Whether you are in a serious relationship, just recently married, or have been married for several years, money matters can be controversial if not handled carefully. When two people become a couple they confront a myriad of financial choices and decisions. Are you engaged? How much do you know about your fiance’s financial situation? After the excitement of the wedding ceremonies, it will be time to face your financial future together.
Navigating this somewhat sensitive issue is important because financial problems can strain relationships to breaking point and have been cited as a major cause of divorce yet most couples go into marriage without ever broaching this subject. It may not be romantic, but it is important. Here are some of the money issues that you should discuss with your significant other.
Attitudes to money are formed very early on in life and usually develop over many years. You may not even realize the full effect of your childhood experiences, circumstances, and your parent’s attitude towards money; indeed many people simply assume the savings and money management habits of their parents. Were they very frugal, disciplined savers, or were they spendthrifts?
In relationships there may be different goals and priorities. One may be averse to debt whilst for the other debt is a way of life. He might want a flash car, whilst she feels more secure with money in the bank. She might spend all the housekeeping money on jewelry, shoes and bags whilst his priority is to give the children a sound education. He may view the new home cinema as their greatest new asset, whilst her priority is to make a down payment on their own home. If the differences are fundamental this will be a source of conflict. At the same time, be conscious of the fact that it shouldn’t be all about scrimping and saving towards the future; enjoy yourselves as well.
Who will manage the family finances? Women often enter marriage assuming that their spouse will handle all money issues and thus delegate almost total responsibility and sit on the sidelines without being involved. Determine who is best able to manage the routine everyday financial matters. Teamwork is essential and shared duties work well for some families, but even if one party is more involved, both should have a general overview of the total picture. Periodic meetings are important so you know where you stand financially and can see whether you are actually moving closer towards your family goals.
How much debt are you bringing to the marriage? Many people do not discover the full extent of their spouse’s financial obligations until they are married.
Debt brought into marriage can be a major source of strife if not well handled. Each partner should know the debt load the other one carries, as once you are married that debt load is shared. Whilst you are not legally responsible for the loans opened in your spouse’s name, it could certainly affect your eligibility for joint loans such as a mortgage. It should be a priority to try to deal with it together and bring it under control.
How do you feel about budgeting? It is surprising how many married couples get by without a budget. Through budgeting you have a better idea of what is coming in and how much can be spent. You should both know how much you pay for your rent or mortgage, utility bills, insurance, and so on. Budgeting responsibilities should be shared such that neither partner should feel that they have to shoulder the entire responsibility. Periodic meetings, are useful to review bank balances, any outstanding debt, routine expenses as well as any major expenses that need to be carefully planned for.
Who pays for what? Something as basic as the handling of everyday household expenses is a source of friction in many families. How will you handle routine household expenses? You both earn but how much should each person contribute? Are you both doing your “share”? Should it be equal amounts no matter what each person earns, or a certain percentage? If you earn significantly more or less than your spouse, it seems only fair to contribute amounts in proportion to your respective incomes to reflect this imbalance.
Some couples assign expenses – you pay the rent and school fees, whilst I’ll pay for groceries, utility bills, and so on. Others couples use one partner’s income for all expenses and apply the other income to build up savings and investments.
There has been extensive debate over single and joint accounts. Some argue that joint accounts create a sense of unity that is vital to any relationship. If money is separated do you weaken the bond that is the essence of any long-term relationship? On the other hand, separate accounts allow each the ability to retain some independence; this, it is suggested, could actually strengthen a relationship.
Will you have separate or joint accounts or a combination of the two? Having a joint account combined with individual accounts for personal expenses is a good compromise as each partner takes some responsibility for the household budget, yet is still able to retain some autonomy. Partners contribute a certain amount of their monthly salary into the joint account to cover routine household expenses such as food, utility bills and so on. Some couples decide to pay their salaries into the joint account and then pay themselves a monthly allowance.
If you had a fairly independent existence before this relationship and managed your own finances and made your own investment decisions, it may be more difficult to give up that control to another person. Yet if you were not particularly structured about your finances you might be more able to opt for a joint account.
It is important to remember that parties to a joint account have a right to withdraw all the money in the account. It is for this reason that the use of joint accounts is usually limited to people who have built a solid level of trust. Look critically at the options and try to come to a compromise that will suit your relationship.
Will you set spending limits? Do you have to account for everything you spend to your spouse? If you show up with an expensive new TV or a car, could this be a cause of tension? Everyone needs some personal spending money that doesn’t have to be accounted for. The amount will vary depending on the couples resources and lifestyle. Some couples set spending limits on how much either can spend without consulting each other.
With careful planning, clear communication and compromise, many frustrating conversations can be avoided and conflicts resolved. There is no one size fits all when it comes to relationships and finances; even the best system may not always be appropriate so be prepared to modify your system as your relationship and financial situation evolve. Try to find the right balance that works for your situation; if one option doesn’t work, try another.
Happy Valentines Day!