LEVEL FIVE

Don’t Let Money Destroy Your Relationships

It is infinitely easier to get strangers to talk about their love lives than it is their financial lives. And I should know, I’ve asked.

Several years ago, I produced an online video series for MSN about dating and relationships. The format was woman-on-the-street, which meant I had to talk to strangers. If talking to strangers doesn’t sound bad enough, I had to talk to those strangers about their romantic relationships. I asked questions like, “How often are you and your husband intimate?” You’d think those strangers would’ve slapped me in the face and pitied my mother, but it was quite the opposite. People were super candid about their love lives. I learned more about how, where, and with whom people get it on than I ever wanted to know.

A personal finance website saw my videos and asked if I could do the same thing for them, only ask people about money. “Heck, yes,” I said. “It’ll be so much easier to talk to strangers about a less awkward topic.”

I couldn’t have been more wrong. I asked simple questions like, “Are you saving for retirement?” and “What are your biggest financial fears?” and people would clam up. “Who are you with?” they often asked, like I was trying to sell them Amway.

Sex is an awkward topic, but based on my experience, money is leaps and bounds more taboo. Like relationships, money can be complicated, but most of us are better at dealing with people, whether they’re our partners, parents, or friends, than we are at dealing with money. And money only makes relationships more complicated. Couples argue about money more than any other topic,¹⁵ money is the leading cause of stress in relationships,¹⁶ and arguing about money early on in relationships is a strong predictor of divorce.¹⁷ It’s likely that when I asked these couples how they deal with money, I was hitting a nerve.

In addition to romantic relationships, money can destroy friendships, too. One of my best friends and I didn’t talk for years because we had a spat about money, and I never thought I would be that person. Part of figuring out how to keep money from taking over your life is figuring out how to keep it from destroying your relationships with other people, whether it’s friends, family, or your spouse.

WHAT’S YOUR MONEY PERSONALITY?

By now, you’ve learned that personal finance is personal. We all deal with money differently, and financial psychologist Brad Klontz says the different money personalities can be categorized into basic habits, what psychologists call behavioral scripts. “Money scripts are those frequently unconscious beliefs we have about money that are passed down to us, through our experiences, through our family, through our culture,” Klontz explained. “And these beliefs about money predict our financial behaviors. They’re associated with your income, your net worth, your credit card debt, and a whole host of financial behaviors. So they’re extremely powerful.”

In his research, Klontz and his colleagues have identified four different categories of scripts.

Before you start talking money with anyone, it helps to know which script describes you best, because each one comes with its own unique set of challenges. For example, I border on money vigilance and money worship. These traits work in my favor when it comes to saving and making money, but they can get in the way, too. “If you grew up in poverty, you might have the money script, ‘There’ll never be enough money,’ and that can be a very powerful belief, held by very intense emotion, because poverty can be a very traumatic experience for people,” Klontz said. “It can be so hard to let go of that, even being a multimillionaire and having more than you can possibly spend in a lifetime, some individuals are so anxious around that belief that they just can’t enjoy their lives.” By contrast, you might be a money avoider and make smart career choices but terrible financial ones, which can then negatively affect your career.

None of these scripts are wrong, but they can be challenging. Add another personality into the mix, and dealing with money can become really stressful, really fast. When my husband and I started to get serious, I realized he was a money avoider, which is the opposite of my money personality. As you can imagine, this led to a few fights. It’s crucial to know how you approach money and also how your partner approaches it.

WHEN IS IT TIME TO TALK MONEY?

You’ve started dating someone new. Things are going well and you start daydreaming about all the next adorable steps you’ll take together: buying groceries, moving into an apartment, taking a trip. It’s magical, and you let your mind swim in that magic for a while, but as time goes on, you start thinking logistics. Wait, what if he can’t afford a trip right now? Should I offer to pay for his flight? What about rent? How much is he used to paying? Will I have to pay more than I do now? Can I afford that?

“Money starts to become part of the conversation before you probably realize you’ve entered that territory,” says Erin Lowry, author of Broke Millennial. “You’re getting clues from the first date about what kind of spender you may be dating and expectations about lifestyle.” The problem is, many of us don’t even pick up on these clues because money isn’t on our mind when we start dating someone new. Even worse, we often don’t even talk money until it becomes a problem.

“When you are getting into a relationship with someone, you get to know their personality, their goals, and their values. Often, you don’t know their financial status until you are significantly involved with one another,” says Paula Levy, a marriage and family therapist in Connecticut.

The solution? Pay attention to how your new partner values and manages money, Levy says.

When you start early, you can set yourself up for success down the road, too. Let’s say you decide to move in together, and rent is due, but your partner explains that he might not be able to make it this month because of an unexpectedly high credit card payment. You’re annoyed, and you ask what this credit card business is all about, only to discover he’s in massive debt. That’s a big surprise, and not the good kind. When you’re aware of these situations from the start, you can curb any potential issues. If nothing else, at least you won’t be as surprised when they pop up.

“You should be proactive about starting money conversations early in the relationship,” Lowry adds. “It doesn’t mean you’re asking, ‘How much debt do you have?’ but rather setting ground rules and expectations for something like gift giving. ‘How much should we spend on each other for Christmas?’”

You probably don’t want to bring it up on the first date, but when things are getting serious, it’s time to talk money. And when there are hints you may become emotionally or legally connected, then it’s time to have a more substantial talk about money, Levy adds. “If you find yourself ‘falling’ for this person, you need to have the money talk. Certainly before you sign a lease or buy a condo, you should have a discussion,” she points out. “Finding out about money problems when you are trying to rent an apartment is embarrassing and frustrating. If you start thinking about a future with your friend, you want to know about his or her money situation because their money problems can become your money problems.”

WHAT TO TALK ABOUT (AND HOW TO BRING IT UP)

Whether it’s a new relationship or just your current one, it can be awkward to start a money conversation because, again, people are more comfortable talking about the Kama Sutra than they are budgets. Levy offered some concrete examples of how to start this potentially uncomfortable conversation:

PRO TALK: Paula Levy, Marriage and Family Therapist

Whatever script you use to bring up the topic, the purpose is to have a money meeting with your partner. You might even call this a “money date night.” If that level of cheesiness makes you nauseous, feel free to call it anything you want—or nothing at all! The idea is just to sit down, maybe even with a glass of wine, and talk about your money issues and goals. My husband and I try to do this once a month, and a friend of mine conducts her own money meetings with her spouse at IHOP. That way, if things get heated, they keep their voices down because no one wants to be the couple who argues at IHOP.

HOW TO AVOID A FIGHT

It’s way too easy for a conversation about money to turn into a fight about money. To keep this from happening, start by having the conversation in the right environment. A good environment to have this discussion in is, for example, a low-pressure Sunday afternoon. Neither of you is stressed out or preoccupied with work, and it’s easy to maintain eye contact. A terrible time to have this discussion is when you’re driving somewhere in a hurry and you decide to bring up your husband’s spending problem because you’re annoyed about it and just can’t hold your annoyance in any longer.

“Acknowledge what the other person is saying and validate their ideas,” Levy suggests. “For example, ‘I hear that saving for a trip to Italy is a priority for you since your grandparents were born there.’ Do not be judgmental. Listen to what the other person has to say.”

Whatever comes after that sentence, this statement tells your partner you’re hearing and empathizing with what they say. It can help to set some ground rules when you talk about money, too. “Money disagreements are going to happen,” Lowry adds. “Even the most well-synced and financially aware couples have the occasional money dispute.” Some ground rules for keeping conversations from entering full-blown fight territory:

“The two of you should consider yourselves on the same team and create financial goals together as well as learn to compromise with one another,” Lowry adds.

THE YOURS, MINE, AND OURS MONEY PLAN

Merging finances for the first time can be tricky, especially if you’re used to being independent and spending your money the way you want to spend it. When everything is separate, who cares if your partner blows money on gummy bears and novelty socks? You certainly don’t, because it doesn’t affect you one bit. In fact, it’s even kind of cute. But when you combine your finances, everything changes, and those expenses suddenly become a problem: Seriously? Twenty dollars a month on gummy bears? How old are you, twelve? There’s an easy fix for this: the “Yours, Mine, and Ours” plan, which involves three basic accounts:

You and your partner decide how much of each person’s income will go into the shared checking account. You can keep a shared savings account, too, for shared savings goals (maybe you’re both trying to save for a home, for instance). Decide how much each person will contribute to these shared account(s) and then set up an automatic deposit into that account every month or pay period. This way, you and your partner are free to spend your own individual money how you want because your shared needs are already met.

PRO TALK: Holly Hanson, Certified Financial Planner^®

THREE STICKY MONEY ISSUES WITH FRIENDS (AND HOW TO DEAL)

We talk to our friends about pretty much everything, except money. You can know someone for years, share intimate stories, share drinks, share meals, and still have no idea how much money they make or whether they’re saving for retirement. We don’t talk about money, and it can be especially awkward to deal with money issues when there’s a big income gap between you and your friends. Here’s how to handle some of the most common problems that pop up.

When Your Friend Wants to Do Expensive Stuff All the Time

Let’s say your bestie wants to go to concerts every weekend and it’s bleeding you dry. It’s one of the most common issues in friendships. You might even remember the Friends episode dedicated to this problem. In this episode, Phoebe, Rachel, and Joey get annoyed because they can barely keep up with all the expensive stuff Monica, Chandler, and Ross want to do. But everything works itself out when Monica gets fired and all the friends unite over being broke. Ideally, your own situation resolves with a better solution. Your friends are supposed to be there for you (as the Friends theme song goes), so there’s nothing wrong with saying, “I can’t afford this, sorry,” or the more diplomatic, “This isn’t in my budget right now, sorry.” Be prepared with backup activities, too. Find some common ground with shared activities you can both afford, like dinners at home, happy hour, picnics in the park, or free summer concerts in your neighborhood. Check your local library, college, or city’s weekly newspaper for free events.

Maybe the issue isn’t that you can’t afford things, exactly, you just have certain goals for your money, like getting out of debt or saving up for something. Here’s a novel idea: try talking to your friend about these goals. This way, not only do you have a reason for skipping out on costly activities, you now have some accountability for your goal.

When I was trying to cut my restaurant spending one month, my friends were pretty cool about it. I told them about my goal early on, and when I would later suggest grabbing dinner, they’d remind me that I was breaking my own rules. It was annoying, but helpful!

When Your Friend Offers Unsolicited Advice

We all have that “Well, if you ask me…” friend. The friend who offers advice even though nobody asks, ever. Sometimes it comes from a good place, and sometimes they have no idea what they’re talking about because they don’t understand your situation. If your friend keeps giving you money advice, politely let her know you appreciate her help, but she needs to back off. Still not sure how to phrase it? Try this:

“I appreciate that you’re trying to help, but I’ve actually been learning a lot about money on my own. It’s challenging enough as it is, but I’m getting a handle on it, so I’m good on the advice front.”

The thing is, sometimes your friends don’t realize they’re making things difficult for you. They might just want to share what they’ve learned or vent about their own frustrations. A little patience will go a long way, but if it’s getting ridiculous, try the above dialogue to nip things in the bud.

However, maybe you’re the friend who feels the need to offer advice. I’ve seen some of my own friends make questionable money moves, but rather than grab their shoulders and yell, “YOU’RE MAKING A HUGE MISTAKE,” I usually wait for them to bring it up. If your friend complains about her finances and you feel compelled to offer her advice, at least make that advice objective. Try using yourself as an example or mentioning advice you’ve read. (Ahem, “Hey, there’s this awesome finance book called Get Money, and it said…”) If they casually mention their money issues, tell them you’re here for them if they ever want to talk about it.

When Your Friend’s Wedding Costs You a Fortune

Weddings aren’t just expensive for couples. They can be pretty pricey for guests and people in the wedding party, too. From travel to gifts to parties, the costs add up fast, and, at some point, you may need to put your foot down.

In addition to being an author, Lowry is also a wedding guest veteran. “You need to be realistic with yourself first about whether or not you have the extra money to attend or be in a wedding,” Lowry says. “Immediate family members are usually an automatic yes, but you generally have at least some idea it’s coming and you should start saving early and often. But when it comes to friends or extended family, you will sometimes need to say no.”

A gift can go a long way, so sending a small thank-you to your friend is a kind gesture that you appreciate the invite or offer but, unfortunately, cannot attend.

“Rejecting an invite to be a bridesmaid or groomsman needs a lot of tact,” Lowry adds. “You will need a reason other than ‘Because I don’t want to.’ Finances may be a good one to bring up, or perhaps because you’ve committed to other weddings already that year. You can offer to be supportive in other ways during the planning process, and say that you’ll be there on the day, but that you unfortunately won’t be able to participate in the bridal party.”

When you let your friends down, keep a few rules in mind:

Like any other relationship, communication will go a long way in your friendships, too. Money is an awkward topic to talk about, but ignoring important financial issues like these only makes things more awkward.

IF YOU’RE GOING TO BORROW (OR LEND) MONEY, SET SOME GROUND RULES

Speaking of awkward, borrowing money from a friend (or lending money to a friend) is probably one of the most awkward money scenarios. The best way to keep it from getting awkward in the first place? Don’t do it. Seriously, I’ve been there, and there’s too much potential for conflict when you borrow or lend money in a friendship. You forget to pay your friend back, you disagree on the terms, you get angry because your friend spends money on stuff you don’t agree with… the list goes on.

That said, you might feel compelled do it anyway, and I get that, too. When you see a friend who’s really in a bind, it can be hard not to offer some kind of financial help. And when you’re the one in the bind, you have to do what works for you, and sometimes that means asking for and accepting a personal loan. But if you’re going to borrow, at least follow some ground rules.

Make an actual contract: It might seem like overkill, but coming up with an actual contract can ease a lot of the pressure and prevent miscommunication and awkwardness. This way, you’re on the same page and you both know what to expect. Make sure your contract includes deadlines, payment amounts, due dates, and interest… which brings us to the next rule.

Add interest: If you’re the borrower, offer to pay interest. Your friend’s money would earn interest sitting in a savings account, so it’s only fair. Plus, if you were to take out a loan elsewhere, you would be paying interest anyway (and maybe a lot of it). You don’t have to offer to pay a lot. Even 1 percent would be an appropriate and reasonable offer (and likely what your friend’s money would earn in a high-yield savings account anyway).

Set a clear deadline: Both parties should know exactly when the full amount will be paid. Your friend might say, “Eh, just pay me back whenever you can,” but that level of casualness can get you in trouble. Their idea of “whenever” might not match yours, so who knows how long is too long? This is why it’s crucial to set an actual deadline.

Finally, if you’re the one lending, it’s probably best to follow one final rule: don’t expect to get the money back in the first place. This will keep you from lending more than you can afford to lose, and while you should still set up some ground rules, it will help you prepare for any unpleasantness down the road.

If a friend asks you for money and you want to say no, you shouldn’t have to explain yourself, but if you feel pressured to do so, keep this in mind: research shows that people accept refusals better when you use the word “don’t” instead of “can’t.” If you tell your friend you can’t afford to lend money, they may find it hard to believe. But when you say you don’t lend money to friends or family, it’s harder to argue with that rule, and pushing the issue means disrespecting your boundaries. You can, however, offer to support your friend in other ways. If they’re looking for a job, help them write a résumé, for example, or take them out to dinner so they can pick your brain about a potential job interview. Communication is the key to successful relationships, but empathy goes a long way, too. Understand that nearly everyone has a complicated relationship with money, which is why talking about it can be such a challenge to begin with.

STAGE I COMPLETE!

In the last five levels, your goal was to power up your personal finance knowledge by learning the basics of money management. You started an emergency fund, established some frugal habits, built a budget, learned how to talk about money with other people, and, most important, you came up with some tangible goals for your finances.

Now let’s get ready to optimize your finances and make them even better.