The season of weddings is upon us. Soon, summer's newlyweds will be facing autumn's debts. The happy couple's wedding vows may have included "For richer and for poorer," but what that means in real life may come as a shock. It's no accident that finances figure so prominently in divorce court.
Though couples probably shouldn't stand before their friends and family and pledge, "I will love you and honor you, and keep only one credit card and pay the balance off every month," all couples should develop their own financial vows. It's as important to know that your spouse gets weak in the knees and loose with his billfold every time he steps into Home Depot as it is to know that you share a love of Star Wars and the art of David Hockney.
Elizabeth (TMF Zuzu) and Robert (TMF Bro), Fools who married in September 1999, made an investment in the financial health of their marriage by creating what they call a "Financial Manifesto." This list of five precepts -- the result of heated conversations over hot beverages, and numerous road trips -- attempts to chart a practical and peaceable course toward achieving their lifetime goals.
Here's the list of their fiscal fab five, followed by some coupled commentary.
The Financial Manifesto
- What's More Important: Your Hobby or Your House?
Prioritize and Post
TMF Bro: It all starts with deciding what's most important, and keeping it front-and-center. As for us, our priorities are 1) children, 2) retirement, 3) a house, 4) Elizabeth's Ph.D., 5) travel. Those endeavors must be funded first. Everything else is fluff, flue, and folderol (i.e., nice to have around, but not worth spending your future on).
TMF Zuzu: This may sound easy, but it can be hard to subdue that little voice that says, "Come on! This is a perfect night for a movie and popcorn." We're not extremists, and we enjoy the simple pleasures, but it's important to look at how just a little delay of gratification can add to your bank account over the long haul. A couple of ways we remind ourselves of these larger priorities:
- Posting the Manifesto, and pictures of dream hovels, on the fridge.
- Keeping a mini-Manifesto in our wallets so we have to confront it before making a purchase.
- Doing a little equivalency computation before buying something (e.g., "I had to work an hour to buy this book.").
- Having very little cash on hand (self-imposed parsimony).
- Put the Shackles on Your Shekels
Track Inflow and Outflow
TMF Bro: It's hard to count your beans if they are constantly jumping.
TMF Zuzu: And it's hard to figure out where to cut back if you only have a general idea of where you are spending your money. I was shocked when I figured out exactly how much I spent last month at the drugstore, especially since I can't point to anything significant to show for it. We've decided to track inflow and outflow by:
- Assembling a spreadsheet analysis of how we've spent our money over the last three months.
- Checking our account online on a weekly basis to keep track of expenditures and better monitor outflow.
- Keeping a bowl near the door where we put all of our receipts.
- Don't Eat Your Money
Put Cash in Context
TMF Bro: The hardest part about tracking our finances was figuring out where the "$60 ATM cash withdrawal" vanished to. We figured that 75% of our cash purchases went to onion bagels, veggie subs, pan pizzas, and lo mein.
To put this in the context of our goals, just foregoing the occasional Big Mac Meal could add significant buckage to our retirement. If we could shave off $50 each month this year for our retirement, 35 years from now that $600 growing at the market's 11% average would add $23,145 to our retirement savings (not accounting for taxes, commissions, or acts of dog). Even with inflation, that savings could easily pay for the Jacuzzi in our future RV.
TMF Zuzu: This was a hard luxury to tackle -- thank heavens for the inexpensive salad bar at our local grocery store. We have been trying several ways to cut down on food expenditures:
- Sticking to a grocery shopping schedule. (Otherwise, we eat out more "because there's nothing in the house.")
- Preparing extra food with our meals so leftovers can be used for lunch.
- Using coupons and preferred shopper programs.
- Suggesting low-cost alternatives when our friends want to go out to eat. ("How about a picnic? It's so nice outside!")
- The Wacky Khaki
Find ways to save money
TMF Bro: Back in my financial advisor days, the CEO of a local sportswear manufacturing company spoke to all the brokers in the office. He held up a pair of khaki pants and explained how they made these pants and then shipped them to three retailers. Sam's Club sold the pants for $15; JCPenney sold the pants for $25; Macy's sold the pants for $40. The only thing different about the pants was the label. To us, the story is emblematic of the need to comparison shop, and the need to search for better deals.
TMF Zuzu: Our strategies here include:
- Hitting the discussion boards and sharing in the collective knowledge. The Living Below Your Means board is just one of the many incredible resources out there.
- Taking on extra jobs to fund the fun stuff. I was able to pay for a huge chunk of our honeymoon just by doing a freelance newsletter once a week, and we were able to keep our more serious financial goals intact.
- Frequenting consignment shops, yard sales, and Internet bargain sites (Half.com, FleaOnline.com, Dotdeals.com, etc.).
- The State of the Union
Monitoring progress
TMF Bro: We decided to meet on the first Thursday of each month to review our budget and accounts, to see what's working and what's floundering.
TMF Zuzu: I'd rather go on a walk with my husband than share our latest financial statements, so this one has been tough. But, we've resolved to stay on top of our situation, and monitoring is a necessary part of the process. I contribute to this by balancing our checkbook and letting Robert know how much we have in our accounts, as well as keeping track of how much we've saved for a house down payment. Robert devised a budget spreadsheet and will get around to doing another analysis of our spending one of these days.
Problems and Pitfalls
(Before your dearly beloved becomes your dearly departed)
You might think that, working at The Motley Fool, we would have no problems talking with each other about money. But, there are as many approaches to money management as there are personalities. Being up-front about each other's weaknesses (TMF Zuzu: cool gifts for people; TMF Bro: CDs and Dunkin' Donuts coffee), choosing the right time and place to talk, and figuring out how you'll deal with problems and financial setbacks are just a few of the steps on the road to matri-monetarial happiness.
Some of the Problems We've Had:
- Different ideas about when we need to get things done. Robert's timetable tends to be less urgent than Elizabeth's. Set a realistic timetable that both people can stick to, assign jobs, and take responsibility for them.
- Different priorities for spending the small amounts of money. Elizabeth thinks it is well worth $20 to get that cool camera that takes sticker pictures, especially if it's a present. Robert is better at remembering the whole picture and the sticker price. Offer your spouse a gentle reminder of the goals during momentary lapses of good sense -- but no nagging.
- Choosing the wrong time to talk about these issues. There are just some times when you're not going to be successful talking about financial issues. We made this mistake a few times, but were able to realize it soon enough and move on. One solution was to have the discussion via e-mail, giving each other time to think and respond, without the other person staring at you.
- Divergent ideas about the Manifesto itself. Robert had written a three-page constitution, laying out every single way to save money. Elizabeth thought that was too much to conquer at one time. Once egos were checked, Robert agreed that simplicity was best.
No doubt our Financial Manifesto, like our marriage, will undergo numerous transitions in the years ahead. But, the idea is not so much to have a contract engraved in stone as it is to agree on a set of short- and long-term goals, establish good communication, and keep a sense of humor when co-mingling our assets. (As for other co-mingling, that's subject matter for another article, and perhaps a different website.)
Have you and your spouse written a Financial Manifesto (or a Declaration of Financial Independence, or a Finance-ipation Proclamation, or a Moola Carta)? Share your agreements, tips, and resolutions on the Investing for Couples discussion board.
Haven't gotten around to it yet? Share this article with your spouse, then follow up with e-mails to talk about how you could make your own (better) Financial Manifesto.
Related Links:
Investing for Couples Discussion Board
Happily Ever After -- Financially Speaking, Fool Specials, 10/25/99
How to Develop Good Money Communication
See Also