Money is one of the leading causes of divorce and discontent in a marriage and it’s easy to understand why – our finances are private, often emotional and can be stressful.
In a perfect world we wouldn’t need to have THE TALK with a spouse or potential spouse. Ideally our personal finances would be in perfect order, 401Ks are earning money and retirement plans are in place pacing to hit their goals when we reach 65, have very little debt and our credit score is, of course, excellent. Sorry, but time to burst that little bubble because it’s just not the real world.
THE FIRST STEP is actually approaching the conversation in a way that won’t make the walls come slamming down or cause your partner to freak out.
First of all, don’t put it off. Look at your expectations, know why you want to have the big talk and accept that this is going to be a difficult, possibly stressful conversation. Try this…
Be collaborative when you approach the subject and choose your words carefully. Being collaborative means not dropping a bombshell on your partner and demanding answers at that very moment. Start out by saying something like “I’ve been thinking some about my financial future lately. I wonder if this is something we should talk about as we look at our future together”. Don’t say “Can we talk” or “We have to talk”. Instead acknowledge that this is going to be a tough and sensitive conversation.
Clarify that you know you both have different perspective and that you want to work together to have a better understanding of those perspectives. Use words like “What do you think about…”, “I’ve been thinking about…” or “I want to better understand…”. Don’t beat around the bush and keep it simple. And give your spouse some time to think about the topic but, again, don’t put it off - mention you’d like to have the conversation with 48 hours.
DON’T point fingers or be judgmental. Ask for understanding in a supportive way like “Help me to understand how (or when, where, why)…” Show your respect for your spouse – be prepared – pay attention to non-verbal communication – Reach an agreement you can both live with – and know when to get help.
Now that you have a better idea about how to approach the conversation, let’s look at some of the specifics that should be part of the conversation.
Amounts of debt and your plans for paying it off – it’s important to know whether you would go into a committed partnership with joint debt or if that debt will continue to be paid off individually.
Spending habits – how does your partner approach budgets and spending. Does your partner spend their entire paycheck each month, or do they save? Does your partner mainly spend money only on necessities, or does he or she also spend money on luxuries? How does your partner’s style jive with your own?
Mistakes of the past – part of trusting your partner is having complete transparency. Don’t hide anything to try and cover up the mistake up by lying.
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.
But what if we have different financial ideas and goals?
If you’re not working on the same goals, then you’re going to be literally working against each other in terms of your use of money and time, which will hold you both back from what you want to achieve. The best approach is to sit down together and figure out goals that you share, then figure out a plan to work toward those goals. It might not be an easy process. You might not even know for sure what goals are most important to you. That’s also going to be part of the conversation.
Budgeting – Decide how you want to budget together. This can make your financial goals possible because it’s a roadmap by which you can achieve them. A good suggestion would be to create three accounts—one for you, one for your partner, and one joint fund. Once you've determined the total cost of your shared living expenses, both of you should contribute your portion of these costs to the joint account each month. Whatever money doesn't go toward these costs stays in the individual accounts, to be used at each person's discretion.
Who will be in charge? – determine who is going to handle the day-to-day finances, like budgeting and bills, and who will be in charge of long term finances. Perhaps one of you is much better at being organized and keeping track of things than the other. The point here is to decide proactively who is going to manage the money. If both of you manage your finances together, you can set up times where you go over your finances to make sure you’re on the same page.
Just One More Thing…
TRUST is the foundation on which relationships are built and last. Whether you like it or not, you will have to use money in your relationship. The sooner you have these conversations the better, you can create your plan as a team.