Planning Finances with Your Spouse or Partner
As difficult as discussions about money are to have even in the most stable relationships, they are an essential step that should be considered.
Personal relationships between U.S. adults have never been more dynamic than in recent years. According to Pew Research Center, that's certainly true for young adults. As of 2014 among people aged 18 to 34, the number of Americans who said they were married or cohabiting was almost half of what it was in 1960. Meanwhile, the number of people who said they were living in another "nontraditional" household surged - these include adults living with parents or on their own but who would be considered single for tax purposes, for example.
"Finances are a common source of stress among married couples."
No matter the exact living arrangement, some things haven't changed, including the importance of personal finances in a relationship. Recent studies estimate that money is the primary cause of stress between romantic or cohabiting partners, which doesn't come as a surprise to most of us. But that doesn't mean we are getting better at talking it through with our spouses or significant others.
As difficult as discussions about money are to have even in the most stable relationships, they are an essential step that should be considered as a couple moves toward marriage, or before taking any big financial leap together. Fortunately, these talks don't have to be a high-stakes, zero-sum game either - use this time to plan for a future together, not to find reasons to end the relationship.
Key discussion points for your 'money talk'
Even for young couples without too many financial obligations, there can be a lot to discuss in terms of personal finances before taking the next step in the relationship. Financial advisors tend to urge couples to keep the following key points in mind:
Debt and credit
Even in unmarried couples, debt can become an issue as they spend more time together - and pool more of their income. It's a good idea to talk to your partner about your current debt situation as well as theirs, being specific about the type of debt, how much is owed each month and when it should be paid off. One practical way to do this is to review each other's credit reports. While not exactly the ideal date night activity, this will give both of you greater insight into your financial situation and provide a roadmap for the future.
Financial values and goals
If you are both in it for the long haul, it's important to keep in mind one another's aspirations related to money, both now and into the distant future. Financial advice blog Money Under 30 offered a few sample discussion points related to your goals and values , with questions like:
- When is it OK to take on debt?
- If we had to cut down on spending, what would be the easiest expenses to reduce? Which would be the hardest to reduce?
- Do we want to own a home (or buy a new home) in the future? How much could we expect to spend to meet our needs, and what could we reasonably afford?
- Do either of us have a savings routine? Are we budgeting for contributing to an emergency fund?
- How do you imagine our financial plans changing one year from now? What about five years from now?
Plans to own a home or take a big trip together are important to discuss well in advance. An even more challenging talk for most couples, though, is about children. Specifically, if you plan to have kids, how will all of these plans change? Can you expect income to remain the same? Of course, this might require many separate conversations.
Managing finances is an ongoing task for everyone, and keeping our mind open to our partner's own money issues is another constantly evolving process. Don't hesitate to consult with a professional for more complicated money matters as you enter the next chapter of life together.