When I told my friend that I was becoming a financial coach, her first reaction was: “you are going to save a lot of marriages”. I never thought of it that way, but she made an important point. Many relationships and marriages fall apart due to insurmountable money issues. In general couples fight over what money represents or where to set responsibility. Couples discuss many things before marriage, but their relationship with money is most of the time not one of them.
Parents teach money values
Most of our financial behaviors start with our parents, even though a lot of people do not grow up with educational conversations about money. Parents tend to wait with conversations about money until the kids have gone to bed. Nevertheless, our relationship with money is being established during our childhood. Your earliest memory of money and what you have learnt about it from your parents or guardians, will shape the way you think and feel about money as an adult. You may imitate your parents’ way of handling money without being aware of it. Or some may do the exact opposite.
When it comes to being in a relationship, you and your partner each bring your own set of emotions towards money into the relationship. For example: my mother has taught me to always be financially independent of my partner, because despite the romantic balloon you live in, you never know what’s going to happen in the future. This is my emotion and it definitely has an impact on the way I approach money in a relationship. If I would be in a relationship with a man who wants me to be financially dependent of him, then we would have a big problem. Therefore it’s important to know what your and your partner’s money personality is before you tie up to each other. If you don’t talk about it, it may take a while before you notice that your partner is a big spender or a hoarder who drives you crazy. And when it’s getting to annoy you and haunts your relationship, you may fall off the pink cloud faster than you think.
Male and female differences in approaches to money
Besides childhood money memories, there are various other factors which determine male-female differences in approaches to money, like culture, what society expects from you or level of education. Psychologists Olivia Mellan and Karina Piskaldo came up with an interesting example: “when men make money in the stock market, they credit their own cleverness. When they lose money, they blame the incompetence of their advisors or bad luck. When women make money in the market, they credit the cleverness of their advisors, good luck or even the stars. When they lose money, they blame themselves.” Although I have no doubt of examples which prove it the other way around. The above example shows that men and women value the same money experience differently. Therefore discussing finances needs to be an ongoing talk throughout your relationship, just like talking about intimacy and the wellbeing of your kids.
So, in order to keep financial peace in the house, here are six crucial topics to discuss:
1) Income: When you want to share the household’s expenses, you have to know what your partner earns per month. Decide on whether you want to split the mortgage or rent 50/50 or if you want to contribute a percentage of your income based on how much you each make.
2) Debt: A college loan, a car loan, credit card debts, most people come to the altar with some sort of financial baggage. It’s important to know how much debt your partner has, so you know if they might have difficulties keeping up on basic monthly payments (like rent, mortgage, utilities). Talking about personal debt and how you can reduce this once the two of you start sharing a house, might save troubles later.
3) Spending, savings and assets: Are you a spender or saver? What about your partner? Is he or she living from paycheck to paycheck with little savings? Or does he / she have plenty of emergency savings and funds for retirement? (Although retirement plans means nothing to the average millennial ;)) Understanding how your partner approaches financial matters will make it easier to create a financial plan that suits you both. You can merge some of your income for joint expenses and savings and keep the rest separate on your own bank account. That definitely averts some conflicts. Try to find a common ground.
4) Credit score: In order to qualify for a mortgage they check your credit score, so it’s really important that you’re aware of your partner’s score before you start shopping for a new home. The last thing you want is to be denied for a mortgage based on your partner’s bad credit.
5) Relationship / financial / life goals: What are your short term and long term goals for the future and what are the goals of your partner? What shared goals do you have? Marriage, buying a house, having a baby or traveling the world? It’s important to know if you share the same goals in life and what you expect from one another in terms of saving. Make a shared spending plan together by merging the goals that have come up on your list. Don’t wait for external circumstances to occur before you take action. This habit of waiting for “I will do that someday” keeps you from the ultimate good of reaching that goal in life. For example, if you would like to travel the world together, start a dedicated travel fund. Create a new account with your bank and feed it on a monthly basis. Make it easy to transfer money over from another account. Make it a fun effort together. Make it a habit.
6) The CFO of the house: Who will handle the finances? Will one person look after household expenses, mortgage and savings, or will you share the responsibility? As a woman, I definitely vote for shared decision making and shared power. It is the only arrangement that works. But whatever you decide, make sure you’re both happy with the decision.
Source picture: Learnvest