My wife and I got hitched in September 1999, and 10 months later, we revealed to the Foolish world how we married our finances in an article entitled A Financial Manifesto for Couples. Personal finance articles aren't usually as popular as the stock-related fare offered on Fool.com, so we were surprised when our "Financial Manifesto" ended up being one of the most popular articles in the summer of 2000.
The article led to other developments, such as the Couples & Cash online seminar, for which 1,000 couples from around the world enrolled, and The Motley Fool's Guide to Couples & Cash , our latest book.
But it also reminded us that our audience was interested in more than stock picks. Spend a day on the discussion boards and you'll meet thousands of Fools who -- with sincerity, intelligence, and humor -- are enriching their lives and those of others. That, I think, is why the article was so popular. Fools know that there's more to life than money, that it's a means to an end. And for many, that end is a lifelong, fulfilling marriage.
So grab your significant other, pour two of your favorite drinks, and curl up in front of the computer. Reading about your finances is not as romantic as a weekend getaway, but it's eminently more important.
The season of weddings is upon us and soon June's brides and grooms will be facing July debts, perhaps the first real trial of their marriages. The happy couple's wedding vows may have included "For richer and for poorer," but what that means in terms of the real world may be left up to chance or worse, to be settled in a series of future arguments. It's no accident that finances figure so prominently in divorce court.
In this case, it may be what's unsaid that holds the most power for the couple's lifelong happiness. This is not to say that couples should stand up in front of their friends and family and pledge, "I will love you and honor you, and I will only keep one credit card and pay the balance off every month," but that all couples (married or not) should develop their own private financial vows, to be taken as seriously as the flowery prose of the matrimonial ceremony.
TMF Bro and TMF Zuzu, Fools who married in September of 1999, made just this investment in their marriage by creating what they call a "Financial Manifesto." Sprung from a series of talks on car trips and conversations over coffee, their Manifesto attempts to outline their lifetime goals, and to arrive at an agreement for how to achieve them.
What's More Important: a House or a Hamburger?
Prioritize and post
Robert: 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).
Elizabeth: 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).
Follow the Bread Crumbs
Track inflow and outflow
Robert: It's hard to count your beans if they are constantly jumping.
Elizabeth: 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
Robert: 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 forgoing 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.
Elizabeth: 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
Robert: 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. Wal-Mart's (NYSE:WMT) Sam's Club sold the pants for $15; J.C. Penney (NYSE:JCP) 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.
Elizabeth: 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, MySimon.com, Overstock.com (NASDAQ:OSTK), etc.).
The State of the Union ("My fellow Brokamps...")
Monitoring progress
Robert: 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.
Elizabeth: 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
You might think that we would have no problems talking with each other about money, since we work at The Motley Fool and all. But there are as many approaches to money management as there are personalities. Being up-front about each other's weaknesses (Elizabeth: cool gifts for people; Robert: 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:
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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.
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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.
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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 email, 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 commingling our assets. (As for other commingling, 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.
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