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.
Good post, well-balanced view….pun intended:)
Really, I like these 3 overarching guidlines. In terms of clearly delineated equal rights, I share similar sentiments about that example you shared about the other family where one pays more, and the other makes it up in other ways. That seems to be a situation where inevitably, no matter what anyone says, some element of control will seep into things. Best to have both partners share equally, and carry things as a partnership. To me, that seems like a healthier way to go long-term. Nobody should live indebted financially, even if unspoken and not overtly expected, to a partner or partner’s family. Operate as a 2-person equal team instead.
Sometimes if it’s unspoken, it can be worse than if it’s spoken! At least a debt with a banker is pretty impersonal, but when family gets involved things always have the potential to get a little hairy and messy. Having both partners have an equal say and an equal stake is important to have balance.
It’s not to say that it can’t work when one person effectively “owns” the home and the other contributes in other ways, but it really depends. Is it “their” home, or is it “her” home and he’s just living there?
Nice analysis Kevin. My husband and I have pooled our income since we got married. We’ve always considered every dollar earned as “ours”, no matter who brought home the cheque. We do consult each other on just about every purchase over $20 or so. It’s not really a rule. We just do it out of mutual respect and as a way to make sure we’re not spending money on things that won’t provide some kind of lasting value. We were married relatively young by today’s standards, so I think that made it easier for us to share everything. We were both starting out pretty much at ground zero.
Once kids come along, then you really get to the meatier discussions. How much is it worth for one parent to stay home and care for the kids? Will it mean that the person earning the income has more power in the home/relationship? Is that fair?
Hi Balance Junkie,
I agree, it’s very important to have the “our” feeling, for each partner to have an equal and valid stake in the household finances and in the balance of power. Me and my girlfriend have been together since college days, so we are also starting out from ground zero in a sense. Those questions will definitely be important ones to consider going forward.
Financial balance comes in a variety of ways including intangibles. Most of my marriage, my wife is contributing in many non financial ways. She worked part time for years while our children were small. She was my rock when I took financial chances investing in income property, starting businesses and changing careers. We are very well balanced beyond the finances. Frankly, that is why I never think about the financial balance.
Hi krantcents,
Your wife is lucky to have a husband like you that appreciates everything that she’s done, and you are very lucky to have a wife like her for being very supportive of you! Thanks for contributing.
I can somehow rely to the story of your friend. Our situation was not the same, but we self-constructed our house, with a lot of help of my “in laws”. At some point, the “in laws” were giving their opinion on EVERYthing. The color of this or that, the material we should use so that we pay less and even who we should hire for some specific jobs. This was really frustrating for me as I was living on my own for many years already with no one telling me what to do. After a long discussion, the spouse and I agreed on what place the family should have and what was of no one else business. Since then, all is taken care of mostly by our own and we both feel comfortable with it and enjoy the freedom we have as individuals and also as a couple. We both use each other money and see it as “our” money. We do also have spare individual money to spend as we want. To me, this is the perfect balance we could have.
It can sometimes be tough to deal with others giving their opinion and having to tread the line between being respectful and doing what you want to do. It sounds like you were able to come to a pretty good arrangement, and I really like your idea of a “perfect balance” as that is exactly what I think, too: It’s really great when you have consensus on the shared expenses and still have some personal freedom at the same time; by balancing your own needs and the needs of those you care about, you can achieve harmony while still keeping things fair for all involved!
Your friend’s arrangement seems a bit messed up, but I don’t know the whole story. Maybe they just don’t want to pay the bank the interest and rather pay the family.
When we purchased out first home, I borrowed some money from my parent to help with the down payment. We’ve paid back since and it was an OK experience.
I think Chinese family view money differently. I think they view it as family money so it’s tough for westerners to understand.
If it works out for my friend, then who am I to judge? I personally wouldn’t want that situation for myself though because I would be personally uncomfortable and it wouldn’t feel we had a home together. I don’t feel it’s balanced but that is my opinion.
Chinese definitely do view money differently. Money tends to stay within the family but at the same time money can be a HUGE problem in Chinese culture causing many family fights and tensions… but of course this happens in Western families, too.
P.S. definitely a big difference between borrowing money for downpayment and your parents buying the place for you. It’s not like your spouse is living in your parents’ home and it doesn’t sound like your spouse is renting from you; it’s still your home together.
I think balance is the key for solid money foundations in any family and situations as the one you describe with the 70/30 house are putting pressure on the future of those involved.
There’s a lot to talk about that other subject you mention in point 3… our relation with money can have such a significant effect on how we handle our finances and how they wind up at the end of the road, that we should all pay attention to it.
I think that as far as the home and things like that are concerned, a 50/50 split is the way to go. Unless one person is a billionaire and the other person isn’t and they just moved in together… then maybe that situation is more complicated. However, for two people around the same level I believe that 50/50 is fair so long as both partners are contributing the best way they can!
I like your line about wealth being a positive net gain. The only time I feel bad is when people exchange money for family time. I would love more family time myself but I also know some people who work crazy hours during the week and only see their kids on the weekends. It’s then that I feel bad.
I’ve always made roughly the same salary as my husband, although I think he makes more these days (we flip flop depending on bonus’s etc). I feel good about contributing my fair share and I’m not sure how I personally would feel if I couldn’t contribute as much monetarily. My mom was always the primary breadwinner in my family so it’s sort of ingrained that I have a role to play in supporting us. Yeah, I guess I do have some issues with money, come to think of it.
I’ve never known a 70/30 split that didn’t end up badly. One person inevitably feels like the other hasn’t contributed enough or feels like someone is wielding power with their purse strings.
Well it definitely goes both ways. If you love money so much you’re willing to sacrifice your family for it, aren’t you lowering your overall life EV? Life is all about trade-offs so we can’t just stay at home all day to be with our family unless we’re independently wealthy, but there is a point of diminishing returns. I believe that one should view money with a view to what it can do for us and how it can make our lives better. If we love money so much that it actually makes our lives worse overall, then we lost sight of the goal.
I feel somewhat the same as you as far as contributing goes. To me, it feels good to know that I’m helping out and doing my fair share, and that we don’t rely on just one person. That said, it can also work if one person stays at home for a while, say after a kid is born, because then they are contributing in other valuable ways. What’s important is that things still remain balanced and that both partners feel that they have an equal stake in the household.
It’s when things become unbalanced that problems can arise, but I guess that can still work if one partner is willing to submit to the other partner all of the time. I don’t know; it’s not for me personally but if it works for others then who am I to say it’s wrong *for them*? My opinion is that it’s an undesirable situation to be in, but a lot of things are relative in life, I guess…
Great post Kevin, really enjoyed it and those principles above.
Like a few other comments above, my wife and I have always pooled our income. It’s ours. We’re a team, not individuals. Kinda like Balance Junkie, we consult on major purchases – anything over $100ish. We always make time to discuss where our expenses are coming from and where our spending will be going to every few weeks. It’s a balance we both appreciate and both couldn’t live without. I could not imagine my partner in life not being cognizant of her spending habits and how it might impact our relationship. I’m very lucky to have her 🙂
You also have a very lucky wife to show your appreciation. 🙂 I don’t think pooling all of the income is required but it definitely makes sense for those big shared expenses and common goals together.
Hi Kevin, interesting thoughts on a milestone in life, when we cease being One and become a One of Two equal parts. Some days, I think Mrs. 101 and I are still figuring it out after 15 years.
As for work-life balance, my friend is fond of saying that no one’s last words ever were “You know, I wish I’d spent more time at work”
True, I doubt there’s many people that end up saying that! The difference could be if you have work you really love or you are working for youself, but then would you still call it “work” at that point?
My wife and I achieve a balance by simply saying everything belongs to us both. I have been the income producer over the years while she has been the homemaker. Her job, in my opinion, has always been much tougher than mine. Although I have earned the money, I have no more say about how we spend it than she does; we have always made joint decisions about OUR money.
Hi Joe,
I think that’s so much better than saying “Here’s your $50 allowance for the week”. To me there’s something wrong with one partner being on an allowance. You are right, even though she isn’t working she is doing plenty to contribute toward the household, and it seems like you’ve achieved a healthy balance by being inclusive of this. In our case we both work so our finances are more like the Venn diagram, but should one of us stop working to raise for the kids I imagine the diagram would become one circle at least for a while. It’s only fair unless the person is just watching soap operas all day instead of doing their “job” 😛
Awesome awesome post. Love the Venn diagram picture (haven’t seen one of those for a long time).
Seems like everyone is talking about the same thing lately, about relationships and money. 🙂
I agree with you that the situation your friend is in, in which it’s not exactly 50/50 or even close to it, could be sticky if the relationship were to dissolve.
I also agree that the Venn diagram would work with couples finances. I don’t want to be squabbling with my boyfriend about how he should stop eating out for lunch, because its his choice whether he wants to or not. Of course, down the line if my income drops substantially and I went part time, that would change. But for now, the Venn diagram works 🙂
I think you and me seem to be more or less on the same page when it comes to this! It’s good to see some validation there and to know that this style also works for other people. Thanks for stopping by! 🙂
Kevin, I think so much is individual to the couple. Communication and compromise are the keys as well as agreeing wrt to who is in charge of what! It’s worked for me and my husband for a while 🙂