In this episode of It’s Never About Money, I had the absolute pleasure to be joined by Scott Rick, Associate Professor of Marketing at the University of Michigan’s Ross School of Business.
Scott’s research, which spans across marketing, psychology, economics, and neuroscience, provides a science-based guide to understanding and transforming how we manage money in relationships.
In the episode, we talked about a raft of topics including tightwads vs spendthrifts and communal vs exchange relationships, but there was one topic that I found particularly fascinating. That topic was blurring income differences for a more harmonious relationship.
What is blurring income differences?
The concept of blurring income differences for harmony in relationships is that by commingling all incoming money into a shared joint account and treating it as “ours” rather than “mine” or “yours”, couples can minimise the impact of income disparities on their relationship. This approach creates a sense of equality and shared responsibility when it comes to managing finances, which in turn promotes harmony and reduces potential conflicts.
One key aspect of blurring income differences is the psychological distance with shared funds and its impact on purchasing power. When one partner feels distant from the money and perceives it as an allowance rather than shared resources, it can lead to feelings of inequality and limitations in what can be done with the money. This can create disharmony and strain the relationship, especially if one partner is a spendthrift while the other is a tightwad.
Tightwads and Spendthrifts
The terms spendthrift and tightwad come from Scott Rick’s book, “Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships.” I highly recommend giving it a read. In the book, Scott explains that a spendthrift is someone who tends to spend money excessively or impulsively, often without much consideration for budgeting or saving. They may prioritise immediate gratification over long-term financial goals and may struggle with overspending.
On the other hand, a tightwad is someone who is overly cautious or reluctant to spend money, even when it may be necessary or reasonable to do so. Tightwads typically prefer to save rather than spend and may feel anxious or uncomfortable about parting with their money, even for essential purchases.
If a couple in a relationship fall on both ends of this spectrum, which they often do, it’s even more reason to adopt the strategy of blurring income differences. In the episode, Scott explains an ideal account structure to help relationships thrive and succeed.
By blurring income differences and treating all money as joint funds, couples can avoid pitfalls and foster a sense of unity in their financial decisions. This approach can help partners feel equally invested in managing their finances and empower them to make decisions together that benefit the relationship as a whole. It also allows for greater transparency and open communication about financial matters, which is crucial for building trust and mutual understanding.
To hear the full conversation with Scott Rick, listen to episode 60 of It’s Never About Money.
