in a relationship: it is so easy to fight about money when the balance is not there, yet it becomes that much easier to achieve happiness and satisfaction when the balance is there.
The importance of balance
Why is balance important? If we use love as an example, the reason that balance is important will be clear: most people give love with the expectation of being loved in return. Few people would be willing to stay in a relationship where the other person did not return the love, completely ignored them, slept with other people, etc…. Most human relationships seem to be built around the concepts of reciprocity and mutually beneficial exchanges. We love others with the expectation of receiving love in turn, and this is mutually beneficial because we are both better off. Few people are genuine altruists that are willing to give completely while receiving absolutely nothing in return, not even the psychic benefit of love or appreciation.
Just as balance is important in love, balance is also important when it comes to a couple’s finances. I think this is easier to achieve in the earlier stages of a relationship, after graduation when both the man and the woman hold full-time jobs, but before parenthood when budget strains increase and one parent may stay at home in order to care for the child/children.
Even then, once a couple moves in together, no longer can one person just do whatever they want, because his decisions may affect his significant other. Both people will need to make their decisions with the other person in mind.
Three important qualities
1. Clearly-delineated equal rights
I know a couple of friends that recently purchased a condo together, but their path is a little bit unconventional. One friend comes from China, and her family still lives over there. China currently being somewhere in limbo between a communist country and a free-market paradise, many Chinese look for opportunities to invest their money overseas in stable, prosperous countries, like Canada, and investing in property is one of their favorite investment strategies.
So, although my two friends have both signed a mortgage, what will really happen is that one friend’s family will purchase the condo outright (capital controls means that it takes time to transfer the money needed to do this), and the other friend will contribute in other ways. Their ownership share has been set as 30/70 or some other off-ratio, and my other friend’s family will in turn pay for wedding expenses, and my friend will pay for the furniture, small things like restaurant outings, and more of the monthly expenses as a form of “rent”. I don’t know exactly what their arrangement is, but I know it’s something like this.
I personally see something wrong with this situation. I’m not saying that it can’t work, but to me there is something not right about one person and their family essentially having total ownership over the place and the other person trying to bring things back into balance by making up for it in other ways as a form of “rent”. In my opinion, this is no way to bring about balance as one party still has a clear power advantage over the other person, and in my view, power should be relatively balanced in a healthy, stable relationship.
What if down the road, one partner only sees that they purchased a condo and forgets about all of the contributions that the other has made, since most of them were individually small and therefore easily forgotten about? What happens should the relationship come to an end? Despite what agreements they may have come to, the law may have other ideas. Things may seem in balance, but to me the situation is like trying to keep a ball on top of a point: one must continually spend energy and effort trying to keep things in harmony.
In the end, this is certainly my friends’ decision and not my business, and he seems to be fine, but I personally would never want to be in a situation like that. Some people would say “wow, he gets to live in a condo almost for free!” but I really don’t see it that way. I would feel a debt worse than the interest I currently pay to the bank, and I wouldn’t feel that I was in my own home.
With my girlfriend, we have both put a significant amount of skin into the place, and we can say that it is our condo, though she got the larger room with the walk-in closet. 😉 Nonetheless, it’s very obvious what our rights and responsibilities are, and neither of us has power over the other: Either we come to an agreement together or we wait until we can. It is our home.
2. Personal space
I just said how it’s important for a couple to be in balance and harmony, like a professional balance scale. It’s important to come to decisions together, but I also think that it’s important for each partner to have control over their own finances and discretionary spending as well.
This nice Venn diagram from Natalie Dee illustrates my point pretty well. When it comes to the shared expenses that affect both partners equally, then it’s important to come to an agreement together. There are also expenses that one partner might be interested in: A new guitar for the guy, a trip to the spa for the girl. Each partner should also have the freedom to spend on personal items without having to get “permission”, so long as the other partner isn’t negatively affected.
3. A healthy view of money
How do you tend to value money, and what role does it fill in your life? In order for two partners to be comfortable with money together, I think each partner has to become comfortable with money on their own, first.
Ask yourself the following questions:
- Do I feel that successful entrepreneurs do not deserve their wealth?
- When a friend of mine receives a windfall of money, do I feel jealous?
- Do I have a strong emotional attachment to money?
If you answered yes to any of these questions, then it may be a sign that you see wealth as a zero-sum game. You see the gains of others as your loss, and you place too much importance on your relative standing.
In reality, wealth is a positive-sum game, and if you are reading this post, chances are you are doing very well on both relative and absolute measures. Money is an indirect representation of the stored creation of value, and that is all it really is. It was created spontaneously since direct exchanges via barter and IOUs become unwieldy at a certain point. It is not good or evil any more than a stick or a rock is good or evil; it is all in how we use it as a tool, and whether we choose to use it to better our own lives and the lives of others.
There is a popular pop song on the radio, where a couple of lines go “You gotta love yourself if you can ever love me”, and I think the meaning applies to more than just love. You each need to be comfortable with money on your own so that you and your significant other can be comfortable with each other when it comes to money and other financial matters in life.
So, reader, what are your own thoughts on financial balance, and the role that money plays in relationships? As always, I’d love to hear your thoughts and personal experiences.