It can be a difficult task talking to your spouse or significant other about money. In a 2013 study published in the Kansas State University journal of Family Relations, more than 4,500 couples were examined and found that fights about money were a top predictor of divorce regardless of income, net worth, and debt levels. Whether you’re married, engaged or seriously dating, it’s a good idea to discuss your financial situation. If you are considering spending the rest of your lives together you’ll have an economic and financial partnership, not just a romantic one. Here are a few tips for couples looking to have the money talk:
Ease into the Conversation - Strong emotions can arise when individuals discuss money and finances. Start slowly and be understanding. Begin with easier topics, like your long-term financial goals. Then slowly work towards more sensitive ones like debts, assets and credit histories. Try not to judge. Your partner has a different financial history than yours and may not be what you expect.
Agree to Disagree – Couples value money differently. But setting a budget is an area where you both must compromise and agree. Do an inventory of your financial situation. Start with how much you both spend, what do you both own and what do you both owe. Compare notes on income and expenses:
- Income - How much do you each make? Do you expect that to increase, decrease or stay the same in the short-term? Do you have other sources of income, such as rental property or investments?
- Expenses - What are the necessary expenses every month – housing, transportation, insurance, tuition, etc. What system do you use to track expenses?
- Assets - How much of your income are you saving for retirement? How much have you saved so far in retirement accounts, such as 401(k) or 403(b), Roth and traditional IRAs? Do you own your own home?
- Debt - How much do you owe left on your mortgage? How many credit cards do you have? Do any of them carry balances at the end of each month? How much?
- Insurance - Do you have health insurance? What kind of health care benefits are available to you at your job? Do you have short and/or long-term disability income insurance?
Long-Term Goals and Financial Priorities – It is important for you both to be on similar pages, with life goals and priorities. Ask each other a few questions to see if they align: if everything worked out exactly the way you wanted it to financially for us, what would that look like? Where do you see us living a year from now, in five years, in retirement? If we plan to have children, do you think one of us should take a career break to raise them?
Credit Transparency - Show each other your credit reports. For many couples, this can be the most challenging part of the conversation. Regardless of your credit history, transparency is key in having a healthy discussion about finances. Full disclosure is crucial, particularly for engaged and married couples. It’s important to review and discuss any major items, such as bankruptcy or a history of significant late payments or charged off accounts.
Having the ‘money talk’ with your significant other isn’t going to happen in one conversation. It’s going to take place a number of times over the course of your relationship. Hopefully, these tips will help you establish a foundation for those conversations.
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