If you have been in a relationship for a long time, especially if you are married or living together, it is almost certain that at some point in your relationship you have fought for money. One of the causes of problems in a relationship are the differences in values, goals and habits in regard to money, especially in communication about money problems.
Money cannot buy love, but it can separate it. The objective of this article is to learn to talk about money, learn to align your financial goals. If you can do this, you have done more than many couples do, and you have done enough to maintain a strong relationship.
Sit down and talk about the house, children, children’s education, fund for emergencies, buying a car, traveling every year, buying clothes, electronic devices, shopping and computers, etc.
- Then you must prioritize and see if they agree on something. If they have different points of view, it is important that they talk because they do not agree, and consider the other person’s wishes. If that is what makes the other person happy, you should want the other person to be happy, that is the basis of a good relationship. But relationships do not only have one side, you must also be happy. The goal is that both sides should be considered, and they should look for a solution where both win or compromise that both will be happy.
- Discuss how they will handle debts and assets that accrued before the relationship began. If you are married and live within the United States, your spouse’s creditors can hold you liable and pursue your assets if you do not keep your finances completely separate, or in the case of a divorce. In addition, your spouse’s credit history will affect your ability to obtain a credit, which is often necessary for a large purchase (such as a home). So if you are married, it is best that you work together to pay the debts as soon as possible, and avoid arrears. If they plan to get married soon, a prenuptial agreement can protect a person’s assets from the other person’s creditors. If you are not married, you may prefer to treat an individual debt as a shared expense, or you may not. You must decide this as a couple.
Do not involve emotions within the financial conversation. From your first meetings on financial objectives to the subsequent conversations (discussed below) it is important that remain calm, do not feel hurt or angry about any problem, try to see the problems objectively. Many times the financial problems are related to emotional problems, derived from childhood, these range from security problems to feel better than the other person, until you feel hurt if you criticize the way you spend money, among others. These emotional problems are related to financial problems, and it is important that you separate them and only deal with financial goals and habits:
- Do not use an emotional, accusatory or inflammatory language, practice a non-violent conversation.
- Do not blame the other person or criticize them negatively.
- Simply talk about your financial goals, develop a plan to achieve those goals, develop a system to deal with finances and so on.
- Also, try not to feel attacked if the other person talks about their own goals or habits, allows it to be an open discussion, and if you feel attacked, stop and take a deep breath and remember that this is not a discussion about your personality, it is a conversation about how both will make their goals converge. Again, think that this is a team effort, not a confrontation.
Develop a plan to unite your goals. Once you are able to create a common financial goal, (a big step, celebrate it) you should create a plan to do it. They must take into account their income, debts, savings, how much they can pay off their debt / or save each month, whether they want to cut back on some things in order to reach their financial goal, or how much time they want to take to reach it, etc. :
- Start by determining a specific time for each goal, and then decipher how much you need to save (or pay off the debt) each month to reach your goal. Try to implement the habit of paying yourself first.
- Create a spending plan (if you have not already done so) for each month, and see if you can adjust it to meet your goal each month. You may need to cut some expenses, or earn extra money, or both. Or they may discover that their goals are not realistic and that they should cut them back, analyze them again, or try harder to achieve their goal. The plan they make is how they will align their daily and monthly expenses with their long-term goals. It is also a good way to resolve minor disputes, for example “definitely you should buy less shoes, and I should buy less video games, this way we can buy a house in three years and travel to Europe in two years”. The spending plans will evolve with the passage of time, that is inevitable;
Develop a system for finance that works for both. It may sound like a trial and error plan, but you must make several adjustments before you have a plan that works correctly. Keep in mind that no agreement is better than another. The best agreement is the one that creates harmony in your relationship.
- Use a communal approach if they have similar style of spending and savings. All income received as a couple must go to a single account, and all expenses must go into a single account. If you do not agree about the expenses, such as if one person tends to make money decisions and the other person disagrees, this approach can lead to frequent discussions. Communication, trust and discipline are essential for these agreements to work.
- Use an individual approach if they have different spending styles. Keep separate accounts where your income is deposited individually. Put some money in a shared account, only for shared expenses. They must decide which expenses will be shared (usually the rent, the mortgage, utilities, etc.) and how much money each person must pay. Each one can pay half of the expenses, or they can decide that each one will contribute a percentage that is relative to the individual income (for example if one person spends twice as much as the other, this person should pay more than the other). The rest of the money can be spent as each one wishes.
- Use the grant approach This approach is a hybrid agreement with respect to the two previous approaches. Place all the money in a single account, but give permission to each person the concession to spend whatever they want. This can be in cash or can be transferred to individual accounts. Decide as a couple how much money each should receive. This works best for couples who tend to spend money on different things, but want to keep their income together.
Decide who will handle the administrative aspects of finance. To put your financial plan into action, you must decide how you will pay your debts, your bills, deposit money in the savings account, have money for cats (like gasoline and pantry) and so on. Someone will have to take responsibility for each part so that the system works (it is better if both are involved, but they should analyze what works best, as a couple). There is usually a person more inclined to keep accounts, and sometimes he or she does not mind having this responsibility. Otherwise, they must define and assign responsibility. One person can go to the bank while the other updates the financial program, or perform the accounts to make sure they have a balance, for example:
- If one person will handle the finances more than the other, what responsibility does he have when consulting the other person before, say, changing the money to a savings account?
- If the person who normally handles these tasks can not do it (due to a medical problem, an unexpected trip, etc.) Does the other person know enough to carry out the process?
Have financial meetings every week. This is very important and it is a step that many couples overlook. Just because they have financial goals in common and a plan does not mean that everything is fine. If one person takes responsibility for finances, for example, and the other has no idea of what happens, there are likely to be problems along the way. You do not want to be in the situation where one person takes charge of the money and the other remains in ignorance … until it discovers that there are other payments that have not been made so sooner than they think they will go bankrupt. This is not good for the relationship. To avoid these kinds of problems, they should have a weekly meeting, where they both sit down and talk about finances. They can review their accounts, their spending plan, what will come in the next few weeks so they will need some budget, problem areas, what they will do with their annual bonuses, where they are with respect to their goals and others. Make sure that both are aware of everything, and that they work as a team.
Adapt according to your needs. You may need to adjust the proportions if you must make a large expense, if for example you lose your job, suffer from an illness or injury, or have a new hobby (and expense). For example, let’s say a couple decides to take a communal approach, and one of them decides to play golf. The couple must decide how they can accommodate this hobby, placing it as “a golf concession” so that the other person knows exactly how much the other person will spend on this hobby and that there are no surprises (“You spent too much on the golf club “). (There may be additional expenses in the golf example.) Many couples modify their agreements significantly when circumstances change. A couple can, for example, start with an individual approach,
Above all, they must be positive and honest. Remember: they are a team. Both have the same goals and want the happiness of the other. Team members can help each other and motivate each other, or they can separate the team by being negative, blaming themselves and working against common goals. If they always stay positive, they will be a successful team. Motivate yourself, stay focused on solutions not on blame, and make sure that the basis of everything is love in everything you do.
- No matter how they decide to manage their finances as a couple, they should discuss and designate money for an emergency or 3 or 6 month savings fund that covers housing expenses.
- Just because they have individual accounts does not mean they do not have confidence. Sometimes it is not convenient to discuss about every purchase they make all the time, this sometimes leads to disagreements and even charges of overdraft in the bank. It is possible to have individual accounts become joint accounts so that they can see their financial activities, but they must agree not to use the other person’s money without discussing it first, unless it is an emergency.
- Even if you have a ‘joint account’ you must have an individual account for you, because it gives you independence from your partner.