Many people do not discuss money with their partner before getting hitched. One person maybe picturing splitting money chores (e.g. paying bills and investing) and deciding together on big purchases or saving goals (e.g. buying a new car, purchasing a home and saving for retirement). The other person may not be thinking about money at all or have an entirely different picture of how money will be handled.
How you handle your finances together can affect how happy you are as a couple. When you’re in sync with your spending, saving and investing you’ll argue less about your finances and feel more financially secure. The additional benefit is that it’s not just about your money. You’ll also feel greater relationship satisfaction.
Use these five money moves to enhance your wealth, your financial compatibility and your relationship.
1. Get Financially Naked
Few couples practice financial transparency. It’s much more common to avoid money talks with your partner or, worse, lie about your money. However, you’ll have much less conflict when you share information about your money and you’ll have a much stronger foundation for your union.
This may sound trite, but, if you’re feeling shame about where you stand with your money, a partner who truly loves you will want to know where you stand so they can help. It’s not easy if this is your starting point. But, it will be worth it if you take a deep breath and get financially naked.
Your aim is to deepen your understanding of your partner.
To get started, create a happy moment – crack open a bottle of wine. Then, start by talking about your first experiences with money. Discuss how your family spoke, or did not speak, about money. Share how your history has impacted how you handle your money now. This may lead to reveling what you consider to be your biggest money mistakes and what you learned from these. Talk about what’s important to you about money and how you’re managing your money now. This conversation is not about your numbers. It’s about your beliefs and habits with money. Before you finish, decide when you’ll next talk about money together.
When you sit down next, create a happy moment – crack open a bottle of wine. Then, start with sharing what you remember from what your partner shared last time and any reflections on this. Now begin looking at your numbers by making a net wealth statement for each of you – what do you own (assets) and who do you owe money to (debts or liabilities). Using an excel spreadsheet will help you easily add up your assets and liabilities. This statement will also help to uncover any opportunities or shortcomings with your current approach to money like debt growing faster than savings or an emergency fund larger than you need. Agree that you’ll update your net wealth on a regular basis – quarterly, bi-annually, annually. This conversation is about knowing your financial starting point. Before you finish, decide when you’ll next talk about money together.
2. Agree on Spending Limits
It’s very common as a couple that one person is a spender and one is a saver. The saver might accuse the spender of being fiscally irresponsible; the spender might accuse the saver of being cheap. You both think you’re justified in your thinking and that’s when the trouble starts. This classic spender-saver tension can be bad for your relationship and can also negatively impact your finances.
Savers can get anxious every-time they see their partner swipe a card. Spenders may feel oppressed if they think every purchase is scrutinized. To overcome this tension, automate savings so this money is never in question. To minimize conflicts when spending joint money agree on a spending limit, say $50 or $100. Above this amount you discuss the purchase BEFORE the money is spent. Also, consider setting up separate discretionary spending accounts. These accounts are for optional personal spending and you do not have to answer any questions with regard to your purchases from this account.
A good habit to get into is to review your spending and saving regularly. Regular is how you define it. If this is new to you more regular, say weekly, reviews help you get comfortable and reduce overwhelm. If you’re in sync a monthly, quarterly or even annual review could work for you. Either way, regular reviews help you minimize lifestyle creep and uncover cash leaks.
3. Kill Debt Before it Kills Your Relationship
One of the most common money fights is about credit card debt. Not only is excessive debt unattractive, it also chips away at your financial confidence. Credit card debt, in particular, stands in the way of your aims and aspirations. Instead of focusing on your future and what you want to achieve together, you’re focused on simply getting out of debt. If you don’t change your spending habits the credit card balances may never decrease. You may feel you’re standing still or worse going backwards. This can be frustrating and discouraging.
If tackling debt is a common goal as a couple, you can experience success together. Jointly creating a pay down plan and tracking your progress helps make your relationship healthier.
However, it can be emotional to fully reveal your credit card, line of credit, student and car debt to each other. Agree to share this information at a time when you’re both fresh. For example, a Saturday morning after a good night sleep. Agree that this is an information gathering exercise only. Agree that if it does start to get emotional that you’ll take a break and come back to it within a certain amount of time – an hour, a day or whatever time works for you.
Finally, agree your pay down plan. You can start with the highest-rate credit cards to reduce total interest paid and then move onto other debt. However, if you want to enjoy early success start with the lowest balance and get that paid off before moving onto the larger balances.
Remember, life happens. Reviewing your progress regularly, weekly or monthly, can help you stay on track and focused. Mutually committing to eliminating consumer debt can help you see yourselves differently, more successful as a couple and the arguing ends.
4. Agree Your Long Term Savings Goals
There’s no question that you need a plan for building wealth so you don’t have to work forever. You’ll also have ambitions like owning a home and saving for your kids’ education. Amassing the required amount of money for large projects takes time.
Most couples are in agreement that they need to save for these things. However, many do not know the amount required to save and do not have a savings plan to achieve their desires. Often planning stops at the agreed goal. It doesn’t go deeper into the steps you need to take or the money you need to save to get to where you want to go by a certain time.
It’s important to understand if you’re saving enough for the life you want. The amount of your savings will depend on your wants. It will also depend on the amount of your pension and government benefits. A no-brainer is to save at least enough to get your full company matches, if any are available to you. Another good no-brainer savings focus is to commit to investing at least 10% of your income for your financial freedom. As an aside, millionaires commit to investing 20% of their income long term.
Create a plan as a team when it comes to saving and investing. Ensure your investments match your risk profile. Being too conservative could mean you have to save more or work longer than you need to. Being too speculative may mean you’re taking on more risk than you need to to reach your goals.
5. Ask for Help From a Professional Financial Advisor
Even when you track your finances, eliminate debt, save regularly together and invest appropriately it can be hard to find the time to talk about your money and your long term aims and aspirations. Listening requires you to put aside your views long enough to hear your partner’s ideas. This can be hard to do. It’s not unusual for you to be formulating your own thoughts rather than listening to what your partner is offering.
When you’re not on the same page, you may resort to keeping quiet or you may agree to disagree and never resolve the issue. This is not good for your partnership or your money. Not resolving differences can compound stress as it makes it more likely for the problem to fester and cause an argument later.
This is when a professional financial advisor can help. You both can talk, uninterrupted, about what you’re hoping to accomplish with your money and what your fears are. This is often the first time you’ve really listened to each other without jumping in with your own view. It’s not uncommon for one partner to want financial security while the other partner is comfortable in taking more risks. Working on a long term plan for your money with an empathetic specialist can help you get on the same page and achieve your goals sooner
If a strong union is important to you, consider asking for help to talk about your money together.