Money and Relationships

The subject of money and relationships is a difficult one. We may want to be open in discussing things with loved ones, but it is more common to "feel" our way to agreement on money issues than to honestly and openly discuss them. How many couples with shared accounts have a clear understanding, for example, about how much one or the other can spend without discussion?

Is it necessary to have such a defined understanding? Maybe not. If two people share common values and ideas when it comes to money they can often get along fine without open discussion or rule making. But if one person in a relationship thinks it is okay to by a car without telling the other, and the other thinks even a new coat purchase should be discussed, there is a problem.

Here are some ideas about how to deal with issues like these, for couples and friends and family. This is not advice, since different arrangements will work better or worse for different relationships. This is just to get you thinking, so you can find the ways that work best for you.

Separate Accounts?

A couple I know has been happily married for 40 years and have always kept separate bank accounts. They both worked, and contributed equally to common expenses (mortgage payment, utilities, groceries, children's needs). Beyond those they could agree to share costs or not when it came to other major money decisions. When she wanted a sports car, she bought it herself, and when he wanted a new room for his hunting trophies, he paid for it.

This kind of arrangement keeps arguments about money to a minimum. It could even be done in a single-income family, if a wife or husband is contributing by taking care of the house and children. Assign a certain amount to all common expenses and split the rest of the income. Each is free to spend their share as desired or to collaborate on mutual goals.

Family Loans

Some people consider it "greedy" to ask for interest on a loan to a family member. But why? There is often dishonesty and unspoken expectations involved in loans to family or friends. For example, it might be considered too much to ask a brother or friend for a gift of $400, while asking for a $10,000 interest-free loan for a year is seen as okay. Of course, the lender may lose $400 in interest that would have been made in the bank, so it is dishonest to pretend that this is not a $400 gift at a minimum.

I happened to be born into a family where loans were common and approached in a more business-like manner. Interest was always charged, and loans virtually always repaid (they certainly were if I was the lender). This may seem strange to those who think family values include free money help, but it meant that there were almost never bad feelings or arguments about loans. We all knew where we stood, unlike with the more common family loans that come with hidden or undefined expectations.

Income and Assumptions

If you happen to make more money than some of your friends, be aware of how this affects the relationship. For example, do you take turns paying for dinner when you get together? It may mean nothing to you to cover a $120 dinner for four, but that can make life difficult for someone making less money. If you choose the restaurant when your friend is paying, choose one that fits his or her budget to be considerate.

Income and asset disparities can be hard on even the best friendships. I once talked to a woman who went out with new friends on their large boat and offered to help with gas. When the time came she pulled out her $20 contribution and then looked at the bill. It was $700 to fill the tank. It was obviously going to be difficult for her to spend time with these friends unless they were willing to pay for her participation in things and she was willing to accept that generosity.

One way to deal with this is to share different interests with different friends, as we all do to some extent anyhow. When I play chess at the local coffee shop, for example, millionaires play with unemployed workers and those in between. Some activities take a lot of money, others take little or none.

Establish Your Rules

Earlier in life I regularly made loans to friends and charged relatively high interest. I was happy if they did something useful with the money, but skeptical as to how much money could help, and in any case, I wanted my money to make money for me. The reason this approach didn't strain relationships is because they knew what I expected (and occasionally holding collateral made it clear).

I was very open about my motive: to make money. If they were starving I would feed them, if homeless, let them crash on my couch, but if they wanted a loan I wanted interest. And when they didn't pay on time, I didn't worry about it or harass them. Friendship is friendship, and business is business. I wouldn't lose a friend over one bad loan - I just wouldn't loan him money again (and they new that).

Most of the bad feelings and relationship problems that result from money issues are avoidable. More honesty and openness helps a lot. So do clear guidelines and expectations. Consider the following example.

Frank has two friends. He could almost always cajole Bob into lending him money even when Bob doesn't really feel like it. His friend Steve, on the other hand, never lends money unless there is collateral and interest involved and he approves of the purpose. One day Frank really needs a loan, but both Steve and Bob refuse to help.

Now a question: Who will Frank be angry with? Will he resent Steve for being like Steve always is? No. He will be angry with the friend that almost always helps him: Bob. Because Bob has previously yielded to the Frank's begging, an expectation has been built up, making Frank feel that it is "unfair" for Bob not to lend the money. Frank's attitude may seem unfair to you, but this is how life is (the hand that feeds is most often bit).

Money and relationships are two difficult subjects which become even more difficult when they come together.

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