The issue of money is a leading cause of friction, broken relationships and divorce, yet most couples fail to discuss their financial compatibility. We all have unique personalities that influence our attitude to budgeting, borrowing, spending, saving and investing. There are the scrooges that hate to spend at all on the one hand, and at the other extreme are the shopaholics that spend with reckless abandon. Then there’s the savvy investor who looks out for long term investment opportunities, gamblers who will risk everything including the family home for a hunch, and of course those who sit on the side lines doing absolutely nothing, because they are too afraid to lose anything at all. There is also the whole spectrum in between.
Start with yourself and think through your own perspective on money. Understanding your partners’ money personality is an advantage in a relationship. You do not need to have identical views on money to be able to build a successful future together, but if you are able to communicate about money matters, you may be able to adjust, adapt, accommodate or resolve the issues surrounding your finances. If these issues are not addressed early, they will fester and can damage your relationship.
If you can’t talk about money when there isn’t the pressure of major decisions, when times get difficult, and they will, it may be much more difficult to cope.
Important topics for discussion
Don’t ask about money too early in a relationship, or you might seem like a gold digger or too nosey! Once things appear to be getting serious you may want to bring up the subject of money and do including some of the following questions:
- How much do you earn?
- Do you have any savings?
- Are you in debt? How much?
- What are your goals? Where do you see yourself in five years? 10 years?
- Where do you plan to live?
- What is your attitude to risk? Do you protect yourself with insurance?
- How many children do you plan to have and what sort of education would you like for them?
Look out for warning signs
Naturally if you don’t pick an appropriate moment to discuss money matters, it can be an awkward conversation. You could share this article with your significant other as an icebreaker or way of broaching the subject. However, action speaks louder than words, and it is possible to form an impression just from your partner’s lifestyle. When someone is a really big spender, without the income or investments to back it up, you will notice and ought to be concerned.
Do they live way above their means? Does he or she spend without any thought for the future or about the consequences of their spending decisions? Is your partner in debt that is out of control and is borrowing from every friend and relation? Remember that once you are married, debt becomes your problem so you should be aware and comfortable with it. Does he like to splurge on a luxury vacation whilst you are happy to “manage” in cheap two star accommodation. Is he controlling and makes you have to account for every single penny that you spend? Do you believe in full disclosure about your finances or are you comfortable with secrets?
Does the cost of the gift your date gives you match what you know about their income? Does she insist that she can only ever be seen wearing expensive watches and jewelry, designer clothes and shoes and the average cost of one of her handbags is about five months of your monthly wages as she carries only leading brands? Are you going to be able to afford to maintain that lifestyle if that is her expectation and neither her income nor yours can cover her wants?
If you have noticed that your boyfriend recently financed with credit, the purchase of a very expensive luxury car that he cannot afford, you ought to bring it up, particularly if the relationship is going somewhere. It is absolutely none of your business if it isn’t!
Prioritize Your Goals
Establish clear short, medium and long-term goals. You probably won’t be able to tackle all of them at once so just focus on two or three that are most important at this stage in your life. If you are just starting out together, this may include saving towards your wedding, finding a place to rent, or paying for a car. If you are already married with a young family, goals will include saving for your children’s education. Having just two or three big goals in mind makes it easier to focus on and achieve them. Build in some leisure including holidays into your plans. Of course retirement planning should always be included in the plans.
Joint accounts, separate accounts or a combination
When it comes to combining finances, there is no one size fits all; some couples merge their finances with joint accounts, whilst others prefer to keep their finances separate. Even the best system is not always appropriate for every circumstance, so plan to modify your system as your relationship and financial situation evolve and find an arrangement that works best for both of you.
Will one person pay all the bills or will you share in proportion to your income? Is one of you planning to go back to school in the next year or two? Will you both work or live on one person’s income?
If you don’t like what you see then you need to make a decision. Within a marriage setting a husband and wife should ideally be financial partners but every couple will have to find a solution that suits them. Discussing finances might feel uncomfortable and is certainly not romantic but it is very important to address these issues before committing.
Considering money matters together provides a great opportunity not only for strengthening a relationship but also for fulfilling mutual goals with a sense of direction and purpose. Ignoring this most important aspect of your shared life is only courting trouble.
Nimi’s Financial Compatibility Quiz
Do this quiz with your partner and let’s see how financially compatible you are. If you fail, not to worry; it doesn’t mean you should break up, it just means there is some work to do regarding money matters.