Ah, Valentine’s Day. You exchange love, gifts, and… bank account numbers? Maybe not. But as you get progressively more serious in your relationship, there comes a time when you’re going to want to start talking finances. Love and money go together like peanut butter and jelly. Here’s why.
Let’s say you and your partner are interested in opening a joint checking account. Maybe you split the bill a lot, share living expenses, or are just interested in combining forces financially. Opening up an account together can be disastrous if you don’t have a few frank financial conversations beforehand.
But if you do talk money and investment goals with your partner upfront, not only will you take out a lot of the mystery behind merging finances, but it’ll actually benefit your relationship. So where do you start tackling money and relationships? Glad you asked.
Step One: Get Real About Your PFPs
In order to chart an easy course in any relationship, it goes without saying that you and your partner should generally be on the same page. That’s not to say you need to have everything in common down to your Netflix queue, but you probably want to have some general values in common. Included in those values should be what we’ll call “personal financial philosophy” (PFP).
Having similar PFPs will make your life easier in general, but it will especially help when it comes to combining your finances or budgeting together.
If you’re hard at work paying off your student loans while your partner is going deeper and deeper into credit card debt, you probably won’t be too pleased when they decide to buy a $350 pair of sneakers instead of contributing to the electricity bill. Or what if your partner isn’t in debt, but also isn’t saving for the future?
Do you demand their credit score? Break up? Panic?
We’ll take a step back.
The trick to talking about love and money isn’t to interrogate your partner. After all, talking about money can be a dicey issue in the first place. If your relationship is pretty green, approach the topic from a general perspective. Be transparent and say personal finance is part of your life and it’s something you want to discuss. Here are some key questions you can ask depending on what stage you are in your relationship:
Another good question is to ask your partner what their parents’ relationship with money was like. Nothing along the lines of, “hey, are you a trust fund baby?” Rather, attempt to understand where your partner’s financial perspective is coming from.
Keep in mind, you should be able (and eager!) to answer these questions for your partner, as well.
As you can see, the questions on the right are a little bit more specific and personal. We don’t recommend asking someone what their credit score is on the first date. However, if you’re in it to win it, these are the kinds of love and money questions that will be extremely beneficial to ask in the long run.
Step Two: Mediate The Differences
You might get lucky and discover that you and your partner are financial twins. But there’s a good chance there will be some discrepancies between how you two handle your dollars. Instead of freaking out, stop and contemplate those differences in the context of your relationship as a whole. There might be fundamental philosophical issues between the two of you that are deal breakers (i.e. “I believe you should pay for all the necessary stuff and I want to spend all of my money on craft beer”). But, more likely, when it comes to money and relationships there will be a lot of room for compromise.
For instance, you might already have several investment accounts open while your partner has never even contemplated the idea of saving and investing money — but that doesn’t mean they’re not open to it. Likewise, maybe purchasing an apartment has never been on your radar, but now that your partner has brought it up, you want it to be. The differences could even be as simple as realizing one person spends more than the other person would prefer by a marginal amount. These are all love and money “problems” that can be easily solved through open-mindedness and candor — leave emotion out of it.
Keep things honest and straightforward. Even though it’s easy to get defensive while discussing finances, try your best to be logical and non-accusatory — especially when you disagree on something.
Step Three: Create A Skeleton Budget
Creating a smart budget with your partner can be shockingly intimate. Granted, it’s probably not as much fun as cocktails and a movie, but it is a way for you two to share a super important experience.
Some couples find it helpful to automatically split up their paycheck, keeping 30% (or 40, or 50, whatever) for themselves and depositing the rest into their shared account. This way, you have a set amount of money that your partner never touches, and your partner and you never have to run purchases by each other that one of you might consider frivolous. This is certainly one way to combine finances, but it’s pretty drastic. You may find it’s more helpful to hammer out your specific expenses and to only contribute that set amount of money.
Sit down with your partner and write out a list of the expenses you share. For example:
- Utilities — $30/M
- Streaming — $50/M
- Groceries — $300/M
- Going Out To Dinner — $150/M
- Travel — $400/M
Budget for whatever you spend together, including purchases that may be infrequent, such as travel. Budgets are general estimates, not an exact science, so some months you may come under budget, some slightly over. That’s okay. Keep in mind: you can share these budgets in common but still maintain separate accounts. Sharing one checking account is often more convenient for bill paying, but it’s totally cool if you and your partner figure out a way to have your budgets in common without sharing a bank number.
When you’ve tallied your basic expenses, start discussing your long term investment goals. They might include:
- Buying a house
- Saving For The Education Of Currently Nonexistent Children
We know, we know. You may not have a ton of cash right now, and these seem like lofty, distant financial goals. But believe us, you can never be too premature in setting them. That’s because the sooner you invest your money, the higher the probability of compounding.
Now, let’s talking about handling investment money…
While you may feel fine setting up a joint checking account for monthly expenses with your partner (after all, this is money you’re spending in the short term), it’s totally normal to feel really hesitant about getting into long term investments together. If you want to, more power to you. But there are married couples who don’t even do this.
Instead of opening up a joint savings account, each of you should discuss the combined savings goals you have on your separate accounts. Be honest with each other, knowing that one day you very well might combine the money made in your respective accounts for shared financial goals.
Once you’ve discussed your accounts, voila! You’re done. Now you don’t have to beat around the bush or be passive aggressive with each other about where your earnings are going. No more “do you really need that workable BB8 droid?” (yes, yes you do) or silently worrying that your partner doesn’t think at all about their future. You have a tangible, smart budget you can utilize now and investments to cash in later.
Money And Relationships: Bottom Line
Talking about money is widely considered a mood killer, but it shouldn’t be. Getting honest with your partner about your financial goals helps you get to know each other better, pushes you toward a concrete discussion about your futures, and allows you to introspect about your own financial decisions.
You can do this.