Episode 288 - Scott Rick: Navigating the Money Minefield in Real Relationships

28:21Do two tightwads together tend to be happy? They look good. They look happy. They certainly financially are doing well. They're happy in the way that happiness is often measured on these scales. And these scales, these measures, often give a lot of weight, a lot of high scoring to like a calm, conflict-free life. But if you're someone who needs like adventure to be happy, that would not show up on these kind of measures. These measures really are very conservative and I don't want to say puritanical, But if you were and your partner just kind of eat TV dinners every night on the couch, it would say like, oh, you're doing great.

29:12So they're happy on those measures, but I think they're missing out on a lot of fun. That's a really interesting point. It's like the cantorrel ladder doesn't measure, I don't know, being spontaneous. Given all that, how important do you think it is for couples to understand each other's spending tendencies? I think it's useful. One, it's useful as like a conversation starter, but it's also useful just to kind of know where they're coming from, that they might have developed some strange patterns based on how they grew up and they have a hard time shaking it. And okay, you got me this awful gift.

29:53I might see that awful gift and think, wow, you don't love me or you don't understand me. And it could be that, but it could also be that you spend money in a very different way. You either couldn't bring yourself to buy me something good or you're just someone who throws money at problems and you overspent and you got something that doesn't really match my interests. Like I would never carry that around or want that kind of thing. It helps to see like, oh, okay, I can see why you did that. It's not love. It's just like a quirk of yours. We're going to ask more about gift giving later. That was something that like, I don't do gifts.

30:32for anybody at all ever. I don't know. Your book made me rethink that, but I want to ask it. Should people be bringing out the tightwad spendthrift scale questions on the maybe second date? It's interesting. Only if it's like for funsies. I wouldn't use it as like a screener. Like if they get to higher lowest score, you say, okay, I'm going to see my way out now. But the scale is one way to get a sense of this. But once you know about these tendencies, You can kind of see it. If they're spelling out their reasoning about something, you can say, okay, well, that's a hint of one type or the other.

31:09It's worth keeping in mind. And one thing I say is like, if there's something that irritates you during the dating period, and you're kind of like, I don't know, just know that it's not going to get better in marriage. It's not going to go away. It's just, it's going to kind of accumulate and that irritation will grow. So think about, can I live with this and even more of this during the dating? Was there data in the book on credit score, disparity, and relationship duration? Yeah. Disparity is a predictor of marriage's ending, which is kind of supportive of this idea that when they are different, they're fighting and it's hard.

31:51The sum is also a predictor of it ending. So if we both have really low scores, that's bad too, because we're struggling. That speaks to like, oh, there's this danger of like the two spendthrifts. That's bad, or it can be bad. And if we have this difference, we're fighting about it, and that's bad too. I want to shift to one of the most frequent questions I've had in over 30 years of meeting clients, and it has to do with bank account structures. So what effect does the structure that bank account have on the way that money flows goes through a relationship. Bank accounts have a big effect. And I think it's often an afterthought and there's a lot of status quo bias and people are coming into the marriage and they're not thinking carefully about how these things are set up.

32:36It can be so important. And so we've done a study where we took newlyweds, they had separate accounts and we told them to either keep it that way or put their money into a joint account or do whatever they want. And we follow of them for two years. We kept checking in with them. Are you happy? Are you talking with each other? Do you still like each other? And the couples who we prompted to go for it, to go for the joint account, were happiest at the end of two years. The other couples in the other conditions, you got this normal kind of decline in satisfaction, which is sadly pretty standard. Your happiest day tends to be your wedding day, and then there's a bit of a dip.

33:20But we think the joint account is good. It turns your money and my money into our money. I think all incoming money should be laundered through a joint account. Psychological money laundering, I think that's good. I think it helps to take away attention from any differences in our income. Those discrepancies can really be hard to cope with for a couple. This is advice for couples where things are generally going well. If things are on the rocks, I would not say go all in on a joint accounts. But you want to erase those differences in income and just put those in the background. It's all our money.

33:58And I'm sure we'll get to this, but I don't think only joint is best, but I do think having a joint account that can launder all incoming money is a good thing. How does your view or maybe the academic view more generally on bank account structure differ from popular personal finance advice? Well, it's kind of all over the place, and it's certainly not informed by any science I've heard of or can recognize. Some very conservative people recommend the joint accounts, and I was quite surprised when we had this paper come out on joint versus separate accounts. it was very popular among politically conservative people.

34:42And I don't know that they would love my follow-up advice, which is you should have separate accounts on the back end of that joint accounts. But if you're just thinking about what should I do, and you're just kind of searching the internet for advice, you're not going to get a clear signal. And how does bank account structure affect household spending? If you have someone looking over your shoulder, you spend differently. And so if it's only joint, it can discipline people. And that can be a self-control device. We spend differently when we're being watched. It's like at Whole Foods. At the pizza counter, you used to have to ask for pizza.

35:20And people would ask for one slice. And then they made it self-serve. And they started taking two slices. So when we're not being closely monitored, we can kind of loosen up. If you're in a crunch and you really need to reel in spending, having everything out in the open is one way to do that. Can you talk about the behaviors that get classified as financial infidelity? From my view, pretty much everything. So there's been a lot of stories over recent years about this plague of financial infidelity within marriage and this moral panic around it. And some of it seems quite innocent to me. I go to the store, I buy groceries, I use a debit card.

36:03Let's say it's$100 in groceries. I take out$20 in cash on top of that. I don't tell you that. If you happen to see the statement, the bank statement, you'll see, oh, Scott spent$120 on groceries. But what you don't know is I had that$20 and I can do whatever I want with it. I had a little secret spending spree. That to me seems unnecessarily harsh, that kind of definition. And other definitions are like, well, you don't tell your spouse how much you're spending on like a gift for your mom. I can confidently say my wife doesn't care how much I spend on a gift for my mom, just as long as I get the gift.

36:39It's a really high standard that a lot of people have. They want complete, proactive, 100 % transparency about what is being spent. anything short of that high standard is called financial infidelity, which is a very tawdry term, infidelity. I think it's a little too much. Do you have a sense of how big a problem this is? Again, if you look at surveys that have been done, you'll see these huge percentages of people who engage in this. But again, once you look at what do you mean by financial infidelity, It's kind of harmless stuff. So there are some true secretive spending activities that are super damaging.

37:22You have a secret gambling habit or a drug habit that can happen and that can be devastating. But I think the data suggests that the most devastating purchases are those that are right out in the open. The mortgage that we can't afford, the car, we buy more car than we need, that kind of thing. So it's, I quit to pursue a passion project. If a family is going to spend themselves into trouble, it's usually spending that's right out in the open. You mentioned total financial transparency. What are the downsides of having that? I think there are a lot of downsides. The problem is you're going to get into unnecessary arguments over little things, little purchases that if they weren't made, wouldn't have mattered anyway.

38:12You're not going to become rich by not buying yourself a treat, a latte, a muffin at work. But some people have been convinced that that is what's standing between you and being rich, the small indulgences of everyday life, the latte, the muffin. So people are convinced of that. If they see you spending on that, they're saying, oh my gosh, we could have saved that. We could have invested it. they're going to pick on you for it. And it might just be something you need for your mental health. I might need to get out of the office and go to Starbucks and get away from people for a little bit. Like it's important to me.

38:47It's not an indulgence. It's like a necessity. So there's that. There's also the reality that we have different interests and hobbies, and I might not understand your passion. And if I went line by line on what you're spending on your interest, it's going to seem like, oh my God, it's so expensive. My wife is a needle pointer. I have a guess. I had a guess on what thread costs. And I happened to stumble across something that had a price tag on it. I had to update my thinking. It was quite shocking, but it's important to her and that's what is considered good and necessary material in her world.

39:31And so she's not spinning us into the ground on that stuff. And so I don't need to know the details. It's good to have a general sense of what everyone's doing. Like, oh, you're spending X per month, but the line by line stuff, I think that can get you into bad territory. So is that why you suggested earlier having individual accounts behind the joint account? Yes, exactly. You know the big amount that's going there, but the details end up not phasing you. Exactly. So the details are available upon request, and hopefully the requests are few and far between. They're not kind of proactively offered.

40:07And so that's what we do. We launder all incoming money through the joint, and then we each move money from joint into our own separate accounts. And that's all we need to know. Now, certainly, if you want a second pair of eyes on your spending or your bank statements, you should feel free to ask. But I'm not proactively combing through what you're up to. There's a joint account that everyone gets laundered through, and then there are separate individual accounts where everyone agrees on the amount that goes in there. But what happens with that money is no questions asked. Pretty much, yeah. We each get to spend some of our money without close monitoring.

40:46And so it's important to make it feel like ours. It's still ours, but you need some privacy. You need some individuality, even within a close relationship. Yeah, totally. Super relatable. Also lots of confirmation bias for me because that's how my wife and I do it. Good, good, good. Love to hear it. How do you square though, the importance of joint bank accounts, which we talked about earlier with what we're talking about now, which is having that individual account? How do we square that circle? The key thing is the laundering part. It's kind of erasing the earmarks on money. It's all ours. You want the marriage to be communal where you're not scorekeeping.

41:29You're not kind of keeping close track of who's bringing in what. And you want to say, can you wash the dishes tonight? Because I'm feeling tired. You don't want to say, can you wash the dishes tonight? I did it last night. Scorekeeping can be very bad for the relationship. And the joint account does seem to help with reducing scorekeeping, keeping it communal. Relationships start communal and they slide into scorekeeping. You want to keep it communal. So the joint account helps with that. And then you can use the separate to avoid these unnecessary disputes at the back end. And so it's using account structure to kind of get all the benefits that you can out of a good, healthy relationship, communal nature, but avoiding the unnecessary fighting.

42:20Let's shift to the topic of gifts. What role do you think gift giving should play in relationships? Ben seems immune, but for a lot of us. It's kind of this mandatory, unavoidable thing. It's not clear that if we had it all to do over again, we would have put Valentine's six weeks after Christmas and Mother's Father's Day. I don't know. But they're there. And they're hard to avoid. And so we need to figure out how to deal with them. I suggest kind of turning them into opportunities to kind of express what we understand about our partners. make them feel seen and appreciated and loved. Because a lot of us walk around, if we're in a good relationship, we admire our partners, but we don't say that.

43:11We don't tell them why. Maybe we can't find the time to do it. You might say, oh, honey, I love you because this and that. And your partner might say, okay, well, that's good. Can we figure out how the kids are getting into soccer tomorrow? There's not a good time to bring that up. We have this appreciation that we don't often express. And so the gift giving moments are those chances to say you are seen and appreciated and we need to feel that they're really important. My immunity is, it's not that I never do anything nice, but I don't like having to do it on a specific day. Why does someone get to dictate that it's Valentine's day?

43:48Therefore I have to do something nice for my wife. I'll get her a, I don't know, pastry from the bakery because she loves that on a random day for no reason. I'm all for random days. There are these apps where you can say, prompt me like six times a year randomly to say, would today be a good day for a gift? And you can, you know, swipe it away if it's not a good day, but it's good. You need surprises. You need those moments. I like that, that advice from the book, the random suggestion thing. I also think that your point about this is how I interpret it at least. So you can tell me if I misinterpret it.

44:23It becomes a form of communication. Gift giving becomes a form of communication. Yes. You might think, oh, I communicate all the time with my spouse, of course. But we're often communicating about logistical things and we're not going to deepen to, I understand your inner psychological life. It's hard to get to that. And so the gifts are like a real important substitute for those moments that we don't delve into in everyday life. Which is a really interesting framing to think about this next question, which is how useful is it to ask your partner what they want as a gift? I certainly understand the temptation to do that.

45:04I have done that in the past. It's a way to avoid disaster. So, I mean, it's not the worst idea. It's better than not getting a gift at all, at least if they were expecting something. But no, it just robs you of the opportunity to display what it is you understand about your partner. And so it shows that you're willing to kind of please them, but it doesn't show that you love and understand them. It just shows that like, okay, I'm doing what I need to, to kind of put this fire out and let's move on. I don't like that approach at all. And just asking, it's not like it's so easy to just ask. You can ask in a way that really depresses your partner and like makes them think you don't care about them.

45:47It's like, oh God, okay, your birthday's coming up. I don't know. You didn't like what I got you last time. Could you just tell me what you want? You know, it's not very romantic. Or if you call up your partner, like from CVS, like, oh yeah, Valentine's is tomorrow. Do you want some crap here? The asking itself can be a real problem. So what can we do to improve our gift giving skills? It takes time. It takes curiosity. You got to learn more about your partner, kind of what makes them tick, what they're anxious about, what they're excited about, what are their kind of hopes and dreams and plans and goals.

46:22And there are questions you can ask each other. We can borrow them from psychology. They're called the 36 questions that lead to love. They're often used to get strangers to feel really close and intimate with each other quickly. But things like, oh, if you could have anyone over for dinner, who would it be? It starts off kind of light and it gets kind of deeper over the course of the questions, but it can also be used within couples, people who have been together for a long time, where the answers to these questions are totally non-obvious. If you're just going about your days, talking about kind of logistical matters, who's going to let the repair person in, these questions can help and they can really spark ideas for like wonderful gifts.

47:09Okay, so we've talked a lot about romantic relationships. How do kids learn about money from their parents? They're learning by watching what we do. And they're learning from our active verbal advice. Hold on to that gift money from grandma. You don't need to spend it that quick. We don't need to run out to Target and spend it right away. And then I might say that to my kid and say, hold on, let me just order the new iPhone here. And so they'll see these mixed messages. as a tightwad or a spinthrift, you don't love that aspect of yourself. So you're often telling your kid, basically, do as I say, not as I do.

47:48You don't have to be like me. And we see evidence of that, that the extreme parents kind of give their kids advice to kind of go towards the middle. Also, what the evidence seems to suggest is that over time, we kind of become our parents. we kind of pick up more on what they actually do than what they say in terms of advice. If they see you being like a total spendthrift every day and you just keep telling them, save your money, save your money, it's not going to work. It's just going to tell them that. They're eventually going to pick up on what you're doing. Now, they can't immediately pick up on everything.

48:24They can't buy an unaffordable house as a seven-year-old. but when they encounter these moments later in life, they tend to mimic what they saw earlier on. And so eventually we kind of do look more like our parents than we might hope sometimes. But what if your parents are mismatched? They both matter. It's kind of who are you around or who's kind of doing the big decisions around you. It's who you're more exposed to. So I don't know who would win out. It's just kind of case by case. If dad's working all the time and mom is spending more time with you, it's like, well, what is mom? Even if mom and dad are mismatched, I would look more at who they're spending the most time with.

49:09Interesting. And what if there's disagreements? How should parents navigate that? Assuming there are budgets and realities and trade-offs that need to be made. my advice is that when there's disagreements about kind of material goods, should we get the new video game system or like the best bicycle versus like a medium bicycle? When parents disagree about that kind of stuff, I say, let the tightwad usually win. Defer to the tightwad. And that's just based on research about what makes us happy, material things versus experiences. and so the material stuff, our enjoyment goes down pretty quickly.

49:48So I say let the tightwad win on the material decisions, but on the experiential stuff, should we take this vacation? Should we do certain things on the vacation? Should we go on this adventure? I say on those, let the spendthrift win because those are really important. Good vacations. They matter for a family and they matter in the moment. They matter for the anticipation of it and the stories you tell for years afterwards. They really do matter. So on those types of things, I say maybe let the spendthrift be in charge. Really interesting. Now, what if there's a difference in what a parent would have decided versus what a child decided to do with their money?

50:30If there's a difference in generational decisions? We need more research on kind of the generational component. We need to follow people longer. But in our study where we brought in parents and kids and we had them talk about spending, it was really interesting. Like the kids were much more pro-saving than the parents. These kids were very conservative. I mean, maybe it's because they were in a lab and we had a video camera on them. But you saw a lot of the parents saying, no, I mean, you can buy yourself a treat sometime. And what's funny is the parents who were saying that tended to be more on the tightwad end of things.

51:06I think because they saw like, oh, I don't want you to maybe turn out like me. So you can loosen up a little kid. But again, the parent also knew there was a camera on them. And so in everyday life, the kid is going to see the parent kind of saying, no, I can't do that. I love the advice on navigating disagreements, separating it between material and experiential purchasing. That's pretty fundamental where if a person thinks it's important to have experiences as a family. We talked about this earlier about how someone might rank high on the Cantrell ladder, but not be doing fun stuff. It's a really nice way to solve that issue and settling those disagreements.

51:46I think it can work out. In our world, there is disagreement about what's material versus experiential, like a bicycle. What is that? Because it's meant for experiences. So there is some ambiguity, but I do think in general, that can be a good guideline. Yeah, I bought an expensive bike. It was really expensive. I use it a lot. I'm really tall, so I can't just go and buy an inexpensive bike even if I wanted to. That's my excuse. That works. My wife agreed to, so that's what mattered, I guess. Based on all the research that you've done and the research that you did for this book, do you think people should marry for love or should they marry for money?

52:24This was one of the things I was shocked by. I was curious, what's the advice that's out there? and the digging around I did, I saw way more people recommending marry for money than marry for love. And I wondered like maybe the people who believe you should marry for love are like out actually having a good time and having fun. They're not writing these mean posts, but F. Scott Fitzgerald, great Gatsby, he had this advice. He said, you want to go to where the money is and then marry for love. So it's not the worst idea. He's kind of acknowledging both money and love matter, but it's not so easy to go where the money is.

53:03We tend to hang out with people with similar socioeconomic characteristics. They're not throwing open their mansion doors and saying, hey, come on in, have some, have some. And even if you do meet someone with money, are they super eager to share it with you and see it is our money. There are people who live in apparent luxury, but they feel poor because there are these strict guidelines between this is mine and this is yours, and maybe you get an allowance or something. So it's just not practical, this marry for money advice. Of course, you need love. You need both kinds of love. You need kind of the passionate, burning love of an early relationship.

53:41And you also need kind of the companionate love, like, hey, I enjoy hanging out with you and watching Rocky IV. Let's just have fun doing that. I was watching that with the kids last night, so that's top of mind. But I think you need both and something else. So you need love, you need money, enough money to be comfortable enough, but you also need psychological similarity. You need kind of similar values, goals, plans, interests, not identical. That would be boring. You don't want to marry a clone, but you need the similar taste. There's a story of this couple, they were in love, but he wanted to go on a farm and raise 10 kids in a very religious way.

54:28And she was like a city dweller and she wanted maybe one kid, maybe no kids and wasn't very religious. And they were in love, but they knew that it just wasn't enough. They had the love and the money, but it was just going to be a disaster. And so they went their separate ways and they lived their happy lives on the farm and in the city. And so my advice is like, you go where the similarities are and then you marry for love and money. It's a high bar I'm proposing here for marriage. When you're dating, I say, my goodness, Just explore, see what's out there. But for actual marriage, you got to meet a lot of criteria.

55:08What do you hope people will take away from your book? Certainly, I hope there'll be better gift givers. And I hope they will be more mindful if they have kids about what they display around their kids. And I hope there are bank account structures, changes to those structures that people make and benefit from. I don't expect readers to follow every bit of advice. I think that's fine, but I do think reading through my perspective and the logic of it all will be a useful exercise. Just considering this perspective, which again is, I think, very unusual in this personal finance self-help space. It tends to be very puritanical and it's about how to get rich.

55:52I'm not saying it's bad to get rich, but that is not what my book is about. I can't tell you what to invest in, what fund. There are other people who are good at that, but mine is about routes to happiness via money changes. Great book for people to read. I mean, anybody really, because everyone will have a relationship of some sort at some point where money is a medium that will affect joint decisions. Certainly. Group of friends wants to take a vacation, but we all make different amounts of money and it's, yes, this looms large in all interpersonal settings. How did writing this book change your personal approach or perspective on spending?

56:32It probably made me even more of a spendthrift. Oh, wow. Wow. Really? Yeah. I talk a lot about when do we get to eat, drink, and be merry? And what do people regret later in life? And I see my kids growing up way too fast. And all these thoughts tilted me even more towards going for it a little bit in terms of if there's an opportunity for fun, but it's expensive, go for it, rather than saying, well, let's save it and hope something better comes along later. Part of that is the world we find ourselves in. And there's uncertainty about the future and worries about what that'll look like. And it made me lean even more on seizing the moment.

57:17I'm not going all in. I still have these automatic payments going to saving retirement and kids college. And that's all in the background. That's happening automatically. So I'm not living like each day's my last. but I'm just erring a little more on the side of trying some more fun things, even if they cost some money. Does that mean you've increased your fun budget? So as a spendthrift, I don't do like real micro categories. Like I think that's really helpful and great for tight ones, but yeah, I don't need like that advanced notice of like, oh, I need to set aside this amount for fun, I can find it in the moment.

58:02I mean, I probably should be a little more careful in my own budgeting, but it's more of a loose mental accounting that I'm up to. Hey man, I think that's great. I think personally, budgeting is the most excruciating exercise I have ever tried to engage in. So I don't do it. I do what it sounds like you do, which is I save the amount that I know I should be saving and don't stress too much about spending, but I'm probably more of a tightwad, it sounds like, than you are. Yes, I think so. But I still hate budgeting. Well, we can find some common grounds. Our final question, Scott, and this has been great.

58:41How do you define success in your life? It's a great question. I have no idea. I don't know. It's a real day-to-day thing for me. It's just, am I happy? Are the people around me happy? Do things seem to be going well? It's hard to know. You know, in psychology departments, there's often this joke of like, oh, you're fine. How am I? Instead of like, oh, how are you doing? You need like this outside view. I wish I had a better answer for you. I'm sure you've had guests that have much more insight than I do. I'm still trying to figure that out myself. I think that's a great answer. Agree. This has been an incredible of conversations, Scott.

59:21We're so grateful. Your book, Tightwads and Spendthrifts, Navigating the Money Minefield in Real Relationships is, I think, a must read for everyone. Thanks for your time. Oh my gosh. Thank you both so much. This was a lot of fun.