Dealing With Financial Tensions in Relationships
Make discussions productive with some simple (but not easy) ways to get to the heart of financial conflict.
By Samantha Lamas
Everyone has an emotional relationship with money that's complex, lifelong, and rarely examined. That's why the conflicts that arise when adding a person to this mix are not surprising. In any financial decision, when there are two people involved, each person's emotional relationships with money must be considered, and this can lead to some interesting communication challenges.
Fortunately, many conflicts can be mitigated by implementing a few behavioral strategies now and practicing a few techniques when arguments inevitably arise. In "Financial Turning Points: Relationships, Marriage, and Divorce," Sarah Newcomb, senior behavioral scientist at Morningstar, discusses some techniques advisors and investors can use to help navigate money-related situations in relationships.
Recognizing When Opposites Attract
Whether the cliche is true or not, odds are that many people look at money different from how the partner does. The most obvious is when a spender and a saver share finances. The saver likely associates money with security, safety, and stability, leading them to save as a strategy for maintaining peace of mind. The spender, on the other hand, likely associates money with freedom, opportunity, and the ability to live in the moment.
In times of plenty, the two may not conflict, but when things get tight the tension rises. The saver, as a response to the need for safety, will be inclined to save more fervently when money is tight. The spender's need for freedom is also threatened by a lack of cash and may be faced with the urge to protect the right to enjoy life, even during tough times.
When financial opposites attract, communication is key. We'll lay out a simple (but not easy) way to get to the heart of financial conflict so these talks can be as productive as possible.
The Art of Productive Arguments
Spending and saving are two different strategies for meeting underlying needs. Security, stability, fun, and enjoyment are all things we need to feel fulfilled. In financial conflict, it's important to recognize that even "irrational" behavior is an attempt to fulfill a deep and fundamental need. Focusing on the need rather than the strategy can help conflicts be far more productive.
Divorce settlements are ripe for these conflicts. For example, a recently divorced couple own equal shares of their house. Susan plans to buy John's share of the home, but she is taking her time searching through mortgage options because she fears making a bad decision and causing herself years of financial stress. John's anxious to have the cash in hand because he fears that his plans for a new home will be thwarted if the details aren't worked out quickly.
Both are trying to meet their needs of security, ease, and peace of mind, but the slowness of one conflicts with the eagerness of the other. Conversations that center on the strategy (applying for a mortgage) lead to arguments about what the "right" approach is but fail to address their real need for safety and reassurance. Instead, Susan and John should be talking more about their fears and less about their strategies. Once they can both see that they are trying to meet the same need, they may be more compassionate, understanding, and open to new ways of approaching the situation. For example, Susan may be willing to agree to a specific time frame once she understands what's at stake for John.
Setting Some Ground Rules
There's no one right way to manage finances when two parties are involved because it really depends on the personalities. But once a strategy is set, it's important to set some ground rules, or what Newcomb calls "if-then rules." For example, "If the amount is more than $200, then we must discuss the expense together." In John and Susan's case, they might decide that if Susan hasn't chosen a mortgage within six weeks then, as the executor of the estate, John will begin the process of putting the house up for sale.
Now, because we are human, someone is bound to break this rule. Arguments are a part of all relationships, but there are strategies to make arguments more productive. Instead of pointing fingers, both sides can discuss how this decision affects their deeper goals. Too often, arguments turn into a blame game, which only serve to bring one side down and prompt more destructive behavior. Focusing on how the behavior affects goals instead of emotions can help steer the argument toward a resolution.