He saves, she saves

After Dennis and Erika O'Connor were married nine months ago, it wasn't long before money became an issue. "Skirmishes," Mrs. O'Connor calls those conversations. "I was more conservative in my spending habits, and Dennis was more extravagant."

Both had been married before. Neither was a great budgeter. Yet money was a subject the couple wanted to get right. "We've had to set aside baggage from our first marriages to work together on finances," Mr. O'Connor says. And slowly, they've turned confrontation into cooperation.

It isn't easy. Disagreements about money are one of the major flash points in long-term relationships - and often a reason for divorce, surveys consistently show. But as recent cultural changes, such as rising rates of divorce and remarriage, have reshaped family life, they have also altered the dynamics of family finances. Husbands and wives who might once have been passive or silent about spending, saving, and investing are realizing the value of negotiating.

For example: Although more than half of couples fight about money issues - at least once a month, nearly a third say - more than 40 percent say they almost never do, according to a new study by Tango, a magazine focusing on relationships. The same study also shows couples' growing financial independence. Only 46 percent share a checking account, and only 44 percent share a credit-card account. Almost half consult with each other before buying anything over $250. Two-thirds check before making purchases over $1,000.

Clearly, there are ways to handle dollars without creating conflict. The O'Connors maintain a joint checking account, where they deposit all paychecks and pay all bills. Mrs. O'Connor keeps a separate account for child-support payments for her daughter from a previous marriage. Mr. O'Connor has his own checking account - "his play money," she teasingly puts it.

Mr. O'Connor knew the down side of finances from his first marriage. "Talking about finances was very difficult," he recalls. "It got very territorial. I unfortunately brought that perspective into this marriage. We were both in our camps, defensive. I was being defensive by defending where I spent money."

As a single mother for six years, Mrs. O'Connor had become independent - and a careful spender.

To enhance communication, they worked out a system: "Erika pays the bills and tracks them when they come into the house," explains Mr. O'Connor. "Then I track our bank account through an Excel spreadsheet, so I know where expenditures are, even ones that haven't hit our bank account yet."

Both say that handling finances together has built mutual trust. That trust served them well when Mr. O'Connor opened a public-relations firm in Natick, Mass., two months ago. "Because we had learned to work together financially, it wasn't such a huge leap," Mrs. O'Connor says.

Many remarried couples face another challenge: deciding who pays for what for whose children. "It's an area where couples could get tripped up - 'You spent X on your kid, I only spent Y on my kids,' " says Mr. O'Connor.

Cindy Rakowitz and her husband, David Adelman, of Agoura Hills, Calif., also brought lessons from their first marriages. She and her first husband never learned how to pay bills or plan financially for taxes and their children, she says. This time she has learned to treat money with a new respect.

She and Mr. Adelman, a lawyer, each agree to pay certain bills. "If for some reason either one of us has hit an obstacle in our cash flow, we communicate to each other about it," says Ms. Rakowitz, who owns a public-relations and production business. They are also completing their estate planning and health proxies. "Tax planning, college planning, estate planning, insurance coverage, and communicating openly about month-to-month budgets aren't 'fun' all the time," she says. "But at least we've minimized our conflicts about financial matters."

As more women like Rakowitz own businesses - women account for nearly half of all new small businesses - many are bringing financial savvy to their family finances as well. "Women are controlling more of the wealth in America, their earnings have grown significantly, and they're more self-reliant," says Robert Reby, author of "Retire Without Worry." "All that leads in the right direction for financial planning."

After Barbara Wright Abernathy's first marriage ended in a financially devastating divorce, she declared bankruptcy. When she remarried, she wanted to be sure to protect her assets, which include an interior-design firm in Portland, Ore. Now she handles all the couple's money.

"Both my husband and I are happier that way," she says. "We don't fight about money at all. I don't make a major move, like buying a new house or new car, without getting his input, but he leaves the final decisions up to me."

Noting that her husband understood her concerns about money, she says, "He was actually kind of relieved not to have to be the head of the house and manage all the money."

Beyond divorce and remarriage, another social change - later marriage - is also affecting the dynamics of marital finances, often requiring careful negotiation.

"When people get married later in life, they've both had somewhat of a trial by fire in learning about finances," says Chase Armer, a financial planner in Sacramento, Calif. "They were independent, had to learn to be self- sufficient, and make decisions. When you bring two people like that in their mid-30s together, they've already developed this independence. They have very different views about money, very different risk tolerances."

Mr. Armer, who is in his mid-20s and celebrating his first wedding anniversary this month, knows personally and professionally the different attitudes toward money that couples bring to a marriage. Much depends on how their parents handled money, he finds. One person might come from a family where the father was dominant in paying bills and managing money. In a spouse's family, it might have been the mother. "Usually the couples where one relates to managing money and the other is passive do very well," Armer says. "But when neither wants to take on the responsibility, that's scary. One of them needs to be monitoring this and taking a proactive role. When both want to take a proactive role, it creates conflict."

In such situations, he often finds it better to have separate accounts. "They pay the bills together according to some kind of arrangement but keep a lot of flexibility. When neither of them wants to do it, a joint checkbook is better."

Mr. Reby recommends that couples conduct an annual "household state of the union" review of their financial status. He also suggests that they trade financial responsibilities for a week or more. "It's healthy for both spouses to change every once in a while just to see what the other one is doing on a consistent basis." For the first six or seven years of his own 10-year marriage, Reby paid the bills. Since then, his wife has taken over the role.

Another way to prevent financial problems is to know each other's priorities before marriage, says Diana Don, director for financial education at Capital One. Ms. Don, who has been married for two years, even discussed money in the early stages of dating her future husband.

For many couples, she says, challenges continue to be communication, setting priorities, establishing a budget, and sticking to it.

Susan Zimmerman, a marriage and family therapist and financial consultant in Apple Valley, Minn., observes couples gradually becoming more receptive to outside financial help. Women in particular tend to be more open and less apologetic about getting education.

For the O'Connors, openness has brought both tangible and intangible rewards. "By coming together and being forced to communicate and cooperate, our financial picture is much better than it was a year ago," he says.

"There's no need to be defensive," he adds. "It's just a matter of communicating and planning. You really have to have an attitude that this is teamwork and cooperation, and everything is working toward the same end."

To end those battles over money, communication is a must. Let your partner know your financial habits and expectations, experts say, and be ready to listen to his or hers. Here are some questions to ask as you start building a plan together:

• What's the family dynamic? Typically, fewer conflicts arise when one person takes the lead in handling money. But when both want to be proactive, you'll have to decide who has what responsibilities. Keeping separate checking accounts can help. When neither person wants the responsibility, keep a joint account and negotiate who'll do what. Also consider switching roles periodically.

• What's the state of the union? Conduct an annual review of the family's financial status, so you can revise budgets, adjust spending, or tweak the investment plan as conditions warrant.

• What help is available? Consider visiting a financial planner, especially if you're having trouble setting priorities, establishing a budget, and sticking to it.