Relationships and Money

Several years ago, Ron Lieber of the NYT put together a great piece on relationships and money. This article suggests the contours of a discussion couples contemplate marriage should have about money. Here is the main section:

What follows is a list of four financial issues that ought to be near the top of the discussion list before getting married. Please add to the list in the comments of the online version of this article.

ANCESTRY When Lisa J. B. Peterson started her Boston-based financial planning firm, Lantern Financial, she knew she wanted to focus her practice on young professionals. She quickly realized that many of them could use premarital financial counseling and built a program called Harmoneyaround their needs.

One of the first things she asks clients about is what she refers to as their financial ancestry. “It’s looking back at your own personal past,” she says. “How did your parents deal with money, how does that impact how you deal with it, and how might that impact the couple’s relationship?”

Because so many of our money behaviors are learned, she asks couples to share their earliest money memories — whether their father hid money from their mother or how either parent fretted over the funds available. This can be a particularly intense discussion for people whose parents were divorced, and the stories are sometimes accompanied by tears. “Money is so emotional, and people forget that,” Ms. Peterson says. “You think that it’s just numbers.”

CREDIT While it’s about the least romantic subject imaginable, your credit history holds a chunk of your permanent financial record. It follows naturally from the ancestry conversation, and Lantern Financial pulls credit reports and scores for its clients.

Molly Milinazzo and Scott Donovan, an engaged couple who live in the Dorchester section of Boston and are both 24 years old, were relieved to discover that their scores were within about 15 points of one another when they went through the Harmoney program in May. “A lot of people end up surprised, and it’s best to keep those kinds of surprises at bay,” Ms. Milinazzo says.

Full disclosure on the credit front is useful for two reasons. First, a credit report is, in part, a catalog of past mistakes and overall habits — loan payments you missed or department store credit cards you didn’t really need. That in itself is a good starting point for a discussion about what you’ve learned (or still need to learn) about handling money.

There’s an immediate practical side to this, too. If there are errors or low credit scores that a couple can improve, there may still be time to make the fixes so that the couple can get the best rates on a loan for their first home a year or two later.

CONTROL Figuring out who will pay the bills each month may not seem to be an important conversation or assignment. But it gets tricky when both people want to take it on. “People understand that in a relationship, money is control,” says Jeff Kostis, a financial planner in Vernon Hills, Ill., who walks engaged couples and newlyweds through a checklist of questions. “If you’re not paying the bills, you don’t know where the money is going, and you feel like ‘He doesn’t want me to go out with my friends’ or ‘She doesn’t want me to play in the fantasy football pool.’ ”

For two people who have both been on their own for a while and don’t want to give up doing the monthly financial chores their own way, Mr. Kostis suggests, at a minimum, regular household meetings complete with Quicken or other spreadsheets so that the person writing the checks can keep the other one up to speed. With more stubborn couples, he might suggest handing the controls back and forth at the beginning of each year.

Mr. Kuhlman, who explains the counseling approach he and his wife take with clients at, says it shouldn’t be surprising that control issues come up constantly when talking about money. “It’s concrete, you can see it,” he says. “It’s not ephemeral or less measurable, like affection.”

A few things that he suggests couples discuss early on: If one person is making most or all of the money, does that person get to make most or all of the financial decisions? If you’re the car aficionado or have researched all of the local school options for the children, do you get to make the decisions about those things? “These are the kinds of things that don’t come out when you’re dating,” he says.

AFFLUENCE Here’s another question that tends not to come up during courtship: Just how rich do we want to be one day? Mr. Kuhlman refers to this more politely as the “desired level of affluence.” “Are our career paths going to be something that pulls us together? Or, more often, are they things that will tend to pull us apart, where we’ll really have to be proactive to make sure it’s under control?” he says.

Mr. Kostis might put it a bit more bluntly, say to a spouse of an aspiring investment banker or corporate lawyer: Are you O.K. with acting essentially as a single parent, with your partner working 80 hours a week until the age of 80? “Not that there is a right or wrong answer,” he says. “It’s just about understanding, going into the marriage, what that would really mean.”

He adds that people in the financial advice business often joke that they spend half their time talking about money and the other half acting as marriage counselor. “But it’s the same communication style,” he says. “You’re giving people permission to be honest without having someone jump down their throat for giving the answer that they really want to give.”

Lieber is a great financial writer and is definitely worth reading.

Flow of Dough

This is one of the best posts on budgeting tools, money tracking, and best practices I’ve ever scene. Check it out.


The header photo is a shout out to one of my favorite stories about earning, consumption and contentment:

One day a fisherman was sitting on a bench on a lovely pier, watching the tide come in. His fishing pole propped up and he was very relaxed.

A businessman came walking down the beach trying to relieve some of the stress of his workday. He noticed the fisherman sitting on the pier’s bench and decided to find out why this fisherman was fishing instead of working harder to make a living for himself and his family.

“You aren’t going to catch many fish that way,” said the businessman to the fisherman, “you should be working rather than lying on the beach!”

The fisherman looked up at the businessman, smiled and replied, “Why would I want to do that?”

“Well, you can get bigger nets and catch more fish!” was the businessman’s answer.

“Alright, but why would I want to do that?” asked the fisherman, still smiling.

The businessman replied, “You will make money and you’ll be able to buy a boat which will then result in larger catches of fish!”

“Okay sure, but why would I want to do that?” asked the fisherman.

The businessman was beginning to get a little irritated with the fisherman’s questions.

“You can buy a bigger boat and hire some people to work for you!” he said.

“And then what will my reward be?” repeated the fisherman.

The businessman was getting angry. “Don’t you understand? You can build up a fleet of fishing boats, sail all over the world, and let all your employees catch fish for you!”

The fisherman responded, “Sure, but what could I do then?”

The businessman was red with rage and shouted at the fisherman, “Don’t you understand that you can become so rich that you will never have to work for your living again! You can spend all the rest of your days sitting on this beach looking at the sunset. You won’t have a care in the world!”

The fisherman, still smiling, simply looked up, nodded and said: “And what do you think I am doing now?” He then looked at the sunset, with his pole in the water, opened a beer and offered one to the businessman.

The takeaway should be pretty clear. When we think about careers, the point shouldn’t be to amass wealth but to create meaning.

A Non-Obvious Benefit to a Down Market

It’s upsetting when the stock markets are down and our investments have lost value. Certainly, it’d be better to have not lost the money in the first place, but given that we have, there are a few non-intuitive benefits. I was working with a client recently who should sell some old investments since the funds charge higher fees than some good alternatives. In a good year that might trigger capital gains taxes. One major advantage of a down market is that when you sell some investments to buy better ones, if they have lost value there are no taxes due (under normal circumstances). Even better, if you itemize the dedications on your taxes then, under most circumstances, you’ll be able to deduct the losses.

Investment and Justice

In my introductory FAQ I address commons questions folks in the 20-40 range face about money. Conspicuously absent from that post was a broad discussion of how ethical considerations ought to impact investment decisions.

There are a few basic approaches to Socially Responsible Investing (SRI):

  • Negative Screening: this approach removes companies that the investor thinks are problematic. You might, for instance, eschew oil, military, or tobacco companies, any company that didn’t offer domestic partner benefits, or any company doing business in Djibouti. Calvert offers a popular index fund with negative screens. The Social Investment Forum has more infohere. Negative screening is premised on the hope that non-investment in bad companies will drive down their shareprices and incent better behavior.
  • Best of Class Investing: this approach involves investors investing in companies which are least bad in bad classes with the goal of rewarding less bad behavior and thereby punishing worst behavior. You might for instance avoid Exxon and its efforts designed to discredit climate change research and instead choose to invest in Beyond Petroleum who has more investment in alternative energy. Post-spill though, maybe this sector has a new, least-bad leader.
  • Active Ownership: In this approach you make investment decisions solely on the basis of financial calculus and business judgment. You use your portfolio to influence major firms through shareholder activism of various sorts like proxy proposals, voting, and letter writing.

Personally, I think Active Ownership is the most potent ethical investing approach. It creates the most momentum towards just outcomes and should have the best investment returns.

Personally, I invest with conventional financial firms and use index funds where possible as i described earlier. As my portfolio grows i expect to allocate 1-3% of it to bellow market investment activities designed to produce social returns such as:

  • investing in community redevelopment organizations who offer targeted loans to businesses and individuals designed to create desirable urban outcomes.
  • investing in global micro lending.

Additionally I commit to dispersing 10% (or more) of my post-tax income to justice-creating activities. You can read more about my approach to tithing and what i did last year here.

Frankly, in one’s 20s and much of one’s 30s the amount in retirement savings accounts will be modest. The work of our hands is much more substantial in actually impacting the world than anything we do with our money. It is important to concentrate on the question of whether our day job makes a difference. Are we teaching a new generation of folks? Helping create political change? Economic change? Are we bringing people joy? Helping people learn? Creating culture? Is the world getting better because of what we do?

If the answer is no, we aren’t making much of a difference in our days, that is an important problem to fix. Get in the habit of giving now. I recommend tithing highly. Eventually when you have saved lots of money and 1-3% is a sizeable sum in real dollars, start using those dollars towards justice investment.

If you are very excited about negative screening you can sacrifice 1-2% or so of returns to use Calvert’s more expensive alternative to an S&P 500 index fund. If you earned a 11.2% return over 40 years as the S&P has, after 40 years you’d turn $1 into about $83. If on the other hand you earned 9.7% (1.5% less) in a negatively screened fund your $1 would turn into $37 after 40 years of compounding. Little differences in fees and returns make extraordinary differences in the long term. if there was a good negatively screened fund that mimicked the funds i recommended from vanguard at similar fees I’d recommend them. I don’t think such funds exist and tend to think that negative screening makes at best a marginal impact on the companies invested and not invested in. A marginal social impact is a poor reason to accept half the return over 40 years.


What are our philanthropic obligations? How much should we give to charity/justice? When? These aren’t new questions. Tithing is the oldest known Jewish Israelite solution to this problem, though it is was practiced much more widely:

Tithes were common throughout the ancient Near East, as well as in LydiaArabia, and Carthage.

My goal is to have my annual tzedakah (philanthropic giving designed to bring a more just world) meet or exceed a tenth of my annual income. I will get into the details a bit more below.

We set up an ING account which drafts the tithe amount from our checking account once a month. I have been pre-budgeting money for justice work and suggest if for several reasons:

  • It makes it easier to give happily rather than grudgingly. For instance, if we budget a certain amount to give for the year, then every time someone we want to support asks us for some sort of donation, it feels like they are helping us meet a goal rather than depriving us of some other benefit.
  • It makes our giving conform to our values. Instead of the haphazard way I used to give, I now spend time considering the sorts of organizations I want to support before I consider individual organizations.
  • There are record keeping advantages that manifest themselves if we itemize our deductions at tax time.
  • It helps avoid icky solicitations. For instance, when an organization that doesn’t need our money asks for a donation (a wealthy elite college, a social organization that doesn’t need charity money, etc) we can say that it doesn’t meet our giving criteria and that we have budgeted they money for third world development, HIV cures, etc.

Basically, the way this works for us, is that we use TurboTax’s It’s Deductible all year. Every time we make a contribution to a charity, political candidate, etc once of us enters the total, date, cause, and any additional notes. Towards the end of the tax year, we compile the amounts and compared to to our targeted giving budget. Our target is 10% of our annual post-tax income. We use post-tax as we would prefer to count income tax as neither a penalty or bonus towards my tzedakah. Taxes are, as FDR said, are the price we pay for living in an organized society. That is separate from the spiritual obligation to give intentionally, generously, and without compulsion.

One last thought on taxes, most sorts of tzedakah can be claimed as tax deducations (political giving being the big exception). As a result, if your tithe amount (adding other deductions, like state taxes, mortgage interest, and/or student loan interest) exceeds $5,800 for a single filer or $11,600 (in 2011), you can do better than taking the standard deduction. I have heard of an approach where you maximize the tax-benefit of giving by giving double your tithe, but only every other year. If anybody wants, I will elaborate on how this works in the comments, just ask. I ran ac cross an interesting look at jewish law and tithing written by R. Dovid Bendory, a Goldman-Sachs cs dude and orthodox rabbi.

Right, so that more-or-less describes the process, now who do i give to?

Over the past few years I have taken an initial cut at structuring my thinking about giving but have more work to do. I think eventually I will want to sort the universe into geographic and cause categories. For now here is a very rough outline,

Who I am giving to (macro):

  1. local/jewish
  2. local/secular
  3. global/secular
  4. friends who personally solicit me (ima’s advice)
  5. organizations who have been kind to me

Who I am not giving to (macro)

  1. rich orgs
  2. orgs who solicit in dishonest way (non-annual pledge reminders that imply they are annual, etc)
  3. orgs who use creepy arguments to get me to give

Who I am giving to (micro)

I initiay wrote a post on this subject in 2006 and this is who I gave to that year:

  • Political Campaigns
    • Tester (Elected, MT Senator)
    • Busby (Defeated, CA-50)
    • Ciro Rodriguez (Elected, TX-23)
    • Blog Pac
    • Ned Lamont (Defeated, CT Senate)
    • Fenty, (Elected Mayor, DC, gift solicited by several friends)
    • Jeff Toste, (Defeated, RI State Senate district 5, solicited by James Deboer)
  • Local/Jewish
    • Tikkun Leil Shabbat
    • DC Federation (will not give again due to a misleading appeal designed to trick me into giving twice in one year by misrepresenting the date of my last gift)
    • Jews United for Justice
  • Local/Secular
    • DC Vote
    • looking for another for this category
  • Global
    • AJWS
    • Project Muso, run by dear friends
    • Global Justice (in celebration of the Feinspans’ first wedding anniversary)
    • Jubilee USA Network, which coordinates the US arm of the global debt cancellation for poor country movement (Jacob Feinspan suggests)
    • RESULTS – which is a domestic and international anti-poverty lobby (JF pick)
    • The Stephen Lewis Foundation, which funds small community organizations doing phenominal AIDS work (JF Pick)
  • Domestic (not local)
    • ACLU
    • Shape Up RI (donated in support of Rajiv Kumar’s walk-a-thon)
    • Hazon (donated in support of Joe Gindi’s walk-a-thon)
    • Brown Hillel, following a great choice to respect the muslim community and refuse pressure from the mainstream jew-crew to attack them. (perhaps a blog post will be forthcoming on this topic)
    • I have not yet given to an organization active on pro-choice issues, perhaps Naral?
  • Misc
    • Arava/Hazon (donated in support of my dad’s upcoming bike-a-thon)
    • The Religious Action Center of Reform Judaism, they have been wonderfully kind to TLS–well beyond any reasonable expectation. They have been enormously generous and I feel great about supporting their work.
    • I gave a donation to the Jewish Reconstructionist Federation when i joined their Board. I will give some money at least as long as i am in that role.

Who I am not giving to (micro)

  • Brown University: while i was on the ACCRI we proposed initiating a Social Choice Fund dedicated to avoiding morally speculative investments like military contractors and companies profiting from other incredibly disgusting perpetuation of human suffering. Until the university initiates such a fund i will not contribute. After that, my contribution will be quite small and mostly a token.
  • JNF, last year i contributed as i was asked to run for the World Zionist Congress and it was a necessary gift, they have continued to act in support of west bank settlement and as a result, i cannot give to them in good conscience.
  • Local Federations, as a i described above, the sent me appeal materials which were misleading (i think intentionally).
  • think there are others but none come to mind

As you probably noticed, about a half-dozen of these are labeled as being solicited by friends. When I was little, my mom told me that when people (especially young people) are involved in a cause (volunteering, doing a blank-a-thon, etc) and ask her to support the organization they are working on behalf of she makes supports it. Everyone should always be successful in raising funds for justice! I have followed this great insight. Anytime someone asks me, personally, to give to a cause they care about, i try to. I can’t think of an instance where i didn’t give. I have been blessed to have never received a rejection from a friend when i was raising money for a cause i cared about, and no one ever should.

I want to get better at this, which orgs are you giving to? Categories?


updates: my mom clarified that she always gives to people who are actively invovled in an organization, ie they volunteer or are doing a blank-a-thon or something. She doesn’t feel as strongly about plain old solicitations.

BZ astutely pointed out that the deductibility of State and Local taxes on federal returns means many of us will be able to itemize our charitable giving and legitimately pay lower taxes.

I forgot a gift to the JRF and added a bullet point on that.

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