How To Avoid Money Conflict In A Relationship

Money is the number one cause of conflict in relationships. In fact, recent research has shown that money is the number one reason given for divorce in both the UK and the US. 

This is not surprising really as someone’s money personality is not really something we think about when choosing a new partner. Perhaps we should though, because money has the power to impact almost all elements of our lives. 

The type of work we do, the food we eat, the health choices we make, where we live. Almost everything in life is impacted by money in some way.

For this reason, if you and your partner are not on the same page when it comes to money, then your relationship could be in for some turbulent times.

 Conflict Incoming

The most common cause of money conflict in a relationship is what I call ‘fun money’.

This is the money we spend on the discretionary, ‘nice to have’ items and experiences. Very often one person in the couple will want a new iPhone where as the other one is happy with an old Nokia! One person might want to stay in a 4* hotel where as the other one is happy with a hostel. 

These types of conflict are very common in a relationship and they can cause a deep divide in a couple. Before we implemented this strategy with our own finances, there used to be some tension between my wife and I, especially when I wanted to make a large purchase from what was essentially ‘joint’ money.

I see this conflict in all types of relationships and it is most obvious when one party either has an expensive hobby (horse riding, sailing) or one person has a penchant for some kind of expensive item or thing (video games, new technology etc.).

If the other party doesn’t share the passion for that hobby or thing, then all they can see is huge amounts of money being (in their eyes) wasted. 

This can be very stressful for both parties. The person spending the money feels guilty for doing so because they know their partner disapproves and the person watching the spending often feels anxious because they see a lot of money going out that could be put towards other things (retirement, financial freedom etc).

A Simple Solution

The good news is, there is a really simple solution to this problem that will get your money relationship back on a solid footing almost overnight.

Enter The Fun Money Account

The key to eliminating money conflict once and for all is first of all to do a full budget for your family finances. If you need to know more about budgeting click here.

As part of your budget you should allocate a certain amount of money for fun and entertainment. However, that’s only part of the solution. 

The second part is the bit that removes all conflict overnight – I call it the Fun Money Account. Or should I say accounts. 

The concept here is that you open a separate bank account for each of you – the fun money account. This should be a sole bank account in the name of each partner.

Once you have your budget for fun and entertainment and you each have your separate bank account, you are all set.

Here's How It Works

When you get paid, and you allocate your money according to your zero based budget (you do allocate your money based on your budget, right?), you allocate half of your fun and entertainment budget to each of your fun money accounts.

This money then belongs to each individual partner and can be spent however they want. No questions asked.

So, for example, let’s say that as a couple you earn $3,000 a month. $1,500 is your mortgage or rent payment, $1,000 goes on food and groceries. $500 for property taxes and utilities and $250 goes into your savings and investments. This means you have $250 left over for discretionary spending. (This is a very simple example – just so you get the idea). 

You take that $250 and transfer $125 to each of your fun money accounts. Now, each partner has their own little pot of money which they can spend how they please.

You Have To Follow The Rules

There are a couple of rules to make the Fun Money accounts work as intended:

1. The amount transferred to each fun money account should ideally be equal. I find it works best where couples treat all of their money as joint and then allocate it according to a family budget – even if one person earns more than the other.

2. Once the money is transferred to each person’s Fun Money account, it can be spent as he/she likes.

3. The other party is not allowed to question or criticise their partner on how they choose to spend their fun money – this should be a ‘no questions asked’ pot of money (unless they are spending it on something illicit or illegal, then feel free to intervene!). 

4. Each partner is free to use and manage their fun money account exactly as they please. They can spend it all in one go every month, they can save it all up for a big purchase once in a while or anything in-between. This really is an ‘anything goes’ pot of money. 

5. The Fun Money must be spent on things that are ‘fun’. This is my favourite rule! I would include things like clothing, gadgets, drinks, eating out etc. in this definition.

It really is as simple as that. Please note that technically you don’t have to open actual bank accounts if you can keep track of the balance of each partner’s fun money account using an app or spread sheet, however I do think it’s cleaner just to open the separate accounts (although make sure that your bank wont charge you extra fees for doing so).

Just to recap:

Step 1 – Sit together and agree a joint family zero based budget. 

Step 2 – As part of your budget, allocate a certain amount of money to ‘fun and entertainment’. 

Step 3 – Open a separate ‘fun money’ account in each partner’s sole name. 

Step 4 – When you allocate your money each month after you get paid, allocate 50% of the fun and entertainment budget into each partner’s fun money account. 

Step 5 – Enjoy!

And there you have it – a simple solution to remove almost all money conflict from a relationship. Now if only such a simple solution existed to solve the myriad other problems couples go through!

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