I’m very familiar with going to weddings, bachelorette parties, wedding showers, baby showers, and house-warming parties. Anyone else? I also know that all of these celebrations stem from two people deciding to merge their lives together. And I know that part of sharing your life with someone includes living together and sharing financial responsibility in one way or another.
What I don’t know is whether the financial discussions that should be happening are actually happening. With money being one of the main reasons for divorce, there’s no reason not to get ahead of the curve and have financial conversations from the beginning.
One of Suze Orman’s quotes is “FICO first; then sex”. I’d like to extend this quote to mean that talking about finances should come before marriage or cohabitating. It may not be romantic, but it doesn’t have to be painful. Having these talks in a more relaxed setting like over a meal or a glass of wine is one way to make them less formal. You should have financial discussions on an ongoing basis, so you really don’t want them to be stressful.
Here are my best suggestions for having financial discussions with your partner before you move in together or get married.
1. Financial mistakes of the past
Talk about all of your past financial mistakes. Part of trust is having complete transparency. This is especially true with your life partner. When you’re discussing your finances, tell your partner everything relevant in your financial past (your money blueprint). Don’t hide anything! “The cover up is always worse than the crime” – don’t make this mistake by lying or hiding information about your past.
2. Your current financial status
Talk about your current financial status, including your FICO score, debts (credit cards, student loans – everything), assets, and anything else that is relevant. Knowing where you both stand financially is the first step toward creating a plan for the future.
3. Financial goals for the future
Discuss your long and short term financial goals. This includes talking about your savings and spending goals, in addition to buying a house, retirement, investments, insurance, and health care. This is a good time to talk about whether you want kids and the finances relating to education and daycare. Deciding what you would do if a family member asked for financial assistance is another way to see if you’re on the same page with your finances.
4. Bank accounts – joint, separate, both?
Decide how you want to combine your lives financially. The traditional way of combining finances is to have all monies go into one account. The more modern approach is for each person to have a separate account and for there to be one joint account for expenses. Whichever method you choose (and there are several more than I mentioned), remember that separate does not mean hidden. So, even if you and your partner have a separate account, there should be complete transparency when it comes to those accounts.
I have several budgeting resources that you can use to decide what’s best for you. This includes 1) a free budgeting eBook, 2) budgeting blog posts, 3) budget templates, and 4) a free account with Personal Capital (which is what I use to track my spending).
Budgeting can be the tool that you use to create a plan with your partner. It can make your financial goals possible because it can be the roadmap by which you achieve them.
I love my budget because it allows me to accomplish my financial goals!
6. Decide who will be in charge
Determine who will handle day to day finances, like budgeting and bills, and who will be in charge of long term finances. Maybe a rotating schedule will work for you. Maybe one of you is much better at being organized and keeping track of things. The point is to decide proactively who is going to manage the money. If both of you manage your finances together, set up times where you go over your finances to make sure you’re on the same page.
7. How much communication you both expect
Communication in a relationship is paramount to most things. So, deciding how much to communicate about money is one way to be ahead of the curve. Do you need to tell the other person if you’re spending a certain amount of money? Do you want to meet weekly to go over your budget? Do you want to have quarterly and yearly money evaluations? You don’t need to do any of these things, but you do need to be on the same page as your partner. Having these discussions is the way to decide what will work best in your relationship. It will also help when you are fighting about money.
A Final Note!
Trust is the foundation on which relationships are built. And whether you like it or not, you will have to use money in your relationship. Have these money conversations with your partner now, and create a plan as a team.