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The Best Way to Manage Money As a Couple

In many traditional American households, the husband manages the investments while the wife manages daily budgeting and spending.... and that, researchers say, might be all wrong.
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If you're in a relationship -- or have ever been in a relationship -- you know that managing money as a twosome can be tricky.

We get questions every day about how to divide money and who should pay for what. So when rather controversial research came out suggesting there's a whole new way to divide your money as a couple, we perked up. Especially since, in many traditional American households, the husband manages the investments while the wife manages daily budgeting and spending... and that, researchers say, might be all wrong.

The Findings

In the 2009 National Marriage Project report "The State of Our Unions," Ronald T. Wilcox, faculty fellow at the National Marriage Project and professor of business administration at the Darden School of Business at the University of Virginia, presents evidence that a non-traditional arrangement of a household's finances might be best: That is, the woman invests and the man determines the day-to-day budgeting and spending.

According to Wilcox, we develop feelings of ownership over household tasks, from who empties the dishwasher to who pays the cable bill. Because of this, couples tend to settle into a routine of who-does-what without necessarily considering who might be more effective at what -- and he finds that women would be more effective as the family investors for the following reasons:

1. Men Are Overconfident

"[Men] tend to trade stocks and bonds more actively because they are convinced they know what the next market movement will be," writes Wilcox. "What is likely to go up, and what is likely to go down. In so doing, they incur a host of transaction costs associated with trading -- from commissions and taxes to bid-ask spreads -- but do not pick assets any better than women."

But women, who are well-known to lack confidence around investing, make fewer active trades, so they're able to generate "risk-adjusted returns," meaning the returns they can't get when someone won't hold onto the stock long enough. In other words, by not trading all the time, their money tends to make more money.

2. Women Look at the Upfront Costs

Women are less likely to pay exorbitant fees with the confidence their investment will earn it back (or to pursue the expensive hot stock of the moment), which means that they tend to select good, safe mutual and index funds with low fees. This is particularly important because the bulk of household retirement funds are invested in mutual and index funds, and we all know that retirement should be a core concern for women, who have an exclusive set of challenges.

3. Men Don't Take Advice

If there's a retirement planning seminar (or an introductory retirement article, for that matter), Wilcox writes that women are much more likely to take advantage. Because they don't tend to have the same innate confidence in their own knowledge and abilities as their male counterparts, they're more willing to both take and use investing advice.

4. Men Make Better Budgeters

"Men lose money at the stockbroker's office; women lose it at the shopping mall," argues Wilcox. Thanks to their usual appetite for riskier financial tasks and disinclination toward household budgeting, he says, men might actually be more conscientious, effective holders of the purse strings.

"Even if they don't enjoy doing it, it is that natural aversion to the activity that is likely to lead to stronger household balance sheets," he explains. In other words, because they like to get in and out, men, for example, may not spring for a cute new sponge or fresh flowers at the grocery store, thereby driving down your bill.

(And he may have a point: Overspending is one of the seven mistakes women make more than men.)

So, Who Should Do What?

We've heard before that women could make the best investors, but the idea that men might be better-suited to household budgeting is a new one.

In the same report, Jeffrey Dew, faculty fellow at the National Marriage Project and assistant professor of Family, Consumer, and Human Development at Utah State University, writes that his new research shows disagreements about money to be the most accurate predictor of divorce, and when a spouse doesn't believe his or her partner handles money well, reporting marital unhappiness is more likely.

In fact, a May 2012 study sponsored by TD Ameritrade, "Till Debt Do Us Part," showed that feeling like your partner spent money foolishly increased the likelihood of divorce 45% for both men and women.

But forget men, women and gender for a minute: It stands to reason that if each of us took on the financial tasks for which we're best suited (and "none" is not an option) within our relationships, we would be happier overall.

What would you be best suited to doing -- and what would you assign out to a partner?

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