At what point should couples start talking about money? At Muirfield Financial Services we’ve not yet developed a definitive answer, but put simply; the earlier the better.
One of the most commonly sought areas of advice from either recently engaged or married couples, is asking how best to manage their joint finances.
It’s been estimated that money issues are the driving force in 90% of divorces, but you CAN live happily ever after, financially speaking, if you work at not letting financial issues come between you and your partner.
Everyone has a different attitude to money and spending behaviours, so part of being a couple can mean trying to reconcile those differences, without it becoming an argument.
Everyone thinks about money differently and has different expectations of how it should be managed. With many couples unsure about where to start, here are some steps that can help you get the conversation started.
For many people, it’s only when they are considering moving in with their partner or getting married that they really start to talk about how they will manage their finances as a couple.
Start by talking to each other about your background and experiences with money.
- What messages about money did you receive from your parents?
- What was the single most pleasurable experience you have had as a result of money?
- What concerns, needs or feelings come to mind when you think about money?
- What would you do if money was not an issue?
- What problems, if any, has money caused you?
- What successes have you had with money?
- What, if any, financial decisions from your past do you not wish to repeat?
All of these things help understand how the other person in the relationship thinks about money, budgets, spending and saving.
You will very quickly work out how aligned your views actually are.
Then the next step is to talk about your current situation and what your future together looks like.
- What do you want to accomplish with money?
- What budgeting, if any, do you do?
- What would you want your financial situation to look like in 2 years? In 5 years? What about 10 years?
- What are your top 3 financial priorities at the moment?
- What does financial independence mean to you?
- What would you want your life to look like if money was not an issue?
Asking each other these type of questions will help both of you to come together and see what your financial future as a couple will look like. Write down some goals that together you can achieve, review and celebrate.
Once you’ve discussed your approach to money, the next step involves putting together a schedule of everything that each of you is bringing into the relationship.
The key here is to be totally honest and upfront about this, which includes your income and assets as well as your liabilities and expenses.
Some people may be reluctant to mention all their details – such as unpaid tuition debts or a maxed out credit card – as they may be ashamed or simply worried about what their partner will think. It’s really important that you cover everything, so that you can budget appropriately and your partner knows what needs to be taken care of, should something happen to you in the future, such as a serious accident or illness.
How are you going to pay for things?
You should agree on this as soon as you can, otherwise it could be a trigger point for problems in your relationship.
How spending is shared can be a tricky one, especially if one person in the relationship earns significantly more than the other.
Having already established what bills need to be paid, like rent or utilities, it’s how you share the costs for impulse purchases or longer-term expenses, like saving for a home deposit, wedding or children’s school fees, that can be more difficult to decide on.
Different arrangements work for different couples, however here are a couple of ideas that we’ve seen work:
Complete a budget together, and establish all of your joint expenses, savings and investment costs, then contribute equally to a joint bank account to cover these costs for the year. The remainder of your income is then yours to spend (or save)!
Another option, which works particularly well when the income levels are unbalanced, is to contribute both of your total wages into a joint account, establish what discretionary spending you each need and have that amount automatically transferred each week into each of your personal accounts.
What happens when either of you stop working?
There could be times in your relationship when one of you may decide to leave paid work for a period – whether that’s to stay home and raise children, study full-time or retire.
A good approach is to sit down before you make the decision and work out together exactly how you’ll manage on one income, how you’ll pay for what and for how long this new arrangement will last.
Have you and your partner talked about your money arrangements recently?
A financial adviser can help couples reach common ground when it comes to their money and can put in place a range of strategies to help you achieve your financial goals.
They can discuss a budget, options for building your wealth and protection plans to manage risks in your life, such as a loss of income. Sometimes, it just helps to have an experienced and impartial point of view when it comes to you and your money.