If you’ve been in a relationship awhile, you’ve probably talked about nearly everything under the sun with your significant other. You likely have an intimate understanding of their eating habits, daily routines, family situation, friend groups, career, and hobbies.
Most of us think we know our partner better than anyone in the world, but often we’re surprisingly in the dark about our partner’s financial background. One of the primary reasons is that many people are unsure about how to begin to talk about money with their partners.
This post breaks down difficult financial conversations into digestible parts to enable you and your partner to go from the great financial unknown to setting specific, achievable goals.
How can we talk about finances with our significant other in a healthy, productive way?
It’s easier than you think. As with most things in life, you’re probably putting this conversation off because it can be uncomfortable. The following questions make it simple and straightforward to talk money, allowing you to form a strong foundation for your financial relationship.
These discussions do not need to be all on the same day or even the same month. Try to make it fun and comfortable, going at whatever pace feels right for you.
Conversation #1: Gain an understanding of the foundation of your partner’s view on money.
This does not necessarily need to be a sit-down conversation, and you can gain the information over time. The following questions will help to paint a picture surrounding if your partner has positive or negative feelings about money and if they are open or closed when discussing finances. Hopefully, these starters will lead to storytelling about each partner’s childhood, which allows you to get to know each other better. And what could be better than that?
- What is your first memory of money?
- Did you receive an allowance growing up?
- Did you ever save up for a big purchase as a child?
- Do you remember your family talking about money when you were young?
- Did your parents manage the finances together, or did that job often go to one parent?
Conversation #2: Determine why money is important to you as an individual and as a couple.
As you look towards a future with the person you love it’s essential to understand that whether we like it or not, money will drive many decisions in our lives. How much money we have, or don’t, and how we manage it will determine the types of lives we’ll lead, where we’ll live, the places we’ll be able to explore, and ultimately, the kind of retirement we’ll have.
This money conversation is a little more fun and digs into your values separately and together. It will expose the underlying principles on which you’ve each built your financial foundation. As a result, it’s the perfect opportunity to discuss how you dream of your financial life together.
- Why is having money important to you?
- Do you need a certain amount of money in the bank to feel safe and secure?
- Would a certain amount of money grant you the freedom to pursue dreams you may otherwise not?
- What is the first thing you do with money received from a paycheck? (Saving, Investing, Spending, Paying down debt)
- How do you feel about having debt?
- Why is money important to us as a couple?
- What do we want to be able to do with our money?
Conversation #3: Lay it all on the line.
This conversation is the one most people dread and probably what comes to mind when people think about having “the money talk.” It’s time to pull together your deepest, darkest, financial secrets, and bring them to the light. You may need to gather a pay stub, log into your forgotten 401K account, or dust off the mail from your credit card company that’s been in the corner for months. Below is an outline of the areas in which you can each break down your financial accounts to make it easier to understand and compare.
- Income – Monthly (or an average if commission-based)
- Include income from your 9-5 but also from any side hustles you may have like babysitting or dogsitting.
- Expenses – Monthly
- Include rent/mortgage, bills, utilities, transportation, groceries, pet expenses, eating out, gifts, charitable contributions, etc.
- Expenses – Annual
- Consider annual insurance payments for car, home, disability or life insurance, taxes for home or car, homeowner’s association fees, etc.
- Include any outstanding debt you may have across credit cards, automobile loans, mortgages, student loans, etc.
- Savings – Emergency Fund
- This money is socked away for a rainy day and will likely be readily available in a high yield savings account. Check out this post for more information on emergency funds and why you need one.
- Savings – Other
- You may have these savings earmarked for a vacation fund, new car fund, wedding fund, etc.
- Investments – Retirement
- List any investments here that you contribute to, or have in the past, which you can access without penalty after a certain age like a 401K, 457, Roth IRA, or IRA.
- Investments – Other
- Include Health Savings Accounts, stocks, index funds, or any other investments that are not retirement specific savings vehicles.
*I included Health Savings Account (HSA) in the Investments section as I generally view it as an investment vehicle. If you utilize your HSA for regular medical expenses throughout the year this can move to the Savings – Other section.
Conversation #4: Determine how you want to approach your finances together and define your financial relationship rules.
At this point, you’ve figured out how much debt you are carrying as a couple and the low down on saving and investing. It’s time now to determine how to move forward with this information. This is most applicable to those in serious relationships or married couples. If you are still in the dating phase you likely aren’t thinking about combining finances. Right now, it’s essential to determine if there is anything that came out in Step 3 that is going to be something worth tackling together when the time comes. Depending on the revelations in Step 3, some of the questions below may be unnecessary.
- How do we deal with the discrepancy between our incomes? Should the partner making more money share a more significant burden of monthly bills? Do we want to split expenses down the middle?
- Where will we keep shared financial documents?
- How will we approach large purchases, and what amount of money can we spend without consulting the other person?
- How comfortable are we with our current debt? Should we aggressively pay off debt before we start saving toward other goals? Do we want to continue to pay debt individually or, if married or in a committed relationship, should we pay towards debt together?
- Do we want the money management to be handled mainly by one partner, or should this be a shared responsibility?
- Should we set up a regular meeting to discuss finances?
- What kind of savings rate do we want to have?
- Do we want to manage the household money ourselves, or would we be more comfortable introducing a financial planner to the picture?
- How do we want to manage taxes as a couple?
- How do we want to talk to our kids about our family finances?
- Do we want to work off a monthly budget or spending plan?
A 2017 study by Magnifymoney showed overspending as the biggest source of tension among couples who identified money issues as the number one reason for divorce. Creating a budget or spending plan can be one of the best safeguards against this.
Conversation #5: Create your financial goals and devise a plan to work towards them.
At this point, you’re on the same page about emotions, your current situation, and the rules of your financial relationship. As a result, it’s time to plan towards the things you dreamed about during Step 2. The most important takeaway to come from your conversation in Step 2 is the ability to determine what you, as a couple, will prioritize. For example, you might care less about having fancy cars, but sharing meaningful experiences as a family is super important. Now is the time to figure out those dreams and set a plan in motion to make them real.
- Do we want to take vacations? If yes, how frequently? Where do we want to go, and how much do we want to save together to make this a reality?
- Where do we see ourselves living? How much are we comfortable spending on housing expenses?
- What kinds of career changes are in store for us in the future? Will we need extra cash in savings to allow that to happen?
- What is the ideal situation for retirement? At what age do we want to retire?
- Do we want to contribute to our children’s future by way of a college savings plan? If yes, how much would we like to help them, and how much will we need to save annually to make that happen? (This is a fantastic thing to think about it your children are very young or if you haven’t had them yet. This calculator from the College Board can help you better understand how much you’ll need to save.)
Finally, you’re ready to come up with specific goals in the form of a well-thought-out plan.
“A good plan violently executed now is better than a perfect plan executed next week.“George S. Patton
It’s critical to make your goals feasible and understand how you will come up with the money to achieve them. See the example below for a proper execution of goal setting.
Vague goal: “We will take a family trip to Disney World next year”.
Solid goal with well-thought-out steps: “We will take an annual vacation to Disney World for five days, which will cost us approximately $3500. We will save $300 per month by getting rid of cable television and limiting restaurant expenses to $250 per month. We will plan our first trip for May of 2021”.
I understand that it can be extremely anxiety-inducing to think about exposing your feelings and financial portfolio, even to someone you love. Remember that by exposing your own vulnerabilities, you give others, including your significant other, permission to do the same. My hope is that these conversation starters allow you to work towards viable solutions for any issues that arise and help to make you stronger as a couple.
Did you have any of these money conversations with your partner? Let me know how it went in the comments.