It’s no secret, or surprise that one of the top reasons for divorce is finances. Like religion and politics, money is a taboo subject, but unlike religion and politics, many people don’t have in-depth discussions about money until after they’re married. Since each of you has separate bank accounts, separate credit cards, and no need to show each other your loan statements before the wedding, many people don’t find out about their partner’s massive student loan or credit card debt until after they say, “I do.” Coming to the realization that your financial future isn’t what you envisioned right after you make the biggest commitment of your life can put stress on your marriage from the very start.
Since money touches all areas of our lives, the problems couples face regarding their finances are wide-ranging. They could have opposite spending habits. One person may have a significant amount of debt that causes the other person stress. Maybe both people aren’t on the same page about what their financial future looks like, or one person has been saving and investing and is bringing a lot more money into the partnership from day one. Whatever the case, it’s important to get comfortable talking about money, especially with the person you’re planning on sharing a bank account with and designating as your beneficiary. Here are my tips for how to build a healthy dialogue with your partner and get on the same page about your finances before the nuptials.
1. Be Thoughtful in Your Approach
The mindset that you have when approaching this subject will determine the outcome of the conversation. It is that simple. If you are the initiator of the money conversations, there’s a good chance you’ve been thinking about your financial future and goals independently for a while. If that’s the case, during your first conversation you may get lucky and realize that your partner has been doing the same, but you may also find that they haven’t.
The latter is what happened to me. I had more finance knowledge and had been thinking about my financial goals for years, so after my now husband and I got engaged I brought up finances.
Every time we talked about our finances, we ended up in a fight. I admit that this was mostly my fault. I was frustrated with his lack of knowledge and that he hadn’t put as much thought into our finances as I had. Mind you, I have a degree in money. If you had to discuss engineering and physics in a marriage, the tables would have been turned. Since I was more knowledgeable and had been focusing on my financial future for years, when I found out that his finances would create some roadblocks for how and when I could reach my financial goals, I got frustrated. Not surprisingly, reacting this way made my husband (then fiancé) feel judged, so he would shut down and the conversation would end.
With my approach proving to be unsuccessful, I decided to change course. I realized that if I wanted this to work, I needed to figure out how I could communicate with my husband in a way that would make him feel confident about opening up and contributing. Talking about finances puts people in a vulnerable spot. Nobody wants to learn that they’re the one bringing financial baggage into a relationship. Opening up about your finances may reveal things that change your financial path, but if you work as a team you can still reach your goals. With this in mind, I took the lead in managing our finances and began to educate him on the finance principles I had learned and how we could apply them in our lives to create financial stability and wealth.
If you’re on the flip side of this (my husband in the equation) these conversations will be equally frustrating for you. The frustration on your end will come from a place of feeling vulnerable and attacked. While it may not seem like it, it is important to realize that your partner isn’t trying to attack you by having these conversations, but rather that they’re trying to get you both working as a team. It may help to try to find out why these discussions are important to them, and show them that you’re willing to learn.
As the initiator in my relationship, I had to communicate that money was my main source of trust issues. I had experienced money problems my entire childhood, and the habits that my parents had with money created mistrust. It was important to me to be as open as possible about money in my marriage to avoid falling into the same traps my parents had. After sharing this, my husband could better understand where I was coming from and that I was also willing to be vulnerable in our discussions. Showing that you’re both willing to be vulnerable and that you want to learn and work as a team to reach your financial goals will allow you to have much more productive conversations about your money.
2. Lay Out Your Current Situation
If you want to be able to formulate a plan that will help you reach your future goals, you have to first understand where you are now. That means getting the full picture of what financial assets and liabilities each person is bringing into the relationship. If you’re the initiator of the money convos, opening up about your current financial situation first will help your partner feel like you’re willing to be vulnerable and approach this as a team. If you start by asking them to divulge their finances first, they may feel attacked and start to shut down.
These questions can help you develop a good understanding of your current financial situation, and what financial assets and liabilities each person is bringing to the relationship.
- What are both of your salaries?
- What types of debt and how much does each of you have? What are your monthly payments?
- Do either of you have investment accounts (401K, IRA, brokerage), and what are the current balances. If you are making regular contributions, how much are you contributing?
You can list each of your answers to these out in the way that is easiest for you to track. Excel, Word, or an old fashioned notebook are all great options.
3. Figure Out What Brings You Joy?
If you’re planning on getting joint accounts, this is critical. Joining accounts will bring your spending habits front and center. If you’ve been bringing your lunch to work to cut back on spending, realizing that your partner is spending $100/week eating out for lunch every day can be shocking. On the other end, maybe you spend $100 every couple of weeks getting your nails done, and when your partner sees how much you spend on this, they’re frustrated and think it’s a huge waste of money. In any relationship, I can almost guarantee that there is at least one thing each person spends money on that the other person thinks is a complete waste. To avoid getting frustrated every time one of these “frivolous” purchases comes up, it is important to understand what purchases really bring you and your partner joy (cue Marie Kondo), and which ones you can go without.
Start by listing out the purchases you make together that bring both of you the most joy. Maybe you take a trip together every year and want to make sure you keep doing that. If you’re both foodies and love trying new restaurants, maybe you want to be able to go out to eat to a nice dinner at least once a week. Maybe you love camping together and want to go camping once a month and buy the coolest camping gear. Whatever it is you like to do together, make that a top priority for your spending, and if you have to, you can cut back in other areas.
Next, find out what each person likes to spend money on for themselves. Is it getting your nails done, or getting a massage once a month? Do you love to buy new shoes, or get your hands on the latest cooking gadget? Maybe you want to buy car parts or golf equipment, or splurge on a gym membership at a luxury gym. Each person probably has something that they are willing to pay top dollar for that the other person finds insane. Spending on these things may not be a problem at first because you’ll probably be living a similar lifestyle to the one you were living before you got married, but as your lifestyle changes not being on the same pages about where and when you splurge can become a problem.
As you start to plan for your future and need to change your spending habits to reach your goals, “frivolous” spending can become a heated topic. If you decide to start saving for a down payment on a house and need to cut spending, your partner may say, “ok well stop getting your nails done and we will have an extra $200 each month to save.” That may sound easy and minor to them, but maybe you LOVE getting your nails done and think they should get a gym membership that’s half the price instead. Hashing out what each person absolutely loves spending money on, and the areas where each of you is willing to sacrifice will allow both sides to spend on the things they love and cut back on the things that are less important.
4. Determine your Future Goals and Track Your Progress
Now that you’ve covered your current state, and how you want to spend your money together and individually, you can start planning for your future!
Here are some questions you can use to start figuring out what each of you envisions for your future, and how much money you’ll need to get there.
- Do you need to buy a new car soon? If so, have you started saving for it?
- If you have debt, how long will it take you to pay it off?
- How will you pay for your wedding? Are your parents going to help?
- Do you plan on having kids and how many?
- Do you want to own your own home or rent? If you want to buy, when? How much will you need to save for a 20% down payment?
- If you have kids, will you be paying for them to go to college or will they need to pay for it themselves?
- What do you know about your parents’ financial situations? What will they expect of you in terms of care as they age? What is the likelihood that you’ll need to financially support them at some point?
- How do you envision retirement? Do you want to live lavishly, or more modestly? How much money will you need to live that lifestyle?
We discuss many of life’s milestones with our partner before marriage, but we don’t often talk about the monetary side of reaching those milestones. Kids are expensive. If you’ve always dreamed of having 5 kids, but you have a combined salary of $60,000/year, how are you going to make that work? If you need a new car soon, are you saving for it to avoid taking out a loan on a depreciating asset? Want to buy a house in the next few years? How will you save enough for the 20% down payment? Want to travel the world for retirement? How much will that cost and are you investing enough to get there?
Once you’re on the same page about which life milestones you want to achieve, you can start putting an action plan together to make sure you are able to hit them. If you want to save for a house, determine how much you need to save monthly to reach your goal of a 20% down payment by the date you want to purchase your home. If you want to live lavishly for retirement, calculate how much you will need to have invested to do that and make sure your monthly investment contributions are in line with your retirement plan. Once you have an action plan in place, start tracking your progress to your milestones. This will keep you focused and on the same page about where you are on your journey, and when you will be able to celebrate reaching your milestone!
5. Designate Your Money Duties
My husband is the spender and I’m the saver in our relationship. Our differing views on money make each of us better equipped to handle different areas of our finances. Since he likes the immediate gratification that comes with spending money, asking him to take charge of setting and tracking our long-term goals wouldn’t work out very well. On the other hand, I’m more willing to sacrifice my spending in the short-term to see long-term progress, so it is my job to update our financial tracker quarterly and make sure we are taking the necessary steps to reach our future goals.
While I’m focused on the long-term, my husband focuses on the short-term. To make sure we have the most money to work within the short-term, my husband takes care of negotiating all of our bills. Seeing our payment drop immediately after he gets off the phone with a company gives him the immediate gratification he craves. Trying to get my husband to plan out the sacrifices that need to be made so we can reach our future goals would be torture. On the other hand, I hate calling to negotiate and lower our rates. Individually, each of us would slack off in the area that isn’t our favorite, but by keeping our financial duties in line with our personalities we are able to tackle both.
To figure out which duties each of you will be better at, look at what each of you is already doing individually. Is one of you already tracking your finances? Great! Then you should probably continue to have that job going forward. Is one of you great at saving and the other one more knowledgeable about investing? Great! Each of you can choose to handle the aspect you’re good at. Choosing financial duties that each person likes to do will increase the likelihood that both of you will stick to it, and give you better results.
It is impossible to avoid discussing money in a marriage because it touches all aspects of our lives. Being able to have an open and honest dialogue with your partner allows you to have productive conversations about your finances instead of arguments about them. While both of you will enter the marriage with different views and habits around money, the great thing about finding a life partner is that if you work as a team, you’re better equipped to reach your goals than if you had to do it alone. Realizing that your partner is not your enemy, but rather your ally is the key to reducing the stress of discussing finances, and once you get good at it, you may even find it fun!