Who wears the financial pants in your family, and is that the best person to be the financial decision maker?
Does the person who earns the most decide? This question came to mind after I read your comments on Monday’s post.
In case you forgot, the post shared the story of a couple who is clawing its way out of high credit card debt. They have successfully vaporized a lot of credit card debt (they’ve brought it down from over $75,000 to less than $8,000 in three years) which is great. But they way the dealt with their spending and debt left a lot to be desired.
At first, Vic made the financial decisions because he had more time than his wife Jessica (who was busy working her tail off and bringing home most of the money). But Vic ran their financial ship into the ground because he didn’t know how to stop spending money. When Jessica discovered this she took over, and that’s the reason the couple is doing so much better now. She was able to save the marriage.
My question is, does the person who earns the most usually sit in the financial captain’s chair in your house? In our home, the answer would have to be yes and no.
My wife and I are very clear on our ultimate goals and values, and as a result investing and spending decisions aren’t all that tough to make. We also think that “things” don’t have much value. We’re not huge spenders. But once in a while, we disagree.
My training and experience are in the realm of money, so my wife tends to go along with me if I am particularly convinced and convincing. I don’t think it has anything to do with the fact that I earn more money than she does.
This is a system that has worked for us – but not flawlessly. I know how to make a small business successful, but that doesn’t mean I know how to run our family alone. I’ve made a few terrible decisions in the past. Also, I tend to be the bad guy – the one who says,”No…I really don’t think we should do that.” I don’t like being the bad guy. Fortunately for us, it doesn’t happen all that often.
I think it’s dangerous to have one person making all the financial decisions. First, we’re all human and we make mistakes. Second, as many of you pointed out, both parties have to be able to take over in case something happens.
Third, it’s not great for the relationship. At least as far as I’m concerned.
I am fully convinced that just because I make more money than my wife does doesn’t mean every idea that comes out of my brain is going to be sheer genius. I’m glad we check each other.
I can think of countless examples where one person makes the money and also makes all the financial decisions – but clearly shouldn’t be doing so.
Intellectually, most people would probably agree that the ability to create income doesn’t automatically guarantee the ability to make sound financial decisions. But in reality (or at least in the most cases I’ve witnessed), the person who makes the financial decisions is also the person who makes the most money.
How do you handle this? Does the one who earns the most also have more financial clout at home? Are you really able to split all the decisions down the middle where everyone has a truly equal voice? What’s your approach?
Elle says
My husband makes more money, but I do more of the financial planning in our family. We keep each other in the loop by using Google Docs when making adjustments to the budget.
I’d say we agree most of the time, but if we can’t agree on something, we go ahead and have a family meeting and present both sides.
Most of our finances is automated right now (i.e. attacking student loan, building house fund) so that’s also helped as well.
Financial Samurai says
Why you always gotta be the bad guy Neal? lol.
I think the person who DOESN’T create income would be the best in charge. Why? b/c the person who doesn’t create income feels more guilty spending money, and will be probably a much disciplined saver.
Neal@Wealth Pilgrim says
I ask my wife the same question. So far, no answer.
From a logical standpoint, it might work but in reality, my sense is that the money maker is often the decision maker too.
Ken says
I make the most money but I do not monopolize the money decisions. We discuss the upcoming month when I’m setting the budget. We discuss what we are saving for and what big purchases can be done now vs. waiting. I’m more detail oriented so I enter the info into the software each month.
Evan says
It is so simple it is almost ridiculous that every bank doesn’t have it:
Kind of did a post on it:
http://www.myjourneytomillions.com/articles/why-is-layaway-becoming-more-popular/
Never used QuickBooks so I don’t know how it will aggregate everything, however it is likely that it will read each account as a subaccount so it’ll work out.
neal@wealthpilgrim says
Rob (#8)
I like that response very much. 🙂
Evan,
I really have to look into the ING electronic envelopes. I read a post over on GRS and it just seemed complicated. What has been your experience? Is it simple to set up and maintain?
Also, I use QuickBooks and download everything into that…so I’d want to be able to do that too.
Any experience in those areas?
Evan says
Neal,
We use the electronic envvelope for bigger items through ING subaccounts. So if our vacation fund has $XXX.00 in it, and the vacation we want costs 4 Xs lol we have to wait.
Wojciech Kulicki says
Neal, We’ve used envelopes for big ticket items, most recently for saving up for furniture for our new baby (well, maybe not that big ticket). But it worked out well…
Rob Bennett says
My wife and I have different strengths and different minuses. When we are working together, we are a powerhouse and we each make the money decisions we are good at (keeping the concerns of the other in mind when doing so). When we get into failure-to-communicate mode, it’s a mess.
The only good thing I can think of to say about getting into failure-to-communicate mode is that finding our way back to extraordinarily-smooth communication mode is often both educational and fun for both parties concerned.
My personal take is that God set things up in the way He did on purpose!
Rob
neal@wealthpilgrim says
Wojciech,
I love it. You are right. The envelope system does get rid of the “bad guy” problem.
Wondering if anyone has had success with electronic enevelopes for bigger ticket items such as travel, cars etc.
Wojciech Kulicki says
Most decisions in our house are made together, and like RJ we sit down once a month to review how we did, what’s coming up, and how the month impacted our net worth.
One strategy that has been incredibly useful for us is envelope budgeting. It has taken me out of the position of being “the bad guy” because now I just blame the envelope. “Well, honey–there’s not enough money in that envelope.”
It stops the discussion dead in its tracks because we both understand…”yes, you’re right honey, we do not” or “well, where can we move some money around so we can afford this?”
Marie says
Most are made together. We each have sole discretion over our $30 of fun money. I’m a SAHM but to effectively coupon with 3 kids under 4 we do our shopping either together or I go alone. Rarely is something purchased we haven’t discussed before hand even when it comes to groceries. I research all our investments. Present the pertitent info to him and we make a joint decision. If he doesn’t feel comfortable we don’t do it.
Joel says
My wife has more time, so she handles the day-to-day financial work. When it comes to big financial decisions, though, neither of us feels like an expert. Maybe that’s good, though: it causes us to work collaboratively.
Evan says
I am in a similar situation as you are – we work together on the day to day stuff, but just because of education and chosen profession I do the bigger investment decisions.
Neal@WealthPilgrim says
That meeting is probably the key – it’s all about communication. Nicely done RJ!
RJ Weiss says
We automate the day to day stuff as much as we can.
Once a month we sit down together and calculate our net worth, review our budget, set any goals, and just talk about our financial situation. This system seems to work well for us.