"What is right is not always popular, and what is popular is not always right."
I'm at my desk, just about to eat lunch when a client calls.
This client, let's call him Grant, and his wife are clients of ours. Grant is the one who takes care of the money-related things the couple has to do. I've been working on some financial projections for them, but I don't have enough information about their spending. Grant just sent me an email with some very detailed records of his spending. He was calling to make sure I got it, and to give me a message.
Grant tells me that under no circumstances is this data to be shared with his wife.
I have never heard anything like this before. I realized that this is the kind of thing that has the potential to happen when only one partner deals with the money.
When you think about households managing their finances, do you have the following image in your head? The man handles all the money decisions, including how much is saved and spent each month. The woman then gets an amount of money to spend - sometimes even called an "allowance." The woman has no idea what their family's money is invested in. She doesn't know what kinds of accounts they have. Worse, she wouldn't know how to manage any of it if something happened to her husband.
This is a common stereotype. Even though it's an old stereotype, it can still serve a purpose. It can highlight the problems with having one partner manage the finances while the other sits idly by.
Efficient - but Risky
At some level, it might seem like this is an efficient way to go about it. It's common for household chores to get divvied up. Someone has to do the money stuff, so the "chore" gets assigned.
The tricky part is understanding that the management of money is not a chore (although some elements of it might be, like paying the bills). Rather, it's a way to ensure we are using money in a way that supports our values.
Even if you disagree that financial management is not a chore and shouldn't be assigned to one person, you have to admit there are downsides. One of the more powerful ways to learn skills is by doing. If one partner never has to (or gets to) help with financial decisions, there will be a lack of financial education.
Something Could Happen
Suppose there's a household where only one partner handles all the money decisions - who I'll call the financial decision-maker. Further suppose something happens to that person.
Imagine how difficult it will be for the other partner to step in and keep the household finances going. This is a person who had nothing to do with financial decisions and is now being called upon to become the family's Chief Financial Officer.
The financial decision-maker could die prematurely, leaving a grieving partner to try to figure everything out.
The financial decision-maker could become ill or disabled. Again, the partner would be left to do something that's never been expected before.
There could be a divorce. It is very difficult for someone who has never had to think about money before to step up and start managing money successfully.
I'm sure you can think of other risks involved. The key point is that unforeseen circumstances could call upon the non-financial decision-maker to step in and have to do the work he or she is not prepared to handle.
Along the same lines, the non-financial decision-maker is at risk of becoming financially dependent. Financial dependency is complete reliance on someone else for anything money-related. Financially dependent people are found to be less creative and less likely to have good financial outcomes.
Money stuff is difficult enough when we learn about it throughout our lives. Imagine how hard it is for people to handle money if they've never been exposed to making financial decisions until later in life.
One strategy couples can use to manage finances is to have an amount of spending money that each gets without having to explain the spending to the other partner. A way people sometimes think about this strategy is to think about each of them getting an allowance.
That may be fine if it happens on both sides of the table. However, when one partner has full control of the finances and gives the other an allowance, there can be negative feelings and emotions toward the financial decision-maker. If the financial decision-maker, in addition to providing an allowance, puts restrictions on the things that can and can't be purchased, the loss of autonomy will compound these negative emotions.
Easier to Hide
With no oversight, it's easier for the financial decision-maker to hide money-related transactions or decisions. Keeping money secrets from loved ones is called financial infidelity, and the ease with which someone can partake increases when there are fewer eyes on the decision-maker.
One relatively common behavior underneath the umbrella of financial infidelity is secretly giving money to adult children, known as financial enabling. This is teed up when there is a difference of opinion about whether to provide support. Since the financial decision-maker handles the finances, it's relatively easy for that person to give money to the adult children and hide that fact from the other partner.
"But wait!" you say; "We each handle our own money, so this doesn't apply to me. I'll give that one to you; if you each handle your own money, then there are effectively two financial decision-makers. I will add that keeping your partner out of the loop with your spending, although avoiding or reducing some of the risks I talk about above, still keeps the door open for some risks.
I recommend having regular discussions about money.
Getting together regularly to talk about money: your inflows, your outflows, your values, your use of money, how you want to use money to support your life, and so on, will help avoid many of these risks. But it's even better than that. Having regular check-ins gives you confidence in your use of money and your financial decision-making. Get on the same page; enjoy your life.
You only have one life - live intentionally.
Brad Klontz, Rick Kahler, Ted Klontz: Facilitating Financial Health
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