Finances are a leading source of stress in many relationships, according to an Ameriprise study which found that, “About three in 10 couples disagree on finances at least once a month, most commonly about major purchases or spending habits.”
But here’s some good news: With the proper approach, financial conversations that challenge relationships can actually help strengthen them. Those talks will differ at various stages in the life of a couple, but it’s always critical to have them the right way. Here’s how to do it.
At Every Age, the Key Is Honest Conversations
Far too many couples don’t have that honest conversation…ever. They talk about needing to have the conversation, but they never do. They might put it off so many times because, let’s face it, it’s difficult. Even for those who have been putting it off, it’s never too late.
Talking openly and freely about money helps couples unlock the opportunity to combine the financial benefits of two distinctly different brains. Just as two people bringing their strengths and weaknesses to the table can make a relationship better, different views of money and finances can benefit them. The key is communicating so the couple can leverage their differences to create a financial partnership that strengthens their overall relationship.
At Every Age, Agree on Whose Money Goes Where
There are two basic methods of handling finances with a partner. Neither one is more right than the other; it depends on the personalities and preferences of the couple.
The first concept is the 3 Way Split – Yours, Mine and Ours. The important part for this approach is agreeing upon whose money will be used for which common expenses. Making a budget and initialing which bills will be paid by whom can be a big help here.
The second approach is simply Ours, where all money is combined. When using this method, it’s a good idea to agree on how much slush money each person will have on a monthly basis. This should help avoid exceeding the budget while allowing for some personal freedom.
Young Couples Just Wanna Have Fun…For a While
When young couples make it a point to talk early about how they will ideally work together, they can begin to understand how differently (or similarly) they view money. These hypothetical discussions can actually be enjoyable. Hint: It’s okay to not be perfect and it’s alright to not have a lot of money; most people don’t. It’s even okay to have debt; most people do.
From early on, both partners can take advantage of the strengths and weaknesses of their respective brains. Being able to match one person’s positives with the other person’s negatives can build trust.
In the long run, that discussion can help grow income and total net worth, and set up a couple to achieve the life they choose to live and give them the tools to change their path if they desire.
In the Middle Years: Tons of Money, Tons of Bills
Couples in their mid-30s to mid-50s may have a lot on their plate. Paying for children’s needs, saving for college, funding a college student, saving for retirement — this is when money is often tightest. Yes, income is as high as it will ever be, but because of the bills, it’s critical to make smart spending, investing and saving choices.
The most common problem for these couples is that one partner doesn’t have a good sense about the family’s financial situation. This leads to fear and a lack of trust, which can cause lasting damage to a relationship. Overspending is often a problem because the partner who doesn’t understand the finances has no idea of the income-to-expense ratio. Here again, we usually see a couple periodically bring up the notion of getting on the same page, but they don’t actually talk until it’s too late.
It doesn’t have to be this way. Couples at this stage must come to a mutual understanding of their financial needs, and do so with input from both sides. A basic understanding of how much income is coming in versus how much is being spent is a great foundation on which to build the conversation.
Getting a handle on the plans behind checking, savings and investment accounts, retirement savings, life insurance and other important financial products is an essential next step. It all starts with listing these accounts on a spreadsheet or just on paper. The more couples do this together, the greater the trust and the better outcome they can expect.
Older Couples: It’s Never Too Late
For this age group, the conversations become trickier. It’s a simple fact that most women will outlive men, it’s just a fact of life. For older couples who haven’t been communicating about money, if one partner knows very little about family finances and their spouse passes away, they are left asking, “What do I do?”. This lack of knowledge breeds a lack of confidence, not only for dealing with daily finances but even more so for managing retirement accounts.
Older couples should share all basic financial information — a list of financial institutions, account numbers and balances. They also need wills and any necessary trusts to determine what they want their money to do now and where it will go when they pass on. When a loved one dies, the last thing the surviving partner wants to untangle is a complicated financial situation. Building this plan together early on can alleviate that necessity and strengthen the relationship.
For these couples, understanding is the most important element. The conversation should begin, continue and end with understanding. After all, you’re two unique people who have been one for so long, and your financial situation should reflect that.
Live Life on Your Terms. Get Started Today.
There is an old adage that talking about and making financial decisions together hurts relationships. It is a hard one to debunk, because many people feel pain and negativity when they talk about these issues. But for couples who have the money conversation the right way, the open conversation builds trust and helps them to make smarter financial decisions, as a result, the relationship gets stronger.
Those who don’t are often working against one another to the detriment of their financial well-being. So, this month, get together with your significant other and start the conversation. See how financially powerful you can be when you combine your strengths. A wise, Grammy winning singer/songwriter named Jason Isbell says it best: “Are you living the life you chose? Or are you living the life that chose you?” Start living the life together that you, as a couple, choose to live.