Let's talk money.

Discussing and Combining Finances in a Relationship

Relationships- they’re complex to start with, and they can get even more so when money is involved. Actually, money is the number #2 leading cause for divorce, right after infidelity. The more you practice the talk of money with your significant other, the better you should get at understanding each other, and hopefully keeping that relationship stress that comes due to money under control. It’s not easy, but it all starts with honesty.


Be honest

While you won’t talk about money on your first or second date, as the relationship gets serious and especially if/when married, the ‘money talk’ should be had with openness and honesty. Honesty doesn’t apply to just money, but it is a key component to starting a healthy financial relationship. This can start with a conversation of debts and assets that each has, as well as their individual plans if any. Any conversation and openness about money is a good start, so don’t be shy to just start talking. A good follow-up could then be about your aspirations, goals, priorities, and what each one of you would like to achieve financially.


Discuss goals & priorities, jointly and individual

It may be hard talking about money and numbers and so forth, so a good way to initiate such conversation is to discuss aspirations, goals, and priorities. Some of the questions to start the conversation could be:

  • What do you really care about that you’d like to accomplish? 
  • What are some goals you’ve been aiming to achieve and now would like to continue pursuing, together?
  • What are your values that you’d like to see in the way you use, spend and save money?
  • How would you like to pursue paying down debt (assuming there is some) and how aggressive you’d like to get with them?


The above are just some starter questions to get the conversation going and understand each other better. Remember you could be seeing things differently financially, as well as you could be coming from different backgrounds or even differing assets & debts profiles.


Make a plan to attain your goals

After discussing what each one has and owes, as well as the goals and aspirations to achieve financially, then a plan (simple, at the start) can be created to achieve your goals, either those joint goals or even individual goals. The plan should have listed the goals to be achieved, the time horizon by when to achieve them, as well as how much money to be saved or invested towards such goals. A financial planner could also help in this area, helping the conversation around goals, their prioritization, and also some ideas, running numbers on what it would take to achieve them. A more in-depth conversation can be had around what part of the income should be saved, and when saved how to be prioritized among the different goals. Which goals to be funded if not sufficient income or savings to cover them all? Only a good and honest conversation about what’s important to each as well as being able and ready to compromise can make this work.


Join finances, but also retain flexibility

A good suggestion about finances in a relationship is to combine them and see them as ONE. Now, married, you move from two into a unit of one, a family pursuing the same broader goals and priorities. But it’s not that simple, and many couples choose to continue managing separately, deciding what bills to pay and how to cover expenses or savings. While that could be OK at the beginning mainly due to inertia and doing things that way before getting married or together, it typically gets confusing or at times may seem unfair (why do I have to pay the car bill, when we both use it?) That’s why the suggestion, at least mine, is to get the incomes combined, all spending and bills counted together and all the savings to go towards the shared & already discussed and agreed goals. Here could also be some goals where one may benefit more, like paying one’s debt down while the other has none, but the point again is to see these goals as ONE, and not as separate as before. This is just a recommendation and may not work for everyone, I know people that do OK managing ‘separately’ their finances, I just don’t think they are optimizing it and may even add more stress than needed. In addition, you can add some flexibility to a joint budget or goal setting, by keeping some separate accounts where each one can spend a certain amount, already discussed, without any holdback or any asking of each other. 


A budget you can stick to, plus side pockets

A joint budget, as I’m recommending, considers both incomes (if both bringing income) and all the spending and saving for the household. Everything is added into one big budget, all the incomes, all the spending (no matter who does it), and all the savings (no matter what goals). This comprehensive budget is based on a prior conversation on what/where to spend and where/how to save and invest. We share a template we’ve built with all of our clients or prospects to check their spending, fixed and even the variable spending, as well as the main savings & investment ‘buckets’ that most families have. A budget is mainly a projection of where you’d like to be in, regarding spending and savings, but very often it’s hard to be exact. That’s why we allow for some cushion or unexpected spending so that we don’t have to panic if not enough money to cover the bills. 


Another way of budgeting is to save first and then spend whatever is left, this way you’re guaranteed to have done your savings & investing, again whatever works best in your situation. Having “side pockets” and allowing each other to spend some money unrestricted usually takes the pressure of everything being planned and not spending any money out of line. It also removes the pressure of ‘I can’t spend without asking my significant other’. Set a reasonable amount of spending ‘side pockets’ to allow for such flexibility in the relationship.


Make a plan, then discuss it monthly

Making a plan is only 50% of the work, the other 50% is making sure you’re tracking it and staying on course. Many successful couples discuss their money and budget at least monthly. There you can see where you’ve spent if any category has gone over budget (and why?) and how to get back on track. In this meeting you can also see how you’re progressing towards your savings goals, hopefully, most of them have been set on an automatic plan using auto-deposits or alike. 


Talking about money is not easy, and money in a relationship has the potential to add even more stress. But making a plan, looking at your money and spending/saving as one unit (a family), having frequent meetings (monthly), and discussing your spending & saving, should help remove that stress. Most of the stress in money is when one party doesn’t know what’s happening, feels left out, or just plainly is spending without thinking or limit. If a reasonable plan is set, the chances of money adding to your overall stress diminish significantly, and most likely that potential weakness can be converted into a strength. I’ve seen it happen in action, time after time.