Real Money Real Families
Personal finance vs. household finance

By Luke Erickson

One time my daughter gave me a can of Pringles for my birthday. She knows that I try to eat healthy but that chips are my kryptonite. I opened the gift, gave her a hug, and then she immediately said, “Dad, can I have some?”
There’s a clear lesson here. Six-year-olds are adorable and get whatever they want from their daddies. The other lesson is that in a typical household, many things that we think of as “our own,” in reality belong to the household.
Personal finance is no different. The term “personal finance” is a catchy term, but “household finance” is a much more accurate term. Spouses, partners, children, roommates, all have an influence on how the money you earn ultimately gets spent. Sometimes a lot.
And the truth is most of us prefer it this way. We could live on a remote Pacific island somewhere, but Tom Hanks already tried that out. And while the gnarly beard and unlimited supply of crab were impressive, not many of us want to spend our lives sharing our innermost thoughts and life experiences with a volleyball.
Instead, most of us choose a household that is filled with people. It can be chaotic to share our lives with others, but it can also be very fulfilling and rewarding.
Of course, when sharing things like Pringles or our household finances, effective communication is at the heart of keeping household relationships healthy. One of the often overlooked and misunderstood pieces of good financial communication is the act of validation.
Validation does not mean that you have to agree with a person, but it does mean that you have attempted to understand an issue from their point of view and that you feel some empathy for this person and their views. Whether life in general, or shared finances, this principle of communication is the same.
No two people will ever view the same event or experience the same. This has to do with the powerful effect that our formative years have on the way we view and value the world around us. The unique experiences we have in our formative years – primarily ages 0-8 but with strong influence through middle childhood as well as teen years – strongly shape the way we make sense of the world, and our expectations of how things “should be.” When we are young, we see behaviors and expectations modeled by those around us and believe that this limited experience is the way the entire world should operate so that we can continue to make sense of it as we go through life.
Of course, every person who lives on this earth has had different experiences in their formative years. Sometimes wildly different, and thus our expectations, and values and desires are different. Our paradigms are strongly shaped by our geographic location, our generational culture, the broader national culture as well as local culture, and are very strongly shaped by our neighbors and family and the behaviors, choices, and beliefs that they model for us.
The differences we each experience and the associated differences in worldviews and personal values mean that inevitably two people in a relationship will have a difference in opinion on how money should be spent, managed, saved, and valued.
Communication around these differences is essential when finances are shared. As you might imagine, it is unrealistic to expect a total consensus at all times on what money should be spent on. Instead, it is important to learn to communicate these differences clearly and validate differences in our financial needs, wants, goals, and expectations.
Popular personal financial advice often disregards individual wants and needs of a person and instead skips to making ends meet through one-size-fits-all budgeting templates. While short-term this can be exactly what a person might need to buckle down and get out of debt, in the long run this can be very limiting because it disregards the individuality of the person and the overall goal of personal financial management, which is to make our lives happier and healthier.
Validation of your financial goals, values, wants and needs can only happen if you are open and honest with yourself and your partner about what you really want in life. This takes courage to open up and be vulnerable, and to stand up for what matters to you. Because only when you do this will your partner be able to offer any sort of validation or support. If you are timid or trying to “keep the peace” by sacrificing your own wants and needs for your partner, you are essentially agreeing to live in an unhealthy state, which can only last so long before something gives, be it the relationship, the budget, or both.
And the other side of this is to be quick to offer validation when your partner expresses financial needs and wants. For example:
Husband: I’ve thought a lot about this, honey, and I want to buy a pet moose.
Wife: That is the stupidest thing I’ve ever heard! (End of conversation and the end of the husband’s dreams, and maybe the beginning of the end for the marriage).
Second possible response:
Wife: OK, it seems that you’ve put a lot of thought into this and that it’s very important to you; let’s talk about why you want a pet moose, how much it will cost and how it might fit in our other financial goals and life priorities.
Note that the wife didn’t agree with her husband. To agree or disagree later is fine, but up front this conversation needs to start with validation of the want and exploration about why the husband’s worldview includes a strong desire for a pet moose. Of course, at this point in the story we all know that it’s a therapy moose to deal with the fact that his daughter takes his Pringles…
After the initial validation of the want, additional communication and financial tools are always needed, such as compromise and the step-down principle (see https://personal-finance.extension.org/what-is-the-step-down-principle-as-applied-to-household-spending/). But it always needs to begin with validation of the need or want.
In my six-year-old daughter’s case, I acknowledged that she had a worldview that included a need for the very Pringles that she just gifted to me. In response, she just shrugged her shoulders and chomped away. I didn’t get many Pringles that day, but at least I modeled good validation. She’ll thank me someday, right?
(Dad joke alert) And at least I know that we both share the same worldview on Pringles: She’s a chip off the old block! (You were warned!)

Luke Erickson, Ph.D., AFC®, is an associate professor of personal finance for the University of Idaho. He works and lives in the Treasure Valley. @drlukeerickson (Instagram), erickson@uidaho.edu

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