“Darling, it’s time we talked about money…”
In my financial planning experiences, talking about money early in a relationship is incredibly important. Even more important is making sure you talk about money honestly and openly. When a couple start working on a budget, one of the last areas usually tackled is their differing attitudes to risk, and ways of dealing with money on a day-to-day basis. Missing that crucial step often leads to protracted difficulties in later years, as differing views surface at crucial moments. I’ve experienced more than one stand-up argument between couples during an interview, so I am strongly aware of just how important this issue can be to your financial future.
Relationships can be fragile things, and nobody wants to be arguing about money with a new partner! Here’s a discussion on relationships and money from the people at RI Advice, followed by links to a blog, a psychology website and a regulators’ view. I will post a link to this article on the Facebook site, which can be found here. Comments cheerfully received either at the end of this article or on the Facebook site for those who have “liked” the page.
Talking money in a new relationship
At what point should couples start talking about money?
Before you move in together? Before you get married? Before you have children? The simple answer is: the earlier the better.
“Everyone thinks about money differently and has different expectations of how it should be managed when they enter a serious relationship. As a result, it can often be a major tension point” says RI Advice Group, “which is why it’s suggested that you start talking about money, and what it means for your future, as soon as possible.”
With many couples unsure about where to start, here are some questions that can help you get the conversation started.
Question 1: What’s your approach to money?
For many people, it’s only when they are considering moving in with their partner or getting married that they really start to talk about how they will manage their finances as a couple.
“Start by talking to each other about your background – where you grew up, where you lived, what your parents taught you about money” says RI Advice Group. “All of these things help understand how the other person in the relationship thinks about money, budgets, spending and saving.”
You will very quickly work out how aligned your views actually are.
“Then the next step is to talk about your current situation and what your future together looks like” adds RI Advice Group. “What are your medium and long-term goals? What is your earning potential in the future? What do you want to do with your money? Do you want to travel? Buy a new car? Undertake a study course? What are your plans for retirement? Asking each other these type of questions will help both of you to come together and see what your financial future as a couple will look like.”
Question 2: What assets do you have?
Once you’ve discussed your approach to money, the next step involves putting together a schedule of everything that each of you is bringing into the relationship.
“The key here is to be totally honest and upfront about this” says RI Advice Group “which includes your assets and your liabilities.”
“Some people may be reluctant to mention all their details – such as unpaid tuition debts or a maxed out credit card – as they may be ashamed or simply worried about what their partner will think. It’s really important that you cover everything, so that you can budget appropriately and your partner knows what needs to be taken care of, should something happen to you in the future, such as a serious accident or illness.”
Question 3: How are you going to pay for things?
You should agree on this as soon as you can, otherwise it could be a trigger point for problems in your relationship.
“How spending is shared can be a tricky one, especially if one person in the relationship earns significantly more than the other” says RI Advice.
“While working out the bills that need to be paid, like rent or utilities, can be relatively easy, it’s how you share the costs for impulse purchases or longer-term expenses, like saving for a home deposit, wedding or children’s school fees, that can be more difficult to decide on.”
“Acknowledging that any plan you put in place will change as your circumstances change” adds RI Advice “can often help, as does focusing on the end result, rather than just something vague like ‘saving money’.”
Question 4: What happens when either of you stop working?
There could be times in your relationship when one of you may decide to leave paid work for a period – whether that’s to stay home and raise children, study full-time or retire.
“While these decisions are made for positive reasons, they can often place a strain on a relationship as you adjust to life on a reduced income” says RI Advice. “The person no longer earning their own money may also feel a loss of independence, as they start relying on their partner for absolutely everything, even just some ‘spending money.’”
“A good approach is to sit down before you make the decision and work out together exactly how you’ll manage on one income, how you’ll pay for what and for how long this new arrangement will last. This will give you both the feeling that you are willing to support each other and build a life together, even if that means an adjustment in your lifestyle.”
Have you and your partner talked about your money arrangements recently?
A financial adviser can help couples reach common ground when it comes to their money and can put in place a range of strategies to help you achieve your financial goals.
They can discuss a budget, options for building your wealth and protection plans to manage risks in your life, such as a loss of income. Sometimes, it just helps to have an experienced and impartial point of view when it comes to you and your money.
Relationships and money
Everyone approaches money in a different way. Men generally but not always, look at money differently to women. Click on the image for an interesting article from the blogsite “thoughtstoliveby” that talks on money and relationships.
And a link to a psychologist’s thoughts on relationships and money from the website Psychology Today.
The Australian Securities and Investments Commission (ASIC) website moneysmart.gov.au includes case studies and ideas on dealing with money in a relationship. The article is currently under the menu item “Life events and you”. I’ve included the detail as well as the link as some government websites tend to change their links from time to time. Please let me know if the link does not work for you but in the interim you should be able to find it by clicking here.
I’d be interested in any comments or thoughts from readers on money and relationships. As strange as it may seem, a good deal of my time is dealing with the the relationship side of money rather than money itself!