Personal finance for couples
“Money is an opportunity to reach unity… when couples work together, they can do anything.” – Dave Ramsey
Over the past few months, a lot has changed in my life. Buying a house, moving in with my partner and getting engaged have had quite an impact; emotionally and financially. As with any major life change, it takes time to adjust. However, knowing that money is often credited as the number one reason that couples fight and a significant factor in many divorces, I’ve been thinking a lot about personal finance for couples recently.
Related article: Reasons couples fight about money
Money is a very personal issue and we tend to attach a lot of emotional and psychological importance to our financial situation. The amount we earn; the amount we have saved; the amount of debt we carry and how competent we feel when it comes to managing our money; all contribute to whether we consider ourselves financially adept, or lacking in money skills. It’s human nature to play up the things we’re good at and hide the things we’re not so good at but in relationships, if you’re not “good” at money, it’s hard to hide it from your partner for very long.
Sharing details about your finances can be hard but, if you’re planning on building a future with someone then it’s important that both of you have some awareness of each other’s financial situation. As an advisor, I heard too many stories about people who had no idea that their partner was carrying large amounts of debt or concealing large amounts of wealth until something happened to force the secret out into the open. Those stories rarely end positively and often involved heartbreak for all concerned which leads me to believe that, when it comes to money, honesty is the best policy.
Related article: Couples should talk about money
When my fiancé chose my engagement ring, he picked one with three diamonds because it was intended to represent our past, present, and future. As I was thinking about things to consider when it comes to money and relationships, those three elements seemed like a good place to start:
Everything that we’ve heard, seen and experienced in relationship to money influences our ability to earn, hold and grow it. Our current financial situation is a result of our past choices and the things that have happened to us along the way. Sharing information about those things isn’t always easy. Just like we don’t have to disclose every detail of every relationship we’ve ever had to a new partner, we don’t have to share every financial mistake and success that we’ve ever made. However, if incidents from our past are impacting our current situation then it makes sense to disclose those so that our partner can understand us a little better and can support us as we move forward.
When I sit down with someone to discuss their finances there are certain key details that I need in order to determine where they stand financially and where they’re heading.
Related article: How am I doing financially?
While I don’t need to know every single thing they spend their money on, if I know their income, their expenses, their assets and liabilities (savings and debts) and their savings rate then I can usually help them figure out how solid their financial situation is and what it might look like in the future. Similarly, in a relationship, it becomes very hard to budget and set goals as a couple if you don’t have a clear idea of what your joint situation looks like. If one partner earns a lot more than the other then it might not make sense to split expenses 50:50; if one partner has more debt than the other then that could impact the amount they can contribute or if one partner has more savings than the other then it makes sense to clearly establish whether that money is considered “theirs” or “ours” so there’s no misunderstanding or resentment down the road.
Talking about money isn’t always comfortable and it can create some awkward moments but, if you’re building a life with someone, then your financial situation has a direct impact on that life and it needs to be out in the open. Couples who talk openly about money tend to fight less than those who don’t and they tend to stay together longer. To me, those are two really good reasons to get out of my comfort zone, pour a glass of wine and start a conversation!
Part of being a team is having goals and dreams for the future. Too often when it comes to money, we dwell on the past and the negatives of the present and don’t think about what we want to change and how we’re going to get there. There’s power in numbers and having two people on the same page and committed to the same goals will dramatically increase your chances of success. Taking the time to dream and plan with your partner is not only fun, but it’s also motivating too. Having plans for the future and an action plan for how you’re going to achieve them is one thing but setting goals as a couple means also having an accountability partner who will help you stay motivated and will celebrate the steps you take along your path to your goals, which is a huge bonus.
Related article: Setting financial goals and priorities
As I said earlier, money is a very personal thing and, because every relationship is different, there’s no “one size fits all’ solution to making money work. However, if you approach money in an honest and positive way, without judgment or criticism, and tackle it objectively you should be able to take the lessons of the past and apply them to your present situation in order to build a successful financial future.
If you have any tips, tricks, strategies or advice for my soon-to-be-married self then I would love to hear them!