How to Avoid Financial Divorce

One of the most common problems in relationships, and the most common cause of divorce, is arguing about money. I believe the best way to stop arguing is to get on the same page. That starts by having a monthly finance meeting. Pam and I recently sat down to do our December monthly finance meeting. We went over our budgets, our investments, our cash, our assets and our liabilities during the meeting. It is a meeting we are committed to having every month. Hope Isn’t Good for Finance In the middle of our meeting, I remembered back to when I just hoped the financial future would get better. There was a point in my life where all I did was hope. Then one day I committed to making it better. There is a huge distinction between hope and commitment. Once I committed to financial success, it changed everything. It changed the books I read. It changed the way I look at money. It changed what I spent my money on. Perhaps most importantly, it changed the way I think about money. Since Pam and I started having our monthly meetings, things have gotten better and better every month. The best part is, we are on the same team working together to build our financial future. We have the same financial goals. Planning Finance Meetings If you are not yet having monthly finance meetings with your significant other, I encourage you to start. The first thing you need to do is gather your expenses for the month and enter them into Microsoft Excel (or another database program). This will allow you to compare your finances month-to-month and year-to-year. In your document, you need to have categories like groceries, gas, utilities, car payments, etc. If you have children in college, you will need to allow for expenses there. After you enter in the expenses, you need to look at the numbers together. You both need to see where you stayed in budget, and where if applicable, you may not have stayed in budget. After your first monthly finance meeting, you need to make a daily and weekly commitment to reviewing your expenses. The monthly meeting is more to review where you are spending your money at. If you only review your expenses monthly, you can easily overshoot your budget every month. After tracking your expenses at your monthly meeting, you need to look at your income. Income should be divided into passive and active categories. Active income is income you earn exchanging labor for money (i.e. jobs where you punch a clock). Passive income is income you make from sources that you do not trade labor for (i.e. real estate income, business income, investing income, and royalty income). After looking at your assets and liabilities, you should calculate your net worth from month-to-month. Remember that assets are things that put money in your pocket on a monthly basis and liabilities are things that take money from you on a monthly basis. Paying the Bills After comparing our reports each month, we decide what else needs to be done. We are committed to paying ourselves first. This means that no matter what, the first check we write each month is to us for saving or investing. Our next contribution is to charity. We then put money away in what we call our slush fund (some call this the “rainy day” fund). We also have a Christmas fund, a tax fund, and a toy fund. We don't borrow to purchase “toys", so this is where we save money to get things we want. Finally we take our spending money. The spending money is money neither of us have to account for. We can just spend it. It is budgeted for that reason. When we are done, we end the meeting practicing gratitude. Remember half the world lives on less than two dollars a day. We are blessed. So are you. [Ed. Note: If you would like to learn more about planning your financial future, Dr. Tim's new program, Living Every Minute: Design the Life You Deserve, will teach you how. Share your thoughts on this week's article with other readers below.]