Important goals such as the life you plan to have when retired, investing in your daughter’s future, your ideal next home or how to distribute your estate require sound strategies. And, for couples, planning requires more than just a strategy. It also takes communication, openness and collaboration. Whether you are a new couple or not, it pays to have a healthy relationship with your finances. This article explores the challenges couples face when it comes to financial matters and offers a five-step approach for couples needing to have “The Money Talk.”
Money can be a difficult topic – Here are a few key findings from Fidelity’s annual “Couples and Money Survey 2021,” the American Institute of CPAs and the National Endowment for Financial Education:
- 73% of American couples have had a disagreement over money in the past year. And nearly half of those experiencing financial tension say it has had a negative impact on their intimacy. Disagreements are often around needs vs. wants at 36%, spending priorities at 28% and making purchases without discussing them first at 22%.
- 52% of spouses don’t know how much they need to have saved to maintain their current lifestyle in retirement.
- Two in five Americans admit to financial infidelity against their partner with 85% saying the indiscretion affected the relationship in some way. Examples included hiding purchases, money or accounts, lying about the amount of income earned, debt owed, and more.
On the bright side, the studies also show that good communication is critical for success. Those who communicate well are more likely to “Expect to live a comfortable lifestyle in retirement” (79%), “Say that money is not their greatest relationship challenge” (84%) and are “More likely to feel confident in their partner’s ability to assume full responsibility of planning for retirement and other long term goals” (84%).
5-step process to making money talks a team sport
- Start the conversation. Keep it simple and share your experiences, attitudes and relationships about money. What did your parents teach you about money? What were your most joyful and painful memories? Did you live on a tight budget and scrimp, or was there always plenty? Understanding your financial histories in a non-judgmental environment can help you develop a hybrid plan that works for you.
- Run the numbers. Get your papers together – pay stubs, account statements, credit cards, mortgage statements, etc. Build net worth, income and expense reports. Where do you stand? What are your strengths and weaknesses?
- Develop a joint spending and saving plan. There are three main approaches to managing finances – keep things separate, combine everything or a combination. Find out what works well for you. Assuming there are shared expenses, build a joint budget. Where does your money go? Dave Ramsey, author of “Total Money Makeover” says, “Marriage is a partnership, and couples can’t win with money unless they budget as a team.” Don’t forget to create an emergency reserve (Rainy Day Fund) and a Fun Money account for “no questions asked” spending.
- Align your priorities. You each write down your short- and long-term goals and their priorities. Examples include retirement at age 65, paying off credit cards, paying for your child or children’s education, buying a home, or starting a side gig. Compare lists, negotiate and collaborate. Shared visions amplify probabilities of success.
- Schedule check-ins. Now that you’ve prepared a plan and agreed to roles, time to set money dates with each other – monthly or quarterly – to check your progress, make adjustments and discuss upcoming financial decisions.
Unfortunately, money conversations are often too private or taboo. It’s a shame how little couples talk about money and how well (or poorly) it is managed. Hopefully, this article helps you bring these issues to light and, if need be, you can always ask your financial advisor to help facilitate money talks. Always remember the saying, “Love your spouse more than you love your career, hobbies and money. The other stuff can’t love you back.” May this sage advice help you secure your future wisely.