Published on September 9th, 2014 | by Rick Ziemski0
When One is Better Than Two
“There’s a way of transferring funds that is even faster than electronic banking. It’s called marriage.”
~ Oscar Wilde
One of the best things in life for me is walking without a crowd. So naturally I’m a bit of a contrarian, particularly when it comes to the subject of advice for best money management practices for married couples. In fact I am amazed at how much published advice from “financial advisors” is frequently aimed at telling the “sheep” what they want to hear; namely that the best money management techniques are the ones that make you feel most “comfortable”. They can be acquired with the greatest of ease; no change of behavior, nothing complicated, no new disciplines or learning necessary. All you need is separate bank accounts and the only spending that needs to go through a joint account is for the basics of food and shelter. Sound like rubbish? Absolutely!
A couple or a family is an “economic unit”, no different than any other economic unit such as a government or corporation. The challenges are the same. There is money flowing in and out that needs to be controlled and there is a need for a strong balance sheet, mixing assets and debts properly to avoid bankruptcy. Couples need to build a strong net worth over time (net worth = assets – debts). For a couple, net worth determines how well they will retire or even whether they get to retire at all. For corporations good money management processes and systems have evolved over time. The fundamentals have been standardized and widely accepted and the professionals who run these systems do not allow sub-structures in these organizations to do whatever makes them feel “comfortable.” So each department does not get to have its own bank account. Isn’t that amazing?
They keep one set of financial records, a single chequing account along with short and long term investing accounts. All transactions must flow through the single system and be kept in one set of software based records. Through this system of centralized financial control a business can derive greater leverage from the money that it has worked hard to earn. So why anyone would advise a couple or family to do anything different than pool their money and follow a similar formal process of money management is beyond me? The only possible reason is to ingratiate the advisor with clients who are afraid of change and learning or who don’t want their marital union to include financial union.
On the latter point, it seems ridiculous to stand at the altar and make a life commitment that might go like this; “I promise to love and honour you and to share with you the most intimate aspects of my life with full transparency, except for my finances, about which I want you to know as little as possible.” Marital union that excludes finances is a breeding ground for poor communication, build up of suspicions and eventual financial infidelity. Marital counselors claim financial infidelity to be as serious a problem as emotional and physical infidelity. A financial system that includes joint accounts, joint record keeping, family budgeting with regular review and communication not only enhances the power of family money but also strengthens the marital bond through its high level of transparency.
So if you are prepared to share your bed, your body and your deepest feelings with someone then why not your finances too. And if that doesn’t make sense, then just remember that if and when you split up the law divides it all in half anyway.
W. R. Ziemski, CPA, CA