Managing Money as a Couple

[Host] Hey everybody! Welcome to Money Talk, the podcast series that helps you manage your money—and improve your financial well-being! This week we spoke with Len Penzo, blogger at LenPenzo.com, where he writes about everything from improving your credit score to why Miracle Whip has no business on a tuna sandwich. As a married man for 17 years and counting, Len shares his advice on how to determine if you and your significant other are financially compatible—and if not, how to manage your money independently as a couple.

Here’s our conversation with Len. Enjoy!

So Len, when it comes to finances, how early in the relationship should you broach the subject?

[Len Penzo] You know, I’m not saying the first date, but you really should be looking at something like that by the third or fourth date. You should kind of start, well, for lack of a better term, feeling out the other person for where they stand financially.

[Host] Sure. So if you’re talking about finances that early on, what kinds of conversations could you kick off with?

[Penzo] Probably the first thing is their financial past, right? Have they had any bankruptcies? Have they ever been into trouble or been in too much debt? And you know, you don’t just hit them over the head with a question like that, but you kind of ease into it. You try to ferret out exactly what kind of trouble they’ve been in, in the past because that’s very important.

[Host] How about when the relationship starts getting serious? Are there bigger questions you should start asking each other?

[Penzo] You can get into things like prenup, financial goals. Are you interested in early retirement? Do you want to rent or own your own home? And maybe the very most important financial question you probably want to talk to the person you’re dating about is kids. Because kids, I mean let’s face it, that is the biggest expense probably—next to maybe the house depending on where you live—that you’re going to have as a married couple.

[Host] It sounds like what you’re really trying to figure out in these conversations is whether or not you’re financially compatible. Can you give me an example of a couple whose financial styles might not work so well together?

[Penzo] Well the obvious example and it’s the biggest example, and it’s probably the most apropos example, obviously, is if one person’s a big spender and one person’s the saver. And I think that’s where you’ve got to keep things separate, because if not, you’re going to run into some really big problems.

[Host] For couples who do decide to keep their finances separate, how do you handle joint expenses like bills or the mortgage, that kind of thing?

[Penzo] You know something I see a lot, it’s basically where the spouses, you know, you’ll have one spouse responsible for a different set of costs. You know, for example, you might have one spouse pays the groceries and the other spouse pays the mortgage. So you can break things up that way. Maybe car payments. You know, you have his and her cars. You have one spouse paying for their car and you have the other spouse paying for their car. So that’s how you would divide that up.

[Host] Sure. And if you divide up responsibilities like that, is it just a 50/50 split, or should income play a roll in how much each person takes on?

[Penzo] That’s really up to the couple, right? So, it’s really complicated. There’s no set answer for that. You know, you can decide to go 50/50. You can decide to split it up in proportion to each other’s income. There’s lots of ways to go about doing that. But it’s really a personal preference.

[Host] Are there any pitfalls to watch out for if you decide to keep separate accounts?

[Penzo] I’ve been married 17 years and during that time, all of the new cars we got, they went to my wife. And there was a reason for that. But still, you know, you have to fight that urge within you to say, you know, “Gee honey, you’ve gotten all the new stuff and now it’s my turn.” You know, I’m owed something. When you start trying to keep things even then you might start getting into a race where you start spending uncontrollably. You’re a marriage, you’re a team, and you can’t look at things as hers or mine.

[Host] Definitely. So if a couple decides to keep their finances separate, do you have any advice for what they can do to keep each other in the loop about what they’re spending and saving?

[Penzo] You’ve got to consider things like meeting monthly to discuss and update each other on the finances and what you’ve covered—are you falling behind on the bills?—stuff like that. But then once a year you want to meet—and me and my wife do this and everybody should do this—on more of a strategic level. So the monthly meetings are at a tactical level, but the long term is for strategic. So what you’re doing basically is you’re discussing more of the long-term issues. So me and my wife will meet say, once a year and go, okay, let’s look at the big picture here. What are our vacation plans? Do we have any home renovations that we want to do? Is it time for braces yet for the kids? How much are all those big-ticket items going to cost and how are we going to save for that?

[Host] I like the idea of making those touch-base meetings part of the routine. Are there any other strategies that work well?

[Penzo] I’ll just give you the recipe that me and the wife have used and it’s been very successful and is something I preach a lot and that’s running your household like a business. And how you do that is we break up the tasks into two tasks: So I’m the household CEO and the wife is the household CFO. And remember when I was talking back about the strategic and the tactical planning—the long-term and the shorter-term planning—basically as the household CFO, my wife is responsible for paying the bills and she does the short-term planning and she lets me know when we’re having issues financial. Where we might say uh-oh, you know, this is a bill that’s popped up and we have to pull money from savings. So she does the short-term stuff and then I’m the household CEO, so I do the long-term planning, the strategic planning. And that seems to have worked out really well over the years and I strongly, strongly recommend people do something like that. I think it really helps you manage your finances over the long term and I think gives you a great recipe for success. 

[Host] That’s our talk with Len Pezo—thanks for tuning in! Check out more Money Talk podcasts to get personal financial advice you can use to get organized, make a plan and stay on track to a bright financial future.