Many a good union has fallen to pieces over the subject of finances. Here's how to head off trouble.

Money—how to invest, save, and spend it—is what many couples, young and old, fight about most. The good news is that if you can reach common ground on finances, you have a better chance of enjoying many years of bliss.

Don't expect to start out on the same foot, though, because in general, men and women exhibit broad differences in how they handle money. Take investing, for instance. Men are often overconfident about their ability to make sound financial decisions, according to the results of a study published in The Quarterly Journal of Economics in February 2001. The researchers found that males trade stocks more frequently and their portfolios earn slightly lower returns than those of women.

"Women tend to be more methodical, more plotting," says Nancy Dailey, a Rixeyville, VA-based sociologist and author who monitors women's attitudes toward retirement and personal finance.

Another study, commissioned by OppenheimerFunds, confirmed that female investors are indeed more patient than their male counterparts. The survey results, released in May 2002, show that during volatile markets, women are more likely than men to hang tough and leave their portfolios alone. Moreover, just 34 percent of women have purchased a stock on a tip from a friend, compared with 51 percent of male investors.

"Women have an ability to look beyond short-term volatility and stay focused on the long term," says Donna Winn, president of OFI Private Investments, a subsidiary of OppenheimerFunds that's aimed at high-net-worth individuals. "We think that reflects their strong goal orientation, focus on financial planning, and their ability to listen to and heed professional advice."

Not surprisingly, women are also more likely than men to have an adviser guide their investment decisions. According to OppenheimerFunds, 37 percent of women cite advisers as their most important source of investing advice, vs 26 percent of male investors. Among women in wealthy households—defined as those with $250,000 or more in financial assets—the rate rises to 47 percent.

Just because men and women have different approaches toward money doesn't mean you're doomed as a couple. No two people have the same expectations and desires, especially when it comes to finances.

"Marital conflicts over money often have little to do with money itself," says Christopher L. Hayes, a professor of gerontology at Long Island University's Southampton College and co-author of Money Makeovers: How Women Can Control Their Financial Destiny (Main Street Books, 1999). "They have a lot to do with emotional issues, such as a desire to control, fear for personal security, or a need to replicate the family atmosphere one experienced growing up."

Fortunately, there are effective ways to compromise. You shouldn't feel you have to change your style to match your spouse's, or allow your partner to force a new way of thinking on you. As a couple, your merged style may develop into something that's very different, yet more effective, than your individual approaches to money.

No one has a magic answer when it comes to resolving disputes over money, but the following strategies have helped a lot of couples:

Put yourselves on a budget. People tend to bristle at this idea, but a budget can be an effective way to control spending, making you more conscious of where the money goes. Start by dividing your expenses into three main categories: fixed costs (rent or mortgage, taxes, insurance, auto loans, tuition), essentials (food, clothing, home and car repairs), and nonessentials (savings and investments, theater tickets, magazine subscriptions, restaurant meals). Many would argue that savings and investments are essentials. If you agree, set a minimum amount to save or invest, and increase it as your income grows.

Once you establish a budget—or "spending plan," if you prefer—stick with it. "I had a female client who called me once a month in tears because she couldn't make the mortgage payment," recalls Kathy Stepp, a financial planner with Stepp & Rothwell in Overland Park, KS. "One time she mentioned the $700 ring she'd bought for her husband. She talked about it as if it was as important to her as spending money on a heart transplant."

Open separate checking accounts. This gives both partners a measure of independence and the freedom to buy small items without having to consult one another. You may want to open a third checking account to pay bills and make additional contributions to investment accounts.

"As long as neither spouse is a wild spender and each knows how to balance a checkbook, I think separate accounts are healthy," says Charles Davant III, a family physician in Blowing Rock, NC. Davant and his wife, Teena, opened separate accounts many years ago for more practical reasons, after Charles looked at the ledger in their joint account and figured out everything he was getting for Christmas that year.

Some couples find it best to keep separate investment accounts, too. Oddly enough, the total portfolio can often be more diversified than if they had put their assets into vehicles that they had mutually agreed on.

Discuss what you expect from your investments. You can head off a lot of conflict by discussing early on who will make the decisions involving money and what your financial goals are as a couple. Ideally, both of you should have an equal say in those matters. Once two people begin discussing their finances, they often find that their priorities are at odds. The husband may be plowing money into mutual funds with the intention of putting his kids into private schools. His wife, on the other hand, may have earmarked that money for a down payment on a second home.

Talk, too, about what you expect from your investments and how much risk each of you is willing to take. For instance, you may be happy to see your portfolio grow by 5 percent a year, whereas your spouse won't be satisfied with anything less than 10 percent. And how long is each of you prepared to hold steady if the market gets rocky? Six months? A year?

Schedule periodic financial updates. Whatever schedule you agree on is fine; the key is to make the time and accept no excuses. Talk about your concerns, and your progress on goals you've set. Be patient with one another if some of the reasons for doing something seem confusing. If necessary, share articles on personal finance from publications like Medical Economics, Money, SmartMoney, and The Wall Street Journal. On our Web site's home page (www.memag.com), click on "Personal Finance," under the heading "Medical Economics Library." You can also access this list of articles from our "Young Doctors' Resource Center," the link to which is also on the home page.

If you have a financial adviser, don't hesitate to pick his or her brain on a topic that's needling you. It's also smart to meet with this person at least once a year to review and fine-tune your portfolio. Often an adviser can smooth out a couple's money differences before something disastrous happens.

"We had a situation where the husband's approach to life was 'live for today, screw what happens tomorrow,' " recalls Craig Carnick, of Carnick & Company, in Colorado Springs. "His wife understood the implications of her husband's spending habits, and with three young children, she was looking for help. The husband, however, was adamant that he wasn't going to change his spending habits or work harder to earn more. Fortunately, we were able to encourage him to purchase additional life and disability insurance, which gave his wife some measure of comfort."

 

Dennis Murray. Marriage and money: Ways to keep the peace. Medical Economics Mar. 19, 2004;81:88.