It is often referenced that finances are one of the leading causes of divorce in the U.S. However, money problems in relationships are typically a symptom of larger issues having to do with communication, expectations and power struggles that lie underneath. Money can represent different things to people, for some it may represent power or success, others it represents freedom and others it represents security. Having said all that, the fact that opposites attract in relationships does not only apply to personality, but it may also apply to their relationship to money. It is not uncommon to have a saver and a spender in a relationship. Much like an introvert and an extrovert, they both have their advantages and disadvantages. Spenders, for example, can often live in the present and take advantage of memorable experiences. Savers can often live in the future financially and potentially miss opportunities in the present. The goal is not to change the other person to your way of thinking, but rather to have all the cards on the table, understand and respect each other’s perspective and agree upon common goals and priorities.
Keep in mind that this will typically not be just one conversation. Please don’t ambush and interrogate your partner like a scene out of ‘Law & Order’. This should be a planned conversation where both parties are prepared to be honest and open.
The first challenge is getting the cards out on the table. Keep in mind, there’s a ton of shame and blame that come with money. People often make personal value judgments with how people manage their money. Having a ton of credit card debt, for example, can be perceived as a failure of judgment or lack of self-control. On the other hand, someone could have a sizeable inheritance that they don’t speak about for fear of judgment or fear of ulterior motives. One has to judge whether the relationship is at a point to overcome these reservations and ‘open up the books.’
In a 2015 Fidelity Investments survey of over one thousand couples, over 40% did not know how much their partner earned. Some people can have more complicated earnings; such as freelancing or commission-based income, which could make it more difficult. However, in order to plan for the future, it is important to know where you’re starting from an income standpoint. The next logical step is debt. There are multiple ways to get at the debt question. Many people do not know the sum total of their debt, so pulling and sharing each other’s credit reports may be a way to be fully transparent while understanding the entirety of their own debt picture. Another way to understand the entire financial picture is if one or both of you use financial aggregation tools like Mint or Personal Capital. One of the benefits of these tools is to get to a number that is important for anyone to know and that’s your net worth. If you take all of your assets (cash, property, investments) and subtract all of your liabilities (mortgage, loans, credit cards, etc), the balance is your net worth. Finding you and your partner’s combined net worth is a worthwhile exercise to understand where you both are currently and set joint goals for the future.
Again, it’s not how much money one makes or how much debt each other has that impacts the success or failure of a relationship, but rather the communication and expectations around money. It is important for both partners to be engaged financially and make decisions together even if one partner is primarily responsible. Below is a list of a few discussion questions for your money talk.
- What were your first experiences with money? First savings account? First major purchase?
- How do you believe your parents impacted your financial habits? Do you talk to your parents about money?
- How do you feel about saving? Have you been able to save regularly?
- How do you feel about giving? Do you give regularly?
- What is your most regretful financial decision? (purchase, investment)
- How do you feel about investing?
- What are your financial goals for next 5 years? 10 years?
- (Kids) Would you consider one of us staying home if we could afford it?
- (Kids) Would our children go to private or public school?
- How can we help each other reach our financial goals?