From personal experience, I can tell you that having financial conversations with your spouse can be both intimidating and challenging. You're probably thinking, but Wes, you are a financial advisor. You discuss money with complete strangers all the time. Why would it be difficult for you to talk about finances with your wife? I know. It seems crazy right? Honestly, I think there are a number of feelings that flood our minds when we discuss personal finances with one another; especially if it is during the dating process. One, there can be some shame and embarrassment because you either have too much debt or too little savings. You might think, what is my partner going to think about me when I tell them about this? It is human nature to feel nervous because to share one's finances is a level of transparency and vulnerability that is not easy to engage in.
I can tell you that the longer you delay having these conversations, the more it can create a rift in the relationship. The longer it takes to discuss finances and how you will both handle them in partnership with one another, the more difficult it can be to move forward together. There is a statement in the Bible which essentially says "how can two people move forward together unless they first agree?" That statement is true for a number of areas in a marriage, especially when it comes to finances. So, the question is what do we talk about? What should two people who are seriously dating and moving toward marriage or currently married couples discuss? I have a few ideas.
- Sometimes it pays to level-set about our relationship and experience with money. What do I mean? Ask a simple question of one another: What do you think about money and how were money conversations discussed growing up? This kind of question is very open-ended and it begins to break the ice between both individuals. It offers a chance for each person to share their fears, experiences, and upbringing regarding money. Everyone will not have the same expertise or experience with money and it helps to understand that before you go into partnership with one another about it. There are no right or wrong answers. Instead, the goal is to make sure your short and long-term financial plans respect both your needs.
- Discussion number two is financial history. By financial history, I mean are there any financial decisions you've made that you regret? Did you get into credit card debt? Did you lose money on an investment? Is your credit score where you'd like it? The financial decisions we regret and the financial obligations that come with it are part of the financial baggage we bring into our relationship. For better or for worse, getting this out in the open will actually help reduce anxiety around it. Avoidance will not make the money problems go away. In fact, I find that it actually makes things more challenging. The sooner you discuss it, the better it will be for your relationship.
- Here's a big one. How should we bring our finances together? We are going to be sharing expenses, living in the same space, and moving forward together in life. What is the best way to combine those financial responsibilities? Some couples believe in merging finances 100%. And when I say 100%, I mean 100%! All new income, past savings, inheritances, debt. All of it. When doing this, you decide where you are going to bank, you discuss where you will invest, and you decide a plan for debt paydown. Other couples will open a joint checking and savings mainly for paying bills and saving for joint goals, but still maintain individual accounts. In this scenario, you want to decide how to divide bills. Will it be 50/50 or will it be proportional to the amount of income brought in by each? In other words, if one spouse makes more than the other, they may hold a larger financial responsibility for shared bills. A final scenario I've seen lately is maintain separate accounts and name one person the spender and the other person the saver. This works if you are able to live off one person's income.
- A huge discussion should be around your budget. When people hear the word budget, they immediately think of something restrictive. Honestly, that is the wrong way to look at it. Instead, it is a guideline to suggest how funds should be allocated. A budget will help you pay your bills on time, save for retirement, and fund short and long-term goals. If you aren't realistic about what it takes to run your household you can run into many obstacles in reaching your goals. Also, please don't forget to have conversations and check-ins on big purchases or things that will go outside of the budget. Life happens, but your partner deserves that transparency when things change (again speaking from personal experience here).
- Finally, an important discussion couples must have is how do we protect each other financially if something happens? Life is full of uncertainties. You can be healthy one minute and dealing with an illness the next. Another hard conversation is what if I don't make it home tonight? How do I make sure your needs are taken care of financially? This is where appropriate estate planning comes in. It is also necessary to ensure your beneficiary designations are updated. Also, make sure you have life, disability, and long-term care insurance conversations. Again, this isn't a fun conversation, but one that is absolutely necessary.
Hopefully this list gives you great ideas on how to start talking about your finances. In this month where love is celebrated, let's also make sure we have those money conversations. If you need help doing just that, talk to us here at Kobo Wealth Strategies. I have both personal and practical experience helping couples engage in these very important discussions. Book time with me at www.kobowealthstrategies.com.