BUILDING HEALTHY FAMILY FINANCES: Important Things Both Partners Should Know
This is our first article in a 5-part series on Building Healthy Family Finances.
In the early stages of a relationship, there’s so much to learn about a new partner. What are their dreams and ambitions? What’s their favorite food? Favorite movie? Do they like the beach or the country? Are they a dog person or a cat person? Or none of the above? Before you know it, time passes, you have fallen in love and are ready to take your commitment to each other to the next level. But have you discussed money?
No two couples are exactly alike. Some couples may envision a future that includes raising a family, purchasing a house, sending their kids to college, and retiring after a long career. Others may not want to raise a family and would prefer to devote their time and energy to challenging work schedules or plan for an early retirement followed by exotic travel adventures. Whatever a couple’s ideal future may look like, money will play a part, and clear communication about finances will be key in helping those dreams become a reality.
In the beginning of a relationship, it’s understandable that each individual may choose to retain their privacy about financial matters. However, before you and your partner start combining your financial lives, whether you are discussing leasing an apartment together, buying a house or getting married, it’s time to have an open dialogue about money.
Start with the Basics
Discuss your philosophy around money.
- What are your spending and savings habits?
- How much money does each partner earn?
- What are your credit scores?
- What assets does each partner have?
- Do you have any liabilities? Are you carrying credit card debt or student loans? Car or mortgage payments?
- Are you managing other obligations like alimony or child support?
Be clear about your expectations.
- Do you plan to keep your finances separate or will you split all expenses 50/50?
- Do you intend to combine your accounts or keep separate bank accounts?
- Will you share some expenses and keep others as the responsibility of one person?
- Many different scenarios can work well as long as both partners are in agreement, while keeping in mind life changes such as loss of a job, moving to a new house or having children can impact plans.
Share your plans for the future.
- What are your career plans? One partner might currently be working at a certain job but always dreams of one day “fill-in-the-blank.”
- If plans for having children are part of the future, how will that be managed financially? Will one partner stay home to raise them? Will the other partner be able to meet the family’s financial obligations without assistance? Will both partners plan to continue working while hiring childcare?
- What are your dreams and goals as a couple and as individuals? What are the financial strategies that can be implemented to achieve them?
Some couples go as far as creating a written contract before they are married, outlining the assets and liabilities of each party, discussing how finances will be handled during the marriage and how assets are to be split in the event of a divorce. These agreements are prenuptial agreements, or a prenup. While not every couple needs a prenup before marriage, the financial conversations you have are vitally important. No one wants to think about divorce when you are planning to join your lives together, but studies show that money is the second leading cause of divorce, behind infidelity. And unfortunately, too many couples don’t have these money conversations.
When you’ve chosen to blend your life together with a partner, it can be an exciting time of planning for a big future. By taking the time to build a strong financial foundation, you can create a realistic path for achieving your dreams. If you’d like to know more about how a financial advisor can help, please contact us.
BUILDING HEALTHY FAMILY FINANCES
- Part 1: Financial Conversations for Couples Joining Their Lives
- Part 2: Some Important Family Discussions You Should Consider
- Part 3: How to Speak with Your Senior Parents About Finances
- Part 4: How to Talk About Money with Your Children
- Part 5: Couples Communicating About Money