Maybe the Most Overlooked Factor in the Spouse Search: Money-Psychology Congruence
It’s late summer 1996 and I’m playing pool with some college buddies that are also home for the summer break. We’re all about 21 years old, and very comfortable in our upper-middle-class lifestyle fueled by our parents’ corporate jobs that they’ll slog through until they’re 65 and are then released on good behavior to retire on a corporate pension with a gold watch. So I can afford to fritter the day away playing billiards rather than working because hey, I’ve already earned my beer money for the coming school year. (That was my attitude; I’m not proud of it, but I’m being honest here.) We’re at one of my friend’s parents’ house, and in walks the future Mrs. Joe Freedom. She went to high school with a couple of the friends I’m visiting, and she was just dropping by to say hi. She immediately caught my attention. All sorts of thoughts began swirling in my head, and something of a haze clouded my thinking. But I pulled it together, cut through the psychological clutter, and calmly and cooly decided on the first thing I needed to know about her: is she frugal?
Ok, wait. No. I never thought that. Not for a second, not even close. In fact I would spend the better part of the next four years learning everything about her—with little concern for that particular trait. What’s her favorite color? Sure, need to know that. But how is she with money? Eh, let’s not get bogged down by weighty issues like that. In reality, over the next four years I would (subconsciously) do a lot to conceal my frugal money views—spending whatever it took to win her attention. And hey, I was going to be a lawyer, and lawyers are BSD types that make lots of money, so I figured I would not “need” to be so frugal in the future, right?
Now to be fair, if she had been a money disaster, I obviously would have noticed it. If I had learned, say, that she was the proud owner of a large credit card debt obligation, eventually I would have become aware of it, and I want to think that this would have been a significant issue for me (and us). But I can’t say that with certainty. I may have just as likely brushed it aside—”we’ll fix that after we’re married”—I can hear myself thinking. But no, Mrs. JF mostly had her financial house in order. She (mostly) kept her transactions logged in her checkbook ledger so she would know the balance in her checking account. She had nice things, but not luxurious things. Not fancy things. She was just as likely to go “shop” at Wal-Mart as anywhere else (we’re not talking about clothing here mind you; that’s a different story). In most ways we appeared nearly identical in our money-attidue profiles: upper-middle-class suburban kids being funded by their parents, not free to buy anything we wanted but certainly buying just about everything we “needed.”
But the reality that we would discover many years later is that me and Mrs. JF have very different money-psychology profiles. I am something of a minimalist, and an optimizer though and through. And frugal—not because I have to be, but because it just feels right. No dollar should be wasted; it pains me to spend $8 for an item that I could have bought for $6 with just a little more diligence. But Mrs. JF … not so much. She’s a doer, and her productivity goals don’t allow her the time to dither over this type of thing. If she needs something, she buys it quickly and keeps moving. Her time is more valuable to her than searching for a cheaper option; or thinking too hard about whether it is really a “need.” That’s one of the many reasons why she gets much more done than me (aside from the fact that she’s much smarter). She approaches consumption with a supply-side view: she’s willing to modify her earnings level as needed to fuel her consumption level, whatever that may be (i.e., “I’ll just work harder and earn more”). I view consumption from the demand side: I have ultimate control over my consumption level, and by keeping it as low as possible I can avoid needing a paycheck at all. (And in my defense, if your goal each day is to spend as close to zero dollars as possible, you don’t waste a lot of time bargain hunting).
Money-Psychology Congruence Is Huge
By now we all know—at least based on the data regarding the sources of discontent in a marriage—that money and finance is a very material issue in the health of a personal relationship. Many personality differences can be easily managed around: different tastes in television programming (maybe one likes off-color comedy and the other doesn’t)? Answer: two televisions. Different preferences for vacation destinations (one is beach, the other is mountains)? Fine. We’ll rotate years. But money-psychology is qualitatively different. It impacts multiple decisions every day (should I stop at Starbucks this morning?), while at the same time dramatically shaping the long-term path of your life (escape the entrapment chamber to do whatever the hell you want at 42 or 65?).
Not everyone will be able to find a perfect money-match—after all, us FI-types are a fairly rare breed. But you can make your somewhat incongruent situation work … you’ll just have to work harder at it. For 16 years or so me and Mrs. JF were able to both have it our own way because of the luxury of a big fat income fire-hose: we made enough for me to save a lot and for her to not need to fret over every expenditure. Now that we’ve turned off the slave-wage income we do have to work harder at keeping the (financial) peace. I default to spending less (demand side); she defaults to earning more (supply side). We’re resolving this difference in philosophy by aligning the consumption desires with the earning responsibility; if we want to consume more then we need to earn more, and responsibility for that is being allocated proportionately. This is the opposite of the bargain struck by many Working Joes, summarized by what one of my former clients once said to me: “When she decides to go shopping, I just decide to work harder.” That’s cool. If you love your work.
I don’t mean to imply that it’s impossible to find a true money-match partner. It can be done (I’m thinking of the Frugalwoods couple here by way of example), and my best guess is that if you match two hard-core FI types together in a long-term partnership you could easily cut your FI timeline in half (2x the income and less than 2x the expenses because of economies of scale; not to mention the teamwork effect on saving rather than spending). But our money partnership managed to work quite well over a t6-year entrapment period through the combination of a relatively high income, a moderate-but-not-exorbitant spender, and a super-frugal weirdo. But I also recognize that our path would have been much more difficult without that high income—and here I mean both our path to FI and our relationship path. More money does help to smooth over money-personality differences.
What to Make of All This
My conclusion here is that money-psychology congruence is one of the most important factors to consider in seeking a long-term partner. Complete congruence will super-charge your financial prospects and dramatically shorten your path to Financial Independence. But complete congruence is rare, and its absence is not fatal. Complete incompatibility—that is, matching a total spendthrift with an FI-type—will likely doom a relationship to failure at some point, no matter how much income is generated (and certainly if that income is being generated predominantly or exclusively by a frugal or FI-seeking-type spouse). But for the rest of the Bell-curve population (those that are neither at complete congruence or complete incongruence), differences in money attitudes can be managed successfully with additional effort.
A few tips:
- Set expectations and limitations in advance. And here I mean in advance of the wedding if at all possible. Agree on what the expectations are for lifestyle, career commitment, earnings goals, and who will do what. Almost no one will be forward-thinking enough to do this effectively before marriage, but the sooner the better. And the conversation will be an ongoing one as situations and people change over time.
- Work on money and finances together. Let’s say one spouse is a tax attorney with an accounting background that studies personal finance for fun, and the other has a classic liberal arts education and presumes a “debit” is an insect to be eradicated from your home. Maybe it’s just me, but one of these two seems much more likely to gravitate towards the financial duties of the household. Since I was the personal-finance nerd, for the first few years of our marriage I did all of the financial work and didn’t involve Mrs. JF any more than the monthly nagging regarding spending that resulted from the closing of the books. I was happy doing this work, and she was happy to not be bothered by it. But this was a mistake, and it made it much harder to discuss financial issues together because she was so far from the data and the figures. So I began to include her in the monthly “spending report” reviews, savings goal status, investment and net worth progress, etc. My objective was to give her as much as she could reasonably tolerate. The more involvement by the non-financially-minded spouse, the better.
- Combine the books. Shared accounts. Shared responsibility. I know there are a lot of different views on this point, and a lot of financially successful couples that have made the seperate-account approach work, but from my perspective it seems that is would be very difficult to build a synergistic financial partnership with both parties keeping their finances separate. And once kids enter the picture I think this seperate-account plan becomes completely untenable (who pays for little Johnny’s summer camp? You or me?).
- Agree on a “spending plan.” For reasons that I’ll never understand, the term “budget” really chaps some people. The phrase “spending plan” is a nice euphemism. Call it whatever you want, but reach agreement on where your household money is going. And once you agree—until you jointly change that agreement—both parties should respect that agreement as effectively binding. No different than if you agree to meet for dinner at the restaurant at 6 pm after work. If you need to change those plans, let’s talk about it and devise a new plan so we’re on the same page.
- Align consumption level with earning responsibility. The earlier you do this the better. If one spouse has a high income and fuels the high-consumption lifestyle of the other, the latter will eventually view that lifestyle as his/her right, and the former will come to view it as a burden. And if the earning spouse wants to turn off that high income … we have a problem. So while I do believe it is critical to combine finances and work as an economic unit, that doesn’t mean that you have to completely sever the link between individual actions and consequences. If one spouse wants to live a higher-consumption lifestyle than the other, it is perfectly reasonable and logical to expect that this spouse will carry the burden of funding that lifestyle. We did this late in the game after 16 years of high income, and for many couples that likely would not have been an option. Fortunately for me, Mrs. JF is an incredibly motivated and hard-working individual that wanted to pursue her own endeavors and she actually requested that I leave my law job to give her the flexibility to pursue her objectives. (And note here: she had also been working for those 16 years, so it’s not as if we turned to the stay-at-home mom of 16 years and said “Ok, go get ’em!”). So I moved to semi-retirement and she is in start-up mode. We essentially have two versions of a spending plan: one that is in place right now during a period of low income (ahem, my plan), and one that is on the shelf but could spring to life as income increases.
Be Vigilant and Proactive
Don’t let this issue sneak up on you in your relationships. Be thoughtful regarding the money-psychology congruence factor between you and your (would-be) spouse as early as possible. Getting too far down the road and then determining that you are incompatible in this area will likely spell disaster–either in the form of a divorce, or probably just as likely (and I saw this far too often as an attorney), one spouse that is trapped in work to fund the lifestyle of the other. So be careful and forewarned: spouses can create golden handcuffs just as easily as houses, cars, and country club memberships.
Footnote 1: While not discussed above, it is probably quite common to have a complete money-psychology match between two spendthrifts (they occur much more frequently in the general population). In this case, first thing is, heaven help you. Second thing: go find a fee-only financial planner and visit him/her early and often.
Footnote 2: Here is a recent blog post at Moneyish discussing data from a Bankrate survey indicating that 42% of respondents say that someone’s credit score could impact whether they went on a date with them. Hmmm. Higher than I would have expected, and it may be one of those things that people think about in theory, but in reality would do something totally different. But only 13% said this data could have a “major impact” on their decision-making process. That sounds closer to right.