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Home >> Lifestyle: Dollar
Savers:
When
a Spender Marries a Saver
 (ARA) - There’s been so much planning:
the guest list, the food, the honeymoon. Many couples are exhausted
from making so many decisions and it’s tempting to take
a break. But now that the wedding is over and the marriage has
begun, it’s important to sit down with your partner and
discuss your financial goals -- after all, shared goals are an
important part of marriage. Unfortunately, many couples discover
only after the glow of their special day has worn off that they
have not yet discussed their financial affairs.
Money is often
cited as the number one reason couples argue, regardless of income.
It’s common for couples to have a “spender” and
a “saver,” but there are other factors to consider
as well. Often, disagreements occur because of different priorities.
Think about your short-term and long-term plans: How quickly
do you want to pay off wedding and honeymoon costs? Are you saving
for a house? How will you deal with the debt one partner is bringing
to the marriage? And what about retirement?
Research suggests
our money habits are not based on income or education levels,
but on basic human impulses. A financial behavior survey commissioned
by Northwestern Mutual suggests there are common money mistakes
most of us make that could have long-term costs for our financial
well-being. For two people combining their finances, these misbehaviors
can have an even greater impact.
“It appears
that no one is immune from several common ‘blind spots’
that stand in the way of good financial decision-making,”
says Deanna Tillisch, director of Northwestern Mutual’s
research in behavioral economics. “But we also know that
when people are aware of their blind spots or misbehaviors, they
are much better equipped to build a financially secure future.”
These blind
spots are actually theories in a new science called behavioral
economics. Behavioral economics helps explain how and why people
make financial decisions. This latest round of research confirmed
that “framing,” the idea of basing decisions on how
the choices are framed, continues to plague decision-makers.
For example, the Northwestern Mutual survey asked participants
if they felt they could comfortably save 20 percent of their
household income. Half of the respondents said “no.”
Then participants were asked if they could comfortably live on
80 percent of their household income. Seventy-one percent said
“yes.”
The two situations
presented the same outcome, but people chose different answers
based on how the questions were framed. If you’re trying
to get out of debt, or save for a down payment on a home, keep
this in mind and try to look at the situation objectively from
different angles.
Another common
financial misstep is mental accounting. In the survey, respondents
were asked to judge how they would spend their money in two apparently
different retail situations. While most people said they would
drive to a store 20 minutes away to save $8 on a $10 alarm clock,
most would not make the drive to save $8 on a TV. In both instances,
driving 20 minutes would save $8. The lesson here is that we
tend to approach decisions differently depending on the situation
and assign different values to different categories or “mental
accounts.”
“We all
have different financial hang ups,” says Tillisch. “It’s
important to sit down with a financial professional that can
look at your individual situation and create a workable plan.
A professional can be that unbiased third party that assists
you in creating solutions that are comfortable for both of you.
Ultimately, this person should guide you in making better choices.”
Unhealthy financial
habits can be difficult to change. That’s why communication
is essential. Talking with your partner -- even scheduling regular
“money meetings” -- should be a priority. Understand
that comfort levels can differ and strategies can vary. But money
doesn’t have to be a source of conflict. A meeting with
a financial professional can get you off to a good start toward
building a sound financial future together.
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- Courtesy of
ARA Content
- ____________________________________________
ARTICLE POSTED AUGUST 3, 2004
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