We have all heard the depressing headlines about how financial disagreements can impact a relationship. Therefore, I’ll spare you the statistics and instead of focusing on the problem, let’s talk about working towards a solution.
Dealing with money is hard enough on our own so it only makes sense that it can be messy at times when two people try to do this together. Often within a relationship there will be two different philosophies and tendencies for how to handle money. Coming up with common goals and a plan to make those goals a reality can be very difficult. On the flip side, seeing progress towards those shared goals is incredibly rewarding! For many reasons, I am a firm believer that married couples should merge their finances and the rest of the article will work under that assumption.
Below is a list of 10 areas with discussion questions that every couple should work through together. I’m intentionally not providing solutions but rather providing conversation starters. Hopefully I’m not acting as the kindling on the fire but please let me know how the conversation goes by commenting on this post at www.yourfinancialpharmacist.com or by shooting me an e-mail at email@example.com. While many of these are most relevant to those getting married or recently married, I’m convinced many are good discussions to have on a regular basis.
Before you jump in to start having these discussions with your spouse or spouse to be, it is important to note that often (not always) there is one person in a relationship that nerds out about the financial stuff and loves talking about these types of things. Usually, this individual is the frugal planner in the relationship. On the other side, there is often one person in the relationship that is a little more laid back about the financial stuff and getting into the weeds on the nerdy stuff isn’t his/her thing. One is not better than the other and, in fact, they are usually a good balance for each other if they can work as a team.
Why do I say all of this? Most likely if you are reading this article you are probably leaning towards the nerd side of the equation for your relationship. Therefore, be cognizant of how you approach this with your partner. Please don’t print off this list of questions and start rattling them off during dinner. That might not go over so well.
Here they are!
#1 – Goal setting
Have we discussed and agreed upon our short- (1-3 years), mid- (3-10 years) and long-term (>10 years) financial goals? Do we review these on a regular basis (e.g., every 6 months) and update them accordingly. (Tip: Here is a good resource to get you started in setting these goals: http://www.wclibrary.info/research/moneysense/documents/goals_worksheet.pdf)
#2 – Budgeting
Have we developed a monthly budget that accounts for all of our expenses and income? If not, what is our plan to complete that? If so, does that budget reflect our goals from #1?
#3 – Level of engagement
Does one of us take more of the lead than the other when it comes to managing our finances? If so, are both of us aware of our overall financial situation? Do we talk about this regularly?
#4 – Children (Besides wanting to have them or not…)
Is one of us staying home with the kids some day a desire? If so, how will we manage this financially?
How do we feel about paying part or all of our kid’s college expenses? How will we plan for this?
How do we feel about paying for private elementary, middle or high school? How will we plan for this?
What ideas do we have to teach our kids about properly managing money?
#5 – Giving
How does each of us feel about giving (how much and where)?
How will we budget for this?
#6 – Debt
How much debt have we acquired thus far and what will be our plan to pay off that debt?
How comfortable are we with having debt (break this down further to different types of debt including student loans, credit cards, mortgage, car loans, etc.)?
Are we OK with some debt and not other debt? If so, why is that the case?
#7 – Housing / Transportation
How do we both feel about renting property vs. owning a home?
If there is a desire to own a home, do we agree on the location, purchase price and % we would like to put down?
Do we view a car as a necessity or a luxury? Will we lease or buy our cars?
#8 – Balancing Financial Priorities
Of all the financial priorities we have to consider (giving, saving for retirement, housing, transportation, paying off debt, etc.), do we agree upon a plan for how we will balance these? Will we try to do several at once or focus on one before moving on to another?
#9 – Savings (emergency and long-term)
Are we more comfortable with 3 or 6 months of expenses set aside for an emergency fund? Somewhere in-between? If we don’t currently have that saved up, how will we get there and where will we put it?
What is our risk tolerance for investing?
What financial goals are we trying to achieve by saving/investing?
How much will we invest/save for retirement each month?
#10 – Financial Records
Do we have all of our financial records in order with a plan for someone to be able to access that information in the event of an emergency?
(Tip: Consider creating a ‘legacy file/folder’ that includes all of your important financial records in one place. This could include insurance documents, living will, power of attorney, log of financial accounts and passwords, monthly budget, tax returns, college funds, student loan debt balances, retirement funds, car titles, home ownership records, etc. I can’t take credit for this idea. I learned this from Dave Ramsey and felt a huge sense of relief once Jess and I had this in place.)
Financial Homework: Your homework for the week is not to have all of the above discussions. If you do that, I will be impressed. Rather, just start the conversation. See if there can be a commitment amongst you and your partner to talk about these areas over the next 3-6 months. If you are up for it, agree upon a time you can sit down together to manage your monthly bills/budget while checking up o