10 tips for stress-free money management

When Joan* and David* first met, Joan loved the fact that David was free and easy with his money. "He is incredibly generous and never worries about what something costs," says Joan. It wasn't until after they married that Joan realized just how differently they thought about money. David had run up thousands of dollars on his credit cards and showed no signs of slowing down. "I am frugal by nature," says Joan. "I always try and save before I make a purchase, and if I have to buy on credit, I make sure to pay my credit cards off in full at the end of the month. David is much more willing to take on debt."

For many couples, opposing attitudes about money such as these can cause arguments. "Money can ruin a relationship," says Janet Freedman, a certified financial planner and president of Finance Matters in Toronto. "It's so critical to be up front, lay out every single dime you owe and work out together how you are going to manage your finances right from the start."

Here are 10 things experts say that Joan and David -- and every couple -- need to do to handle their money well.

1. Add up the ins and outs
Sit down once a year and map out your cash flow. List what comes in per paycheque (after all deductions), then list all your expenses, dividing them into fixed expenses (such as groceries and mortgage) or discretionary ones (such as gym memberships and movies). Allocate a dollar figure to each expense, stick to it and don't spend more.

"I don't like to say 'budget,'" says Freedman. "It's like 'diet,' another dirty word. But if you know exactly how much is coming in and how much is going out and where, you won't fall into the trap of living beyond your means." She recommends that couples commit 10 per cent to savings right off the top (RRSPs, pension plans, RESPs, if you have children, and debt reduction). "If you try to find the money at the end of the month, it just won't be there. This is not a discretionary thing. It's something everybody should aim for."

2. Save and invest
You should both know how much money you have, where it's at, why it's there and how much you're spending on your investments. "If you're joined at the chequebook, you have an obligation and responsibility to know what's going on," says JoAnne Anderson, president of MoneyPower Inc. in Mississauga, Ont. "Often I see one spouse who has no clue as to why they have certain investments," she says. "Each person needs to know what his risk profile looks like and understand what their differences are as a couple … No one should invest outside her risk tolerance."

3. Manage your debt
List what's owed on each debt and when payments are due. "It's your job as a couple to keep on top of it," says Paul Lermitte, a certified financial planner with Integrated Planning Group/Assante Financial in Vancouver. "If one of you is in charge of paying the bills, the other should at least review what's being done or try sharing the job. It's one way of diffusing arguments about money." He also advises automatic payments: that way everything is paid and paid on time.

And you need to determine just how much debt you can carry. Once you've mapped out what's coming in and going out, it's easy to see what's left. For a mortgage, Lermitte recommends a 20-year amortization as opposed to the more traditional 25. "The first five years are mostly interest," he says. By choosing a shorter amortization you will shave thousands of dollars off your interest costs.

"The real problem area for most couples is credit-card debt," he says. It's easy to understand -- rates vary from 9.9 to 28.8 per cent. If you owe $2,300 at 18.4 per cent, for example, and make only the minimum payments, you'll end up paying more than twice that by the time you make the last payment -- and it will take 18 years. "The day you find you can't pay your cards off on a monthly basis, cut them up," he says.

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