Keeping finances separate can be costly

That’s a tricky process because they haven’t merged their finances yet. “Since dating and through marriage we kept everything separate,” says Carretero, a public relations executive. Although the couple slashed their student loan and credit card debt in anticipation of the home purchase, neither one has a precise tally of the bottom line. “We’ve brought […]

That’s a tricky process because they haven’t merged their finances yet. “Since dating and through marriage we kept everything separate,” says Carretero, a public relations executive. Although the couple slashed their student loan and credit card debt in anticipation of the home purchase, neither one has a precise tally of the bottom line.

“We’ve brought the debt down and put more into savings, but we’re saving separately,” Carretero says. “I keep saying we need to start a joint bank account. We want to buy a house really badly and haven’t been able to come up with down payment because something always comes up.”

Their situation isn’t unusual. Young professional couples are more likely to keep their financial lives separate — and are also more likely to fight, practice financial infidelity and have financial regrets, according to a recent survey by American Express.

Consider the Comparisons

The Spending and Saving Tracker survey defined young professionals as those under age 30 with college degrees and minimum annual household incomes of N5 million. Both partners worked in nearly three-quarters of these households. Among the findings:

•     72 percent of young professional couples say discussions on household finances lead to arguments, compared with 45 percent of couples overall;

•     39 percent misrepresented the amount of a purchase to their partners, versus 27 percent of couples overall;

•     66 percent of young professional couples say that looking back, they would have managed their finances differently. The greatest percentage — 40 percent — would put more into savings and investments and spend more responsibly.

Ginita Wall, CPA and financial planner in San Diego specializing in divorce, says she’s not surprised by the findings. “You would think if their finances were separate, couples wouldn’t fight about money, but what happens is they never have an opportunity to talk about mutual goals,” says Wall, co-founder of the nonprofit Women’s Institute for Financial Education (WIFE.org). “So one of them will set a goal to save for a bigger house while the other may think new golf clubs are more important — and they are off to the races fighting about money.” Nearly one in five of young professionals regretted not discussing financial goals and expectations earlier.

In addition, 43 percent of young professional couples keep their debts separate, compared with 20 percent of the general population, while 57 percent say they are better savers than their partners, versus 40 percent of total respondents. And 96 percent said they don’t discuss finances on a monthly basis, compared to 91 percent of the general population. The study underscores other research indicating that couples who merge their money, but divide and conquer financial chores, save more for retirement.

“A benefit to merging finances is that it forces discussions and even arguments about money,” explains Brad Klontz, financial psychologist and co-author of Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health. “Arguments around money should not be avoided as they provide opportunities for growth and increased intimacy. When disagreements are resolved it can actually strengthen a couple’s intimacy and financial health. Keeping finances entirely separate enables couples to avoid talking about money altogether. While they may avoid fights, they also miss out on the benefits of challenging their money beliefs and assumptions.”

Learning to Communicate

Carretero says her money beliefs came from her father. Her parents divorced when she was a teen-ager. “He said, ‘I want you to be able to provide and sustain yourself on your salary, and don’t ever depend on a man,’” says Carreto, who started supporting herself at age 20, when her father died. “Now it’s become awkward for me to have money conversations, especially about merging things together, because he drilled that into my head.”

Klontz says he often sees a hybrid approach, where couples “strike a balance between financial autonomy and financial interdependence,” he notes, in which they contribute to a joint checking or savings account for major household expenses and goals, while maintaining separate accounts as well. “Merging finances together works great as long as there is honesty, joint sharing of power and control and financial integrity, for example, paying bills on time. Without these safeguards in place, one or both partners can be at significant financial risk.”

Candace Bahr, managing partner with Bahr Investment Group and co-founder of WIFE, suggests couples switch off paying all the bills on an annual basis, so they get a full picture of earnings and spending. That’s how she and her husband divide the chores.

“You get the full flow and can see where everything is going. I can update him and then I hand over the books in good stead on January 1,” Bahr says. “We set common goals but manage our retirement accounts separately. We learned to let each other know what we are doing, because at one point we didn’t do that, and I found I was buying the stocks he was selling. Talking about it is really important.”

Klontz suggests couples agree upon an amount of money they can spend without consulting each other and review progress towards their goals on a quarterly basis.

One problem is that spendthrifts and hoarders are attracted to each other, according to recent research. Bahr suggests before couples tie the knot, they get a handle on their partner’s money personality by asking a few questions. “If you received one million naira, what would you do with it? Where do you see us 20 years from now? How financially ambitious are you? I’ve seen couples where he’s happy to turn down promotions because he likes to leave work at 5, but climbing the corporate ladder is important to her. Then she resents him for dawdling, and he resents her for not being available because she’s so busy thinking about how to get ahead.”

Carretero says she and Kian share similar money styles and ambitions. Their challenge is “putting everything out on the table,” she says. “It’s just the specifics we haven’t gotten into. I know I’m OK on this side, and I think he’s OK on that side, and if anything wasn’t, he would tell me.”

Source: www.yahoo.com