3 Smart Ideas to Manage your Money for Two Incomes

It’s one thing to gain mastery over your own money behaviors and habits but what about when you are in a relationship and the other person’s history, stories and standards with money may be very different than yours. Then what?

In my decades long work with people in helping them gain mastery over their money, I have seen many scenarios undermine couples’ trust with each other over money. Usually it’s a lack of an agreed upon system for money that undermines relationships with money and derails communication between them about their finances.

It’s common for couples to use one person’s income for the basic needs and living expenses while the other’s income is used for the extras like vacation, entertainment, home improvements and upgrades.  But what happens when one person loses a job or has a long term illness, or is on commission and earnings drop?

This system, like many system, may work, when things run “as planned.” But it is smart to think of a contingency plan.

Three alternatives that I like people to consider are:

1      Allocate percentages of both incomes to basic needs, discretionary spending, retirement/investing, donations, and savings. This way, the one with the variable income, knows their contributions are always part of the family “budget” and overspending is reduced when windfalls come in.

2      Determine a yearly budget for savings, investing, donating, basic needs and discretionary spending. Then allocate who and how each will be responsible for that area. Be clear about expectations and possibilities that could impact commitments made by each of you. Develop a system on how to deal with these possibilities that work for both of you.

3      Put all your money in the same account, then allocate to your categories according to agreements you have previously made. Be sure you allocate money to your own spending account about which you do not have to justify to the other person.

No matter which of these systems, another you adopt when there are two incomes, be sure to check in with each other monthly, to see how you each feel about the system you have agreed to use and tweak your agreements as appropriate. Remember to talk to each other respectfully and with the intention of finding a solution when one is needed, rather than attacking each other. It’s smart to manage your money.

Get Comfortable Talking about Money, Because Money Rocks

Money is still seen as a taboo subject. For some it’s considered rude to bring the subject up. I think some of this is because people are uncomfortable on how to broach the subject of money.  They don’t want to appear intrusive or jealous, or prying so they shun the subject or take it to the other extreme and become judgmental. They become reactive rather than responsive with money.

I like money and I like talking about it. It is fascinating to me to learn how people view money, what they do with it, what their fears about money are, what they like about money, how difficult it can be for them to talk about money in a relationship without setting off triggers.

Money is so much more powerful when you feel comfortable enough with it to be able to talk about it to discover what money means to you, how you can better deal with it. It is much freer than talking about money under judgment and unspoken expectations.

To take money out of the drama club, keep conversations about money inquisitive rather than judgmental, neutral rather than adversarial. Consider your intention before talking about money. Is it to scold, to judge, to imprint your money principles on another? If so, turn that judgmental attitude on yourself and ask yourself why this bothers you to the degree it does? What does the other person’s behaviors threaten in you? Is the money conversation to understand another’s perspective on money? If so, this can be a great pillar of support to them on their journey to money mastery.  They will be more likely to let you in to their life with money and partner with you on strategic conversations about money.  

Three sets of questions I like to use and bring to you for more engaging conversations on money are:

Question 1: How did you see money being used, when you were a kid? Follow this up with: How did you use money when you were young? How do you use money differently today?

Question 2: Which is easier for you: spending or saving? How is that affecting your life with money? This is followed up with: What two habits are you proud of sustaining for a productive life with your money?

Question 3: What does money mean to you? How does that align with what you want money to be in your life? How can I support you in what you want your money to be for you?

We tend to regard money in our own unique perspectives with our own history, stories, and experiences around money. It’s freeing to invite someone into a supportive conversation about money because… Money Rocks

Key Strategies to Keep Money Intact Across Generations

When the subject of passing money to the next generation is broached, a question that is often asked is: “What are you going to do with the money?” Although this is a great question, I think there is a farther-reaching question to ask as well: “How is the recipient being prepared to receive their inheritance?” What make this question so compelling? Because it redirects the subject from being about the money to being about preparing the inheritors. And this is so important yet often omitted.

There is a common phenomenon taking place around the world. This phenomenon even has a phrase associated with it. It has to do with the common consequence to inherited money: inherited wealth does not tend to survive beyond 3 or 4 generations. Independent studies have found that 70% of families lose their wealth by the end of the second generation while 90% of families lose their wealth by the end of the third generation. The common phrase that accompanies this horrible unintended consequence is: in the U.S., shirtsleeves to shirtsleeves in three generations; in China, rice paddies to rice paddies in 3 generations; in Italy, barn stall to stars to barn stalls in 3 generations. Although this may be a common consequence to wealth, thankfully, today, this common phenomenon is being addressed head on. Families are looking to change the statistical probability to their accumulated wealth.

Let’s look at two strategies families are using to keep their wealth intact as it moves across the generations.

The first strategy is the passing down of the story, the one that describes how challenges ere overcome, how successes were dealt with, and what it meant for the creators of the wealth to build that which they can pass on. This is important for a family to have because each generation is farther removed from the wealth and having the story reminds them of their roots and of the principles it took to accumulate the wealth future generations have become accustomed to having. When succeeding generations understand what it took to build the wealth in an experiential rather than in a didactic fashion, there is a much greater chance for financial stewardship across generations.

The second strategy is to pierce the veil of sheltered silence, that silence protecting the status quo and instead, talk about the purpose of the money and supporting money stewardship in the family. Teaching money skills, like the 5 S.I.D.E.S. (Save, Invest, Donate, Earn and Spend)© of Money, help family members feel more confident with money conversations. Developing family philanthropic initiatives give families a formal method to talk about how their money impacts their community. Holding Money Nights, where one topic about money is discussed without judgment or interruption, develops deeper trust and more engaging conversations around money.

Find tools to use with your family so that the money you accumulate can stay intact across generations.

How do you view money as a family? Let me know your thoughts.