Managing money can often seem like an endless series of choices between undesirable alternatives. And when a couple manages their money together, financial dilemmas have the potential to become permanent problems.
Lets consider this hypothetical complaint: My husband wastes $400 a month on coffee and lunches out. What can I do?
The dilemma? The wife sees her husbands purchases as a waste and feels his spending is depriving her of things she would like to do. The husband sees his purchases as necessary or allowable indulgences.
What is really going on here, and what can be done about it?
First, we must acknowledge reality. Every day, we try to make ourselves happy. In our society, that often means buying things, but money is a finite resource. So saying yes to one purchase means saying no to another.
There is the dilemma: If the husband buys something to make him happy, then his wife cannot use that same money to purchase something to make her happy.
Can both husband and wife be happy when they have limited resources?
Yes, they can.
Through this four-step process, partners can structure their spending in a way that leads to mutual and individual happiness.
Find a shared dream
This dream could be a vacation, home improvements, starting a business or raising children. Whatever it is, the dream must be shared so both people are working toward an agreed upon goal. When a couple are not working toward a common goal, each persons happiness can come at the expense of the others, a recipe for conflict.
Create a budget
Because every couple have a finite amount of money, they should aim to satisfy their needs and desires with the money available to them. By creating a budget, a couple can make a plan to spend only the money they have and save themselves from spending money they dont have.
Build in accountability
Discretionary spending is the most common source of fights about money. Using a cash-envelope system can allow a couple to spend with integrity and avoid conflicts similar to the one above.
To get started, partners should agree on what spending will be done in cash and dedicate an envelope to each category. I recommend these categories:
Then, using their budget, they can take money out of each paycheck to fill the envelopes.
Have spending money
Make sure to include spending money as a cash envelope one for each partner. Spending money is cash each person can spend in any way that makes him or her happy without being accountable to the other.
With a shared dream, a budget, financial integrity and some spending money, financial dilemmas and fights over money can disappear. On its own, money cant buy happiness, no matter how much we think it can. That will be the subject of my next column.
www.PersonalFinanceCoaching.com. Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance.