A More Intentional Approach to Managing Money Together

If my relationship with my wife were a person, it would have just reached legal drinking age. Twenty-one years ago, we had our first date and, somewhat uncharacteristically, it was an electronic dance music show at the now-closed LA Sports Arena. We were younger then, and one thing I remember for sure is that we split the ticket price. I can’t recall where we ate dinner before the show, but I’m pretty sure we split the cost of that, too.

Zoom ahead to the present day, and the idea of going on a date and divvying up the price of any portion of it seems a bit ridiculous. That’s the way we operate, of course, and I know there are plenty of couples out there who do split their finances.

But is there a “right” way to handle money in relationships? More broadly, what sort of issues arise when it comes to joint financial decision-making?

As it turns out, there’s been a growing body of work in this space within the academic world, so I figured it was a good time to check in with one of its true leaders, Indiana University Professor Jenny Olson, on a recent episode of “The Behavioral Divide” podcast. Alongside her, we had financial advisor Mark Johnson, founder and CEO of Wealth Architects, who navigates couples’ financial decision-making almost every day in his practice.

There were a few big takeaways that I want to spotlight, all of which have practical applications.

What One Partner Knows Isn’t the Same as What They Think They Know

Professor Olson’s research finds that the person who thinks they know more about financial matters is often the one who steers the proverbial ship. What’s interesting is that it’s not necessarily the person who actually knows more, but the person who, subjectively, feels like they know more. One of my favorite demonstrations of this? Olson and her collaborators recorded couples as they discussed financial matters, and the partner who felt they knew more about the topic ended up talking more.

As a fix, Johnson suggested focusing on “below the line” topics rather than just “above the line” ones. “Above the line” refers to the specific financial products that advisors and clients discuss, such as annuities and savings vehicles. “Below the line,” by contrast, represents the values, vision and goals that relate to life (and what money can help support), where neither partner has an expertise advantage, because nobody is the expert on what someone else cares about.

Concretely, an advisor might:

• Ask each partner about their role in financial decisions and how they came to take that role – this may help the quieter partner express what they want and how they want to be involved.

• “Simplify the complex” – reduce jargon to prevent widening the confidence gap, which may lead less knowledgeable partners to feel more disengaged.

Joint Accounts Help, but It’s Not the Joint Account Alone That’s Doing the Work

Olson pointed out that the transition to marriage involves moving from “not just you and me, but it’s we.” Financially, there’s often been a suggestion that joint bank accounts can help solidify the concept of “we” and may bolster relationship satisfaction. But that idea was never rigorously tested until Olson and her colleagues assigned newlyweds to either open a joint bank account or not.

Compared to maintaining separate accounts, joint bank accounts helped preserve relationship satisfaction after the “honeymoon period” ended. The reason is almost more important: Joint bank accounts help create what researchers call “shared communal norms.” When couples have transparency into how each other, and they as a couple, are spending money, it can prompt more conversations about the same below-the-line topics that matter so much.

Practically, pooling finances can feel like a loss of autonomy, which is the most common objection Olson hears. She and Johnson arrived at a similar solution independently: set a spending threshold, or a pre-agreed amount each partner can spend without checking in with the other. Johnson and his wife, for example, set theirs at $700 a month early in their marriage. It's also, as Johnson pointed out, a way to remove guilt when one partner earns much more than the other or isn't earning at all.

Tough Financial Conversations Aren’t as Bad as You Think They’ll Be

In new research, Olson had couples predict how a financial conversation would go, prompted them to have it that night, and then had them report back 24 hours later about how it went. Overwhelmingly, it wasn't as bad as the couple had expected. Plenty of psychology research has found that we misjudge our future emotions, and this is a classic and applicable example.

The solution is to structure and outsource. In other words, if an advisor "assigns" a couple to discuss their financial issues, responsibility is removed from any one party. It's not "I'm upset that you spent so much on X, Y or Z last month," but rather, "Our advisor recommended that we talk about X topic, so I suppose we should." Johnson called this outsourcing responsibility.

He also cited an example of his clients in their 80s who come in every six months or so, specifically to have difficult financial conversations in a safe, facilitated setting. Somehow, that seems more conducive to productive alignment than at 11 p.m. the night before one partner’s big morning meeting, which, as Johnson pointed out, is exactly when many of these conversations end up taking place.

My wife and I stopped splitting our expenses ages ago, and, admittedly, we never deliberately decided that would be our course of action. We accidentally fell into a good setup. Indeed, financial decision-making within couples is often one of those things that simply happens, when in fact it should be intentional, transparent and appropriately audited.