Celebrate Valentine’s Day with Financial Tips from The Singing CPAⓇ

Couples in a relationship may disagree about money because views about money are linked to deeper emotional values like security, control, status, success and freedom.

Psychologists agree that talking about money with your partner early (and often) is the best way to prevent quarrels. While there’s no way to completely eliminate money stress from your life, understanding your partner’s financial philosophies can help you predict how well you’ll manage your money together down the road.

Steven B. Zelin, CPA, Managing Member at Zelin & Associates CPA in New York City and The Singing CPAⓇ, encourages couples to make the process of making financial decisions as much fun as possible.  He offers these ten financial tips for Valentine’s Day.

  1. Treat family finances as a business matter.

Have a financial business meeting or check in once a week at a set day and time at a quiet place (not a Super Bowl party). Start the conversation off simple and just talk.  Some meetings will be longer than others, but even a quick ten minutes will make a big difference in staying on a financial track.

  1. Discuss everything.

Full disclosure is critical to building trust and working as a team. Start out by discussing all financial information. This includes all debt, all obligations, all sources of income, taxes, various types of accounts already existing, any property owned, etc.  Run the numbers and (again) just talk. Make financial decisions together. For example, what’s important in a credit card? Points? No/low fees? Should we get a credit card with points to use the points to take a vacation?

  1. Brainstorm dreams and goals, both short-term and long-term.

Set short and long-term priorities. This exercise helps you get to know one another’s “financial temperatures” and styles. How much do you think we need for an emergency fund? Do you want to take a trip? Buy a home? Have kids? Own your own business? Go on vacations? Build an art collection? Purchase a second home? Have specific retirement wishes?

Don’t limit yourselves to what you can achieve in the present; be curious about your partner’s desires and hopes. Then make sure they are SMART (Specific, Measurable, Attainable, Realistic, Time-based) goals!

  1. Begin to build a simple budget together.

Take action and establish a joint-spending (and savings) plan. The best start is to merely keep track of all expenditures for a month or two. You can find simple online tools to make this easy, like a 50/30/20 budgeting calculator, which breaks down your after-tax income into three brackets:

  • Essentials (50%)
  • Wants (30%)
  • Savings (20%)

These calculations can serve as a benchmark.  At the end of the month, see if you overspent in any of these categories then adjust your spending habits accordingly.

  1. Start with the envelope system.

Consider creating your budget from the “envelope system”. This system was how families managed money in the years before checking accounts were common. People got paid, cashed their paychecks, and divided up the cash into various envelopes: rent, telephone, electricity, food, clothing, savings, vacation, etc.

The envelope told them how much they could spend and how much they had left at any given time. When an envelope was empty, the spending had to stop.

  1. Set up three accounts: Mine, Yours, and Ours.

My university accounting Professor Dr. Acton said that the key to a happy marriage is separate checking accounts.

First, agree on what you will consider “our” expenses and make this specific enough for a complete list.  Will a birthday gift for one of your mothers come from the joint account or not? What about medical costs, clothes, a new surfboard, holiday party costs, entertainment?

You might have to fine-tune this list with a little time during financial business meetings. Next, agree on the amount of discretionary money you will each have.

Make a list of the kinds of things to be considered “separate” expenses like haircuts, gas or gifts. This discretionary account then becomes your own business.  You can each spend that money on anything you want with no questions asked and no defense necessary.

Having an equal discretionary spending account eliminates issues that can arise when there is a large gap between two incomes or if one partner has different spending habits than another. It also makes surprising your partner with a gift a lot easier.

All income other than the discretionary amounts is put into the joint accounts.

  1. Stop checking your bank balance on a daily basis.

Checking your bank balance can be a trap. If you have more money than you thought, you will tend to spend it outside of your planned budget.  If you have less than you thought, you will create anxiety that will break down your willingness to face financial reality.

If you made a money plan and are following it, you should always have enough money to cover your obligations.

  1. Divide up financial jobs.

Put your plan in action by assigning financial “jobs”, set money dates and check-in. Talk first about what you do or do not like. For example, who is a “spender” or a “saver” and so forth.

Then try a plan:  who pays the bills, who does the purchasing of what kinds of things, who keeps track of the income and expenses, who makes investment decisions. How will they be paid for?

Once a month at one of your financial meetings share the information from your job. Switch jobs, do jobs as a team or try various options to see what works smoothly.

  1. Keep a list of things that “tricked” each of you into a bad financial decision.

Did you have a hard time saying “no” to someone asking to borrow from you? Didn’t resist that sale item when you did a little online surfing? Bought too many Super Bowl squares in the office pool?

Stay sympathetic, keep your sense of humor, and be straight up with one another.  You are a team. Try to help one another stay smart about unhealthy financial “relapses”.

  1. 10. Congratulate yourselves.

Acknowledge when you hit the mark – followed the budget, saved enough for the trip you wanted, paid off the car. Set up rewards for partnership successes.

 

If you have any questions, please contact me at steven.zelin@zelincpa.com or 646-678-4496, x101.