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Scott Rick: Are You a Tightwad or a Spendthrift?

A researcher discusses what shapes our money personalities and how financial disposition affects relationships.

Image featuring Christine Benz, host of The Longview podcast

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Our guest on the podcast today is Scott Rick. Scott is an associate professor of marketing at the University of Michigan’s Ross School of Business. He is the author of a new book, Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships. He received his Ph.D. in behavioral decision research from Carnegie Mellon in 2007, and he then spent two years as a postdoctoral fellow at Wharton. His research focuses on understanding the emotional causes and consequences of consumer financial decision-making, with a particular interest in the behavior of tightwads and spendthrifts.

Background

Bio

Scottrick.com

Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships, by Scott Rick

Couples, Spendthrifts, and Tightwads

A Penny Saved Is a Partner Earned: The Romantic Appeal of Savers,” by Jenny Olson and Scott Rick, papers.ssrn.com, Sept. 1, 2017.

Spendthrifts and Tightwads in Childhood: Feelings About Spending Predict Children’s Financial Decision Making,” by Craig E. Smith, Margaret Echelbarger, Susan A. Gelman, and Scott I. Rick, Journal of Behavioral Decision Making, December 2017.

“‘You Spent How Much?’ Toward an Understanding of How Romantic Partners Respond to Each Other’s Financial Decisions,” by Jenny Olson and Scott Rick, sciencedirect.com, 2022.

Common Cents: Bank Account Structure and Couples’ Relationship Dynamics,” by Jenny Olson, Deborah Small, Scott Rick, and Eli Finkel, Journal of Consumer Research, December 2023.

Subjective Knowledge Differences Within Couples Predict Influence Over Shared Financial Decisions,” by Jenny Olson and Scott Rick, journals.uchicago.edu, October 2023.

How Much Do You Need to Know About How Your Spouse Spends Money? Maybe Less Than You Think,” by Scott Rick, theconversation.com, June 10, 2024.

Gift-Giving

Why Gift-Giving Makes You Anxious,” by Scott Rick, Time.com, Dec. 19, 2023.

How to Be a Better Gift-Giver to a Partner,” by Scott Rick, psychologytoday.com, Feb. 22, 2024.

Transcript

(Please stay tuned for important disclosure information at the conclusion of episode.)

Christine Benz: Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Amy Arnott: And I’m Amy Arnott, portfolio strategist for Morningstar.

Benz: Our guest on the podcast today is Scott Rick. Scott is an associate professor of marketing at the University of Michigan’s Ross School of Business. He is the author of a new book, Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships. He received his Ph.D. in behavioral decision research from Carnegie Mellon in 2007, and he then spent two years as a postdoctoral fellow at Wharton. His research focuses on understanding the emotional causes and consequences of consumer financial decision-making, with a particular interest in the behavior of tightwads and spendthrifts.

Scott, welcome to The Long View.

Rick: Thank you so much.

Benz: Well, thank you. We’re super excited to chat today. Your book is so interesting. I wanted to start with a little bit of your background. You said that your work in this area of money, personalities, orientations really started as what you called “me search.”

Rick: Yes.

Benz: There were things that you wanted to study because they’re relevant to your own life. Can you talk about that dimension of this?

Rick: I think I had a somewhat unusual upbringing around money and happiness. I grew up in Houston. My grandparents were there. They had all their grandchildren in town. It seemed like a nice situation, but they got kind of bored of it. They picked up and moved to Vegas, which was sad, but it meant we got to visit them often for weeks at a time over the summer. And they weren’t going there for the Hoover Dam, let’s say. They were going for the casinos and the shows, and they just needed a lot of stimulation. And I got to hang out in the casinos. I looked older than I was, which was fun then. It’s less fun now. But, the security guards didn’t really give me too much trouble. And I got this daily exposure via my family and everyone else of just this daily pursuit of happiness via money. And I got to see some questionable decisions.

Luckily, our family never went too, too far. But I think it did kind of loosen me up around willingness to spend and anxiety around spending. And so that was fascinating. And more so when I would come back to Houston and notice that other families very much did not behave this way around money and seem to be much more conservative than we were. And so, I got interested in these differences and how people approach it. But yeah, that “me search” has carried on into my own marriage and then having kids, and I’m researching that. I tell people, if you see me researching divorce, you know something has gone wrong. But yes, it’s very inspired from memories and day-to-day life.

Arnott: And you also have a lot of really interesting stories and anecdotes in the book from surveys that you’ve done and comments from individual people that shed light on how they look at money. You say that we’re all on a spectrum in terms of our orientation from tightwads to spendthrifts. And you actually have a quiz in the book where you can figure out where you land on the spectrum. I think Christine and I both landed in the middle in unconflicted territory.

Benz: I was close to tightwad territory, though, actually, which is weird. But yes.

Arnott: So, can you give us more background on what the characteristics are of those two opposite polls for tightwads? You say one of the key characteristics is that for tightwads, spending is actually a bit painful.

Rick: Yes. A true tightwad often looks good on paper in terms of current income and savings and debt and all that. You might think they would be quite at ease with their financial situation. But many true tightwads experience a lot of distress and anxiety about spending, particularly on optional purchases. And they’re thinking a lot about what they’re giving up later, what are the so-called opportunity costs of the current purchase? They’re worried about leaving their future self out in the cold. And this leads them to not buy things that they recognize that they need or should be buying. And it’s often to their detriment and even to the detriment of people around them—spouses, kids, friends. So, this can be a source of regret or frustration among tightwads.

On the other end, you have spendthrifts. Those are people like me. And we are a little more present-oriented. We might realize that we’ll get tired of this new item soon, but we care more about the immediate return on the purchase. And so, spendthrifts—it’s like someone cut the brakes in the car, the brakes don’t work. Tightwads are driving around with the emergency brake on, but we spendthrifts, somebody cut the brakes. And so, we end up buying a lot of things that we later kind of regret too. So, there’s frustration on both extremes.

Benz: One thing you explore in the book is whether tightwad-ism is just another term for better self-control and if tightwads tend to exhibit, good self-control in other areas of their lives, like with diet and exercise or whatever. What did you discover there? What do you think about that thesis?

Rick: Yeah, it seemed very possible. And it even seemed likely when we first started looking into it, but we just don’t find a lot of strong relationships. We’re not seeing that tightwads are flossing more often or showing up on time to meetings more often. They’re not just in general much more conscientious than people on the other end of the continuum. And so, I think tightwad-ism is a failure of self-control. Tightwads need self-control to spend, to override the impulse to just play it safe and not risk spending the money and they often can’t do it. And so, in some ways, I think they’re failing at self-control.

Arnott: Is it possible to have mixed traits? When I think about myself, I think I tend to be pretty spend-thrifty with lower-dollar amounts. I don’t really have a problem buying clothes or shoes or going out to dinner or things like that. But with big-ticket items, I tend to hesitate a lot more and I don’t like spending large amounts of money.

Rick: Sure. No, I think that’s why you ended up in the unconflicted category. And there are many people there who have a domain where they’re more tightwad-y and a domain where they’re a little more loose. And it can be just price level. But if you hear stories from people who are truly tightwads, they are getting worked up over really, really small-ticket items in addition to everything else, but just things that you would think are obvious slam-dunk purchases. They just can have a hard time with that if they’re at all seemingly optional.

Benz: You say there is a difference between being a tightwad and being frugal. And I’m wondering if you can talk about that difference.

Rick: Yeah, it’s a fine line because they often look very similar on paper if you look at their bank account balances or debt balances. But a frugal person is someone who believes in reusing items as much as possible and they enjoy saving money and washing and reusing baggies and just all kinds of things that seem very labor-intensive to me. But they enjoy it, they believe in it, and they’re happy. And they just love saving. And that’s fine. But that is somewhat different than a tightwad who has saved money, but they haven’t done it the easy way. They’ve done it by experiencing all this anxiety and the stress and regret later. So, they really find spending painful. And so, there’s different ways to get to a comfortable bank account balance.

Arnott: When it comes to spendthrifts, you also talk about something called the “what the hell” effect. Can you talk a little bit more about what that is?

Rick: This was discovered in eating and dieting research. The idea here is that people who are trying to watch what they eat very carefully, if they are, for whatever reason, induced to eat something highly caloric. Maybe a grandparent says, “Eat dessert. Come on. It’s Thanksgiving.” And if they’re forced to do this, they realize like, well, the day is shot. I’ve clearly gone above my calorie limit for the day. So, what the hell? I might as well enjoy myself today. There’s no saving it, and I’ll just restart tomorrow. And so, you see this in spending also and a lot of retailers understand this. So, if I’m Target, for example, and I know a lot of people are shopping with kids, well, I’m going to put a bunch of really inexpensive items right at the door that kids will coerce their parents into the putting in the baskets. I just want to get that spending going. I want to break the seal on the wallet and the wallet that gets opened tends to stay open. And so, you can get this momentum and this, “I’ve already blown through my budget, whether that’s calories or money. So might as well enjoy today.”

Arnott: I don’t know how many times I’ve gone to Target to buy paper towels or a few essential items and end up walking out with, all of a sudden, I’ve spent $100 or more.

Rick: Yes, on some less-essential items. Yes.

Arnott: Exactly.

Benz: You noted earlier that you’ve always been a little bit spend-thrifty. And you said the process of writing the book made you even more likely to err on the side of spending. Can you expand on your thinking about how spending has changed in your mind since you first started working on the book?

Rick: Yes, that was a surprise. But it was a very real shift. I think it’s a blend of writing the book—I largely wrote it during lockdown. And I wrote it in the context of my three kids growing up extremely fast. And I’ve got one now that’s about to go into middle school, which I can’t wrap my head around. I was just surrounded by reminders of the fragility of life and the speed at which it passes by. And I’m just thinking about some of the stories in the book about what some people come to regret later on. And I think it made me even more open to seizing the day and seizing opportunities for happiness and stories and experiences with loved ones. I haven’t gone off the rails by any means. There’s automatic saving going on in the background and money I can’t touch. And thank goodness. And I’m married to a tightwad and that helps. But yes, it did. And I can imagine people having different reactions to the book. Some might want to save more. I can see that. But for me, it made me more of a spendthrift.

Arnott: In your research, you’ve studied spendthrifts and tightwads across broad population samples. How does that distribution shake out? And did you find any demographic differences or other interesting trends in the data?

Rick: Yes. If I were to summarize across a lot of diverse samples, I would say roughly we find 25% of people who we would label a tightwad, 25% who we would label a spendthrift and 50% in that unconflicted middle. There are some demographic correlates. Women are a little more likely to be spendthrifts than men. It’s a small thing, but it’s something we constantly see. Tightwads are older, a little bit older than spendthrifts on average. Another small thing. Tightwads tend to be more mathematical in their college majors. And yeah, they view the world through that numerical lens a little bit more. But there aren’t a lot of obvious, gigantic demographic markers of this. But there are those small relationships.

Benz: I wanted to ask about how we get these orientations, whether it’s nature and nurture. It sounds like our experiences with money during childhood and adolescence help shape our orientations. But can you talk about that and perhaps share a couple of examples of how people’s experiences might affect where they land on this spectrum?

Rick: No, I think there’s evidence for both, certainly. I think if you were born with a tendency to ruminate or perhaps be a bit neurotic, you might have a tightwad-friendly brain already. But yeah, I think experiences, there seems to be a lot of evidence for that, particularly in formative years. There are a lot of tightwads who seem to have gone through a time of struggle, financial struggle or stress. And some of them come through and come into money later in life, like a career works out or something else improves in their financial lives. But they don’t adjust so quickly. They develop these reactions to spending that protect them when times are tough. But when times are less tough, many of them still have these same reactions that they can’t shake.

Again, you might look at someone on paper and say, oh, you must be quite comfortable. But some people just can’t get past a period of struggle that they experienced. I quote a character in the book Love in the Time of Cholera who grew up poor and became a rich industrialist. And someone called him rich, and he said, no, no, I’m not rich. I am a poor man with money. That is very different. And so, he was not able to shake that mindset that developed in more formative years.

Arnott: That’s interesting that his core identity never changed despite the circumstances.

Rick: Yeah, that’s right.

Arnott: Are there any non-money experiences that can shape our orientation? If somebody has a big life shock early in life or some type of adverse experience, does that tend to make them more risk-averse and tending to seek control in a lot of aspects of their lives?

Rick: It’s a great question. I don’t have a solid answer for you. I think the sample size, it’s always hard to collect a bunch of people who had a unique shock experience. But I certainly wouldn’t be surprised, especially if it’s in formative years.

Benz: I heard you talking about spending as a way to assume control amid uncertainty that by making choices, like low stakes things like should I pick the tan shoes or the brown shoes? Those kinds of decisions help us feel a little bit more in control. Can you talk about that? I thought that was such an amazing perception and a great way to understand that need to spend.

Rick: Yes. And that is inspired by being a spendthrift and seeing people talk about things like retail therapy as a foolish endeavor, like, oh, it’s so silly to shop to cure a bad mood. But to me, based on experience and research, I thought, well, there might actually be something to this idea of retail therapy. So, when we’re feeling sad, we often feel like we are not captains of our own destiny. We are at the mercy of disease or external forces, weather, climate, just random things in nature that we can’t control. And we also know from research that making choices, neutral or pleasurable choices, can give us a sense of control. And shopping is just all about choice. Do I want this or that? Do I want to buy or not buy? And so, we thought and found in experiments that making simple shopping choices, low stakes, sometimes even hypothetical, can accelerate how fast people get over sad feelings. And it did seem to be because they felt more in control. I want this and not that. So, there’s something to it. You don’t want to go overboard and get yourself into debt and now you’re losing control again. But small shopping choices can actually, I think, be helpful with sadness.

Arnott: It’s interesting. You mentioned that you wrote most of the book during the pandemic.

Rick: Yes.

Arnott: And one thing I noticed with myself was we were all staying at home a lot, trying to be very cautious. But after a while, I discovered that I just needed to get out of the house. So, every few weeks, we would go to Home Depot, and I would buy an orchid for myself. And I just really noticed a big lift in my mood just from getting out and interacting with the world and buying something beautiful for my house. So, I imagine that could be part of the emotional lift that you get from spending sometimes.

Rick: Oh, absolutely. We focused on the choice part, but there’s so many other parts. Like you get this beautiful orchid in your home. You have some novelty. You see new products that maybe you don’t buy, but you consider and learn about. And you see other people and maybe there’s kids doing funny things. Like maybe a salesperson is nice to you. There are all kinds of possible benefits to shopping.

Benz: Are there any sort of cheapy ways to address that endorphin rush that you get when you buy something, like I’ve heard about filling your online cart and maybe not completing the purchase? Are there any things that actually do help people come up with those same feelings without necessarily hurting their finances so much?

Rick: Yes, I think things like Amazon Wish Lists or other kind of Pinterest-like things where you’re kind of quasi selecting things. You’re not acquiring them, but you’re choosing what I would like, I do think that could be helpful.

Arnott: Would you say that our culture has kind of a push-pull with spendthrift and tightwad qualities, and which one is better? You see a lot of spendthrift culture being lionized through social media, especially on Instagram and things like that. But I think there’s also a widespread view that being thrifty and delaying gratification is a virtue.

Rick: Yes. Well, they’re good in their own ways. A spendthrift—and you see a lot of that on, say, Instagram—they are doing more fascinating, interesting things, sometimes puzzling things. If you ask people who would you rather hang out with if you had to pick a stranger and you describe the two options, they might select spendthrift there. But if you had to say, who do you want to manage your household’s money and make sure you stay solvent, they’ll probably pick the tightwad. So, it’s like good for what? There are different kinds of happiness out there.

I see a lot of blame, people blaming debts on what they assume is spendthrift behavior, when, from my view, a lot of it is just like bad luck or insufficient income or medical expenses. Someone could be in debt without having a shopping habit. It could just be life. So, I am totally fascinated with how spending habits live in people’s imaginations and the values that we place on them. It’s very ambiguous and murky to me.

Benz: In the book, you share some concrete strategies for tightwads to loosen up and enjoy spending or at least maybe to stress out about spending a bit less. Can you share some of those tips if I’m a tightwad and I recognize that this is not optimal, that I may be shortchanging my life or my loved ones’, some ways for me to just loosen up a little bit?

Rick: Well, I think the main thing is to recognize this, understand your tendency, and do what behavioral scientists talk about, precommit, precommit to loosening up. We often think of budgeting as a way to restrict spending, but a tightwad can use budgeting to loosen up. They know that just left to their own devices, if they see something fun that they’re considering, they’re not going to be able to justify the purchase in the moment. They won’t be able to convince themselves that they can afford it. But if they in advance budget some money, earmark some money as fun optional money, it’s there when these fun opportunities present themselves and it’s accessible. They’ve planned for this already. So, a little precommitment, a little looking ahead can help. Budgeting can actually help loosen tightwads up.

I would also say whatever you can do to take your attention away from money leaving your possessions. So, if my wife and I, if we’re planning a family vacation, I think I should be the one to book things and there’s just some things she doesn’t need to know. Or if she does know things, maybe I try to go for the all-inclusive package where we’re not having to individually pay for each meal or separate experience. It’s all in. You just want to take their attention away from money leaving their possession. My goodness, turn off all the alerts like, oh, you paid your phone bill today. I’m going to send you a text about that. Yes, that happens every month and it’s always the same. Why do I need that reminder? Just manage your attention to money.

Arnott: What about on the spendthrift side? Are there any strategies that people can use if they’re trying to spend a bit less?

Rick: So, it’s harder for spendthrifts because no one is looking to help them. No retailer is looking to help them. And so, they have to be very proactive. So, for spendthrifts, it’s just the opposite. You need to increase attention to the money leaving your possession. I did this when I was in grad school and had very little money. I tried to train myself to become a temporary tightwad. I would pay with cash as much as possible, and I would feel pain when getting the money out of the ATM and then feel pain again when spending the money at the store. And so, I was putting up all these speed bumps, all these psychological speed bumps to slow me down and get me to reconsider things. And when I could not pay with cash, I would pay with the debit card, and I would collect the receipts. And this was a very nerdy thing to do, and I would often get a lot of eye rolls. But I would get the receipts and I would take them home and enter the expense into Excel. And even though it was already recorded on my bank’s website, like it was there, I needed to feel it. I needed to write it out. Like, oh, I spent $25 at CVS. I need to spell that out. So, I was putting up all of these speed bumps and friction and just things to slow down, reconsider, and really be aware of the money leaving my life.

Now, that’s not a recipe for happiness. It’s more a recipe for survival and getting through a rough patch. It worked. It’s no way to live, but that’s the basic idea. And spendthrifts can also benefit from budgeting. There’s evidence showing that when you have a budget over a short time span, let’s say a week, you are more likely to think, oh, if I buy this, then I cannot buy something else. Like, you all of a sudden, start thinking of opportunity cost and what you’re giving up later. So, budgeting can be good for spendthrifts too.

Benz: I wanted to follow up on that cash thing. And this is just personal experience. But whenever I have cash in my pocket, I act like it’s free money. For some reason, it’s super easy for me to spend. What’s going on there?

Rick: Yes. I think there is a time component. So, if I was going to pay with cash, I would want to withdraw it that morning and use it that day. But I totally agree. Cash has just been sitting in your wallet?

Benz: Yeah, like “Weee!”

Rick: Yes, go nuts, monopoly money time. I think, our field—I think this is a big area for research. There is this assumption like, oh, spending with cash is more painful. No, not always. If it’s been around, then I think it’s totally fine.

Arnott: Yeah, that’s one of the “girl math” sayings that if I buy it in cash, it doesn’t count.

Rick: Yes.

Benz: Oh, no. Sorry.

Rick: Yes, I love girl math.

Arnott: A lot of the book also talks about couples and relationships and how couples relate to each other or don’t relate to each other with respect to money matters. But before we delve into the money personality piece of that, can you talk about how big a role financial matters play into a marriage’s success or failure?

Rick: There’s a lot of research showing that it’s right near the top, right near arguments about in-laws, arguments about money. These are the two big ones that can really lead to a marriage’s downfall. And the problem is, there’s so many opportunities to experience friction around this. There are partners who don’t have equal incomes. There are all the explicitly financial choices that they have to make. And then there’s just decisions about how to live a life that are actually, when you look at it, also financial, like what hobbies do the kids have, and what vacations do we want, and what neighborhood should we be in? It’s just so unavoidable. There’s just so many opportunities to get it wrong.

Benz: How about wealth in this? It stands to reason that couples with more financial assets would have less financial strife, and couples with fewer financial assets would argue more about money. But do the data bear that out?

Rick: Well, there’s two things. There’s lack of money, and that’s huge. There’s also differences in opinion about how we spend our money. So those are two big factors leading to distress. And so, there are couples that you might think are quite comfortable. They look good on paper, but they have such different views on how to spend the money. They can be fighting about money just as much as couples who are just barely making ends meet.

Arnott: And related to that, you’ve also noted that money is one area where opposites seem to attract, that it’s not necessarily unusual to have a spendthrift as one member of the couple and a tightwad as the other. What do you think is going on with that?

Rick: Yes. When you’re a tightwad or a spendthrift, you don’t necessarily love that aspect of yourself. And that’s what they tell us in surveys. And that’s why we call the people in the middle unconflicted because the extremes are conflicted. And if you have something you’re not loving about yourself or you’re self-conscious about, when you see someone else do it, when someone else displays your problem, it can really bring it to the surface in an uncomfortable way and shine a spotlight on this thing that you would have loved to just keep in the background. And so, it’s an uncomfortable mirror of yourself.

And, sometimes two tightwads or two spendthrifts, they don’t love seeing that in each other right away. And so, I think at first it can be fun and exciting and interesting and novel to be around someone who approaches money very differently than you. Particularly, you can imagine a tightwad being quite amused with how a spendthrift runs through money. Like it’s fascinating. So, I think it’s fun at first. The tricky part is when you get into a longer-term relationship or a marriage and decisions just have higher stakes. There are all kinds of fatal attractions out there where something that draws you in initially ends up being the thing that irritates you in the long run. So, you’re not doomed if you have a different approach than your partner. It just takes a lot of attention and work.

Benz: So, it seems like the key is for the spendthrift to pick up some healthy habits from the tightwad and vice versa. That seems like a good way for such a couple to find harmony. Do you have any concrete ideas maybe from your own relationship about how couples might do that, take the best that each person has to offer in terms of their money mindset?

Rick: I think conversations, getting on the same page as much as possible, these can be good. Sometimes it’s outsourcing. Like if my wife has me book a vacation and she trusts me not to go overboard, so she can still enjoy it without being burdened by precise knowledge of the price of the trip. We certainly find that good long-lasting couples, there is some movement toward each other. They get less extreme. They move a little bit more toward the middle. It’s hard to just like completely flip-flop. These are fairly stable tendencies, but if it’s going to be successful, usually you’re going to see partners looking more alike over time.

Arnott: You also made the point that I thought was really interesting that if a couple is debating whether to spend money on something, that the tie should go to the spendthrift if it’s related to spending on an experience, but it should go to the tightwad when it comes to spending on stuff. Can you talk a little bit more about that?

Rick: I think this can be a way to try to reach a middle ground. We know from lots of surveys and experiments that a lot of material purchases don’t bring a lot of lasting happiness. There’s often an initial spike, but it often goes away quickly. So, if you’re debating should we get the new outdoor speaker system, maybe go with the tightwad on that. Whereas the experiences, particularly shared experiences with a couple or the entire family, we know that these bring a lot of benefits. It’s not just the experience itself, but also the anticipation, the memories, the stories, the learning about each other. You can learn a lot when you travel with someone. Day-to-day stuff, you can get into a lot of administrative conversations—who’s letting the plumber in, who’s taking the kids to practice, that kind of thing. But I think there’s many reasons why you should err more on the spendthrift side for the experiential decisions.

Benz: You talked about that opportunity for partners to influence each other. I’m wondering if the age at which people join as a couple matters. Are we more malleable when we’re younger and more subject to picking up positive traits or negative traits from other people? Do you think that that’s a possible factor in couples’ ability to get through some of these differences?

Rick: Yes, I think it’s very possible. And we know that people are getting married later than they used to.

Benz: Right.

Rick: And it’s a very interesting thing because they’re coming in with their own separate bank accounts that they’re used to having. And I think they’re a little more reluctant to open up a joint account because there’s just such a strong status quo that they’re stuck with. So, I can see pluses and minuses, but yes, I think you are a little more set in your ways the later you get married.

Arnott: You also write about how differences in income levels can be difficult for couples to handle, especially in a traditional couple with a man and a woman, in the case where the woman might be the primary breadwinner. Do you have any suggestions for navigating those issues?

Rick: Yes. Well, assuming we’re in a trusting place and things are generally going well, I would recommend this is where I like a joint account. I like a joint account to absorb all the incoming money of a relationship. And it’s just kind of immediately, as soon as it comes into the house, it’s our money. There’s no, oh, the paycheck goes to me, and then I chip in some proportion to a shared account, or I give you some part of my paycheck if you’re earning less. That kind of scorekeeping, that kind of precise tracking of who’s contributing what is just a recipe for a lot of unhappiness. So, I like a joint account to blur income differences, push it out of our minds as much as possible. If one person’s working and perhaps the other one is staying home with young children, you’re not going to forget that there’s an income difference here. But you just want it to be in the background, it’s our money, and it’s always our money as soon as it hits the house. And so, it’s like psychological money laundering. You want to take away the labels on these different amounts. It’s always ours.

Benz: You actually studied that issue of the question about whether a couple should blend their finances or stay separate. Can you talk about what you found there?

Rick: We did an experiment with engaged and newlywed couples who had separate accounts, and they were open to what they wanted to do long term. They were kind of undecided. So, we paid them to either adopt a joint account, merge their money into a joint account, or keep things separate, or do whatever you want. And then we followed them for two years. We checked in with them. Are you still talking? Do you still like each other? Are you fighting? And what we found was that the couples we prompted to open and use a joint account, they maintained their newlywed level of relationship satisfaction. Whereas the other couples had the decline that you often see, like the wedding day is often the happiest, and then reality sets in, and there’s a decline.

So, we think the joint account was doing several things. One, it was blurring income differences. Another was that it was helping to keep things what we call communal. Relationships often start communal, where I help you because you need help, not because I’m prepaying for some other favor. You don’t want to get into what’s called an exchange relationship. That’s something you might have at work with a colleague where you’re keeping careful track of inputs, and you nominate me for an award. So next year I have to nominate you. It’s all very reciprocal and they’re scorekeeping. And so, we think this helped couples avoid the onset of scorekeeping by turning your money and my money into our money. And it also prompted conversations, like they talked more, they got more on the same page, which doesn’t mean saving, saving, saving. It might mean, oh, well, maybe we can afford an extra weekend out now and then. But we think that joint account did a lot of good for those couples.

Arnott: It sounds like having a joint account is probably a good idea for most couples, but you also write about how giving each partner some discretion to manage their own spending can be beneficial. What’s the best way to do that logistically?

Rick: Yes. And yes, this might all sound very ironic given what I just said, but I like having a joint account. I don’t think you should only have a joint account. The joint account is the money-laundering device. It is what collects the incoming money. On the back end of that joint account though, there is room for separate accounts where we each get to withdraw some of our money into our separate accounts that we can use. We can each spend some of our money without the other person closely looking over our shoulder. And obviously, the joint account is there for household-level purchases: our mortgage, our rent, our utilities, and children expenses. That’s what that’s for.

But me, Scott, for my personal everyday purchases, do I want to buy a latte at work? Or do I want to buy something for whatever hobby I have? That can be done through a separate account. And my spouse doesn’t need to see all the line-by-line details. Because once you start looking over each other’s shoulders, you’re going to disagree about how to use that money. And we have different hobbies, and I don’t understand what your hobby costs and vice versa. And I’m going to say, do you really have to spend that much? And you’re going to get into unnecessary arguments that just do more harm than good.

Benz: One other piece of wisdom that you sometimes hear dispensed in the realm of couples and money is that if you are spending over X threshold, $100 or whatever, you should tell your partner. What do you think about rules like that? Do they work?

Rick: They can. I think that’s certainly in the ballpark of what I’m suggesting here, where we each agree that we can each take X dollars from the joint account each week or each month into our separate accounts. And that’s in the spirit of this idea that expenses of a certain level, we should talk. But I don’t love hard and fast rules. I think there needs to be some wiggle room and some trust and people using discretion and intuition. But I think my idea is certainly in that ballpark. I have no objection to that approach.

Arnott: We’ve also seen a lot of articles and headlines about financial infidelity, where there’s really a serious breach of trust when it comes to spending. Is that a significant issue?

Rick: Sometimes. There are stories, people have secretly gone into big debt with various addictions, drugs, gambling, things like that. So, it can happen. But I think the extent of the problem is overblown, very overblown. Because it gets a lot of clicks and attention and moral panic and all that. A lot of what I see described as financial infidelity, which, by the way, just sounds so tawdry—infidelity. You could call it just secrecy or privacy or something else. But people are just using that phrase to describe a lack of 100% proactive disclosure of what you’re buying. And let’s say I buy my mom a gift and I don’t report it to my wife. That would be financial infidelity. My wife doesn’t care. She doesn’t want to know. She might want to know, get your mom something so she doesn’t have hard feelings or complain, but she doesn’t need the details. And I think there’s just been too much hand-wringing about this. And I think a certain level of discretion and privacy can actually be good. You need some individuality even in a very close relationship.

Benz: One, I thought, super-interesting section of the book related to giving gifts to one’s partner. You have some thoughts on that. I’m wondering if you can discuss them?

Rick: Yes. I think there’s a lot of well meaning, but misguided gift-giving advice out there, such as if you want to give your partner a good gift, just ask them what they want and give them that. It’s a way to avoid disaster. There’s a story in my wife’s family of someone giving their spouse an iron for a romantic holiday and it gets thrown at them. It’s a nice thing to have in the house, but it’s no gift. But I get it. It is a way to avoid disaster. But no, I don’t think it’s good because two reasons. One, the asking itself is no easy thing. You have to have a lot of grace to pull that off without hurting the other person’s feelings. You don’t want to make it sound like a burden. Like, what do you want? Are we doing Valentine’s this year? Or like, hey, I’m at CVS. Do you want something? Like, no, that’s not good. There’s that.

But there’s also this reality that we aren’t as expressive as we could be with our partners. Even when things are going well, we might have positive feelings about our partner that we just don’t share because there’s not a good opportunity to do that. We’re getting into administrative discussions about just day-to-day running of a household and there’s no natural time to tell our spouse, I love you because…you do these different things. You don’t have the words for it. You feel awkward and you just keep it to yourself, and you get too tired, or you’re worried they’re too tired. So, the gift-giving occasion are these really crucial moments to reveal to our partner that they are seen, that they’re understood and that’s what we want. We want to be known by our partners. And so, to give a good gift, you really need to explore your partner’s inner psychological world. What are their interests and curiosities and hopes and concerns and you really need to get in there and understand what’s going on. So that cannot be done on Christmas Eve or from an aisle at CVS. That really needs like a date night where you ask each other questions and explore what’s going on in your inner world.

Arnott: You also have in the appendix of the book a list of questions that couples can ask each other to get to know each other better and explore different topics either as they’re dating or after they’re already in an established relationship.

Rick: Yes. You might think, oh, I’ve been married to my spouse for 10 years, 20 years, like what else do I need to know? But if you look at these questions, these are questions that were once developed to get strangers very close quickly. I think these are good refreshers for even people who have been married for a while. Again, it’s all about your spouse’s interest and curiosities and fantasies and desires. It’s a helpful refresher for anyone, I assure you.

Arnott: You also have a section of the book related to parenting and money issues related to parenting. When kids enter the picture, it seems like there’s maybe more potential for strife around how much to spend on the kids. What do you think is a good way for couples to navigate that?

Rick: Well, they need to be aware that what kids are picking up on. And kids get a lot of mixed messages. I’m sure I’m not the only parents to, while scrolling Twitter, tells my kids, OK it’s time to get off the screens. There’s a disconnect here. But yeah, so they get a lot of mixed messages. My parents will say, do as I say, not as I do and cross their fingers and hope that works out. But my interpretation of the research out there is that kids are much more likely to pick up what they see the parents doing than any kind of verbal guidance from the parents. And you might not notice right away that you’re turning your kid into a tightwad or spendthrift. My kids cannot mimic my irresponsible home remodel decisions. They’re still kids, but they might do it when it’s their turn to remodel a home. So, it might take a while to realize.

But yes, just be very aware that they are picking up on the behaviors they see. And there’s a lot of questions they have like how did we get certain things? Did we buy it? Was it inheritance? Did we steal it? There’s a lot of ambiguity. So, talking things out. I can’t totally turn myself into a responsible spender around my kids. But I can talk through like, “Well, it’s OK to indulge sometimes. But this means we’re not going to get to indulge on something else you like later. Should we still go through with this?” At least try to not make it seem like it’s so easy and mindless for me just to slap a credit card down and not worry about this at all. Just try to articulate some of the mental processes that are invisible to them. But yeah, when it comes to spouses, there might be things you put up with when it’s just the two of you. But when one person realizes, like, oh, now you’re shaping a kid, like it’s not so harmless anymore, then these things can become really sticky.

Benz: Stepping back from the book, in the world that Amy and I inhabit, where we focus on investing, there’s this obsessive discussion about the psychology of investing, which does seem to be an important vein, certainly in what we do. But there’s much less discourse, at least in my opinion, around the psychology of financial decision-making at the household level, like what you cover in the book. Why do you think that is?

Rick: I’ve certainly noticed that too. And certainly, anyone who has explored the world of TikTok and some of the personal finance advice out there, I think they’ll see that also. But I just think the household-level stuff is so messy. It’s hard. Even understanding an individual’s psychology of investment decisions is also hard, of course. But once you factor in all these discussions and perceptions of a partner and the arguments, it’s very hard to study. That study I described where it took us two years to track these couples. Well, it took us an extra five years to recruit the couples and preregister the experiment, which was just a very complicated endeavor, because the experiment was so—you had couples who would drop out. What do you do about them? And they get divorced. And so, yeah, it’s just a very hard thing to get firm conclusions on. And I wrote the book because we haven’t answered everything about couples’ financial choices. But I think we had answered enough where I felt like, OK, I think I’m in a position where I can help people think through what we do know. But, I agree, there’s a lot more to be done. And you just need adventurous researchers and advisors diving into this area. And yeah, come on in and I’m here waiting for you.

Benz: Well, thanks so much, Scott. Amy and I loved the book. We’ve loved this conversation. Thanks for taking time out of your schedule to be with us today.

Rick: This was a lot of fun. Thank you.

Arnott: Thanks again, Scott.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow me on social media @Christine_Benz on X or at Christine Benz on LinkedIn.

Arnott: And at Amy Arnott on LinkedIn.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. While this guest may license or offer products and services of Morningstar and its affiliates, unless otherwise stated, he/she is not affiliated with Morningstar and its affiliates. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Christine Benz

Director
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Christine Benz is director of personal finance and retirement planning for Morningstar, Inc. She is also the author of a new book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement (Sept. 2024, Harriman House). She co-hosts a podcast for Morningstar, The Long View, which features in-depth interviews with thought leaders in investing and personal finance.

Benz joined Morningstar in 1993. Before assuming her current role she served as a mutual fund analyst and headed up Morningstar’s team of fund researchers in the U.S. She also served as editor of Morningstar Mutual Funds and Morningstar FundInvestor.

She is a frequent public speaker and is widely quoted in the media, including The New York Times, The Wall Street Journal, Barron’s, CNBC, and PBS. In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance; she appeared on the 2021 list as well. In 2021, Barron’s named her as one of the 10 most influential women in wealth management.

She holds a bachelor’s degree in political science and Russian language from the University of Illinois at Urbana-Champaign.

Amy C. Arnott, CFA

Portfolio Strategist
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Amy C. Arnott, CFA, is a portfolio strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She is responsible for developing and articulating best practices to help investors and advisors build smarter portfolios.

Before rejoining Morningstar in 2019, Arnott was an Associate Wealth Advisor at Buckingham Strategic Wealth, where she was responsible for portfolio analysis, asset allocation, rebalancing, and trade recommendations. Arnott originally joined Morningstar as a mutual fund analyst in 1991 and held a variety of leadership roles in investment research, corporate finance, and strategy from 1991 to 2017.

Arnott holds a bachelor’s degree with honors in English and French from the University of Wisconsin – Madison. She also holds the Chartered Financial Analyst® designation.

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