No matter how long you have been together, financial issues can wreak havoc on a committed relationship. According to Investopedia, some of the top money issues between partners include money/personality style clashes, debt, personal spending, children, and extended family differences.
When couples don’t agree about spending and saving habits, it can lead to stress, arguments and resentment. Here are seven ways you can address financial issues positively, preferably before they arise.
- Understand Your Money Styles
Think of some extreme examples of money styles in your circle. Like your friend, the foodie, who won’t touch a bottle of wine that costs less than $75. Your sister who constantly surfs Amazon with boxes showing up at the doorstep day and night. Your mom who washes aluminum foil, folds and reuses it. And your stepdad who always insists on buying everything for the grandkids, fixing his own 30-year-old car, and keeping his handwritten savings ledger to the penny.
Everyone has a money style, and it’s helpful to talk about it without any name-calling or labeling involved. Understanding your partner’s spending habits often involves a deep-dive into money fears, scarcity memories and childhood traumas. Empathizing with your partner while freeing yourselves from negative patterns can be done if you work together. The most important thing is to come up with a spending plan that works for both of you, and hold yourselves accountable to work the plan together.
It’s also very important to check any power plays that may be happening at the conscious or subconscious level. The biggest money-earner shouldn’t think they have the largest say or the only right to dictate how the money gets spent; a marriage should be equally balanced. The partner who earns less and the partner who earns more both need to cooperate as a team to create a spending plan that’s fair for both of them.
So, check your ego at the door. It’s true that money is power, and few things build resentment faster than being made to feel inferior. The person earning more should take great care to act with empathy while taking care of their own needs reasonably rather than selfishly.
- Decide How to Divvy Up Bills…and Save for Future Goals
There are several ways to pay the bills. You can both put all your earnings in a joint account and pay everything out of that. You can divide bills based on a percentage of your earnings. Or you can split bills down the middle and keep the rest of your own earnings for yourselves.
Once you have decided how the bills get paid, you need to devise a plan for saving for your long-term goals—like purchasing a home or securing your retirement. Remember that you need to work closely together as life changes arise—such as one of you losing a job, cutting back on hours to care for a parent, or one of you becoming disabled. If 2020 has taught us anything, it’s that contingency plans are always advisable. Putting together a financial plan for your future is a great first step toward a financially healthy future.
- Create Personal Spending Allowances…That Stay Personal
Having some personal money that’s designated just for you each month can really help how you feel about your relationship. It can also help avoid relationship-ruining behavior like “financial infidelity,” when one spouse hides money or purchases from the other. The personal spending allowance gives each partner the chance to spend their money however they wish, no questions asked—including gifts to each other, a new pair of shoes, or coffee every day on the way to the office. In most cases, the personal monthly spending allowance amount should be equal for both of you so that resentments can’t arise.
- Compromise on Spending for Children and Family Members
On average, it costs $233,610 to raise a child to age 18, according to the U.S. Department of Agriculture. That doesn’t include expenses for grown children, helping them with the purchase of cars or homes, or funding other (expensive) needs that might arise for them.
Furthermore, spending related to the extended family on both sides can also be tricky, especially as your expectations can be very different from your spouse’s when it comes to helping family members out or getting involved with costly family vacations or activities.
Addressing these discretionary expenses and agreeing on them before to committing to children or other family members is critical.
- Face and Eliminate Undesirable Debt
Some debt may be necessary or even advisable depending on your tax situation, for instance, some people need or want a mortgage interest write-off. Other debt should be paid off following a plan that you both agree upon—be it credit card, car loan or student loan debt.
In most states, debts brought into a marriage stay with the person who incurred them and are not extended to a spouse, but debts incurred together after marriage are owed by both spouses. Debts incurred individually married are still owed by the individual, with the exception of child care, housing, and food, which are all considered joint debt no matter what.
There are nine states where all debts (and property) are shared after marriage regardless of individual or joint account status. These states include Arizona, California, Nevada, Idaho, Washington, New Mexico, Texas, Louisiana, and Wisconsin. In these states you are not liable for most of your spouse’s debt that was incurred before marriage, but any debt incurred after the wedding is automatically shared—even when applied for individually.
Both partners should have an honest discussion about curtailing bad spending or financial habits. Couples should also employ a strategy to pay off debt—such as paying off the higher-interest debt first or paying off the smallest loans first (the snowball method).
- Set a Budget You Can Both Live With
One of the best ways to keep in sync with your partner when it comes to finances is to have a budget as part of your overall financial plan. The budget includes your household bills, your personal spending allowance, your debt-paying strategy, and your monthly budget for long-term goals like retirement.
- Communicate Honestly
Lack of communication is the source of many marital issues, and talking regularly, honestly, and without judgment is where the hard work of marriage comes in. Some couples may even find it helpful to actually schedule a time once a month or once a quarter to revisit short- and long-term goals with each other, and meet at least once a year to discuss objectives with their financial advisor.
Don’t talk about things when you’re tired, angry or have had too much to drink—organize and adhere to clearheaded discussions for success. Honest communication can help you both face and conquer the financial challenges of life, changing course and adjusting along the way.
If you have any questions, or would like to review your finances together as a couple, call us! You can reach Nahum Daniels at Integrated Retirement Advisors at (203) 322-9122.