Talking With Your Spouse About Money—Six Key Conversations to Have
May 28, 2021
May 28, 2021
If you are in a committed relationship, it is imperative to set aside time to discuss all important areas of your life, including finances. Here are six money conversations every couple should have.
1. Share your history.
You may feel like you know everything there is to know about your partner, but have you both come clean about your money habits? It is important to know where each person stands as you start making joint financial decisions, including listing all debt, from credit cards to student loans, so you can make a plan to tackle it together.
If your credit card debt feels overwhelming, one way to get a handle on it is to consider a personal loan. This is a helpful way to consolidate bills into one monthly payment—and often at a lower interest rate than you are paying with your credit cards.
2. Work on a joint budget.
Talking about all your financial realities is important so you can create an accurate budget, which you will want to do as you combine your lives. While it can initially sound stifling to have to live within a budget, it actually can be very freeing when you look at it as a way to determine what and where you can spend, not just where you can’t.
One method for budgeting that many couples use is called “50/30/20.” In this structure, you allocate half of your budget to “needs,” which include your housing, car payments, food, utilities, etc.—all those bills that are essential. Then you can direct 30% to “wants,” which include entertainment, home improvement, restaurant meals, vacations, clothing and other discretionary purchases. The remaining 20% goes to savings, from investment accounts to your emergency fund and any debt obligations you have.
Once you have an initial budget, live with it for a few months. Carefully track your spending to see where the money is actually going and adjust your budget if needed. There might be some surprises along the way—maybe you’re going from two rent payments to one house payment and have some extra “fun” money you can use to spruce up your current place, or on the other hand you might discover that your partner’s hobbies are more expensive than you thought. Work through any questions together.
3. Create a savings plan.
It’s exciting to plan your life together, and you probably have several goals, from taking a dream vacation in the next few years to having a comfortable retirement in the future. The only way to get there is to save from the very beginning —and the earlier you start saving, the more time your money has to grow.
Talk to a financial planner about the most appropriate investment vehicles for your individual financial situation and goals. And don’t overlook the importance of an emergency fund to take care of expenses that pop up unexpectedly, such as a surprise car repair bill or vet visit.
4. Decide if you want shared or separate accounts.
If you have been handling your own finances, it can initially feel like you are sacrificing some freedom to combine them. After all, does your partner really need to know how much you spend on your favorite hobby? Having separate accounts might seem like the answer, but it can also get tricky when you are splitting up your budget and bills. Do you do a 50/50 split? Or are there bills that belong to one and not both of you. If there is a disparity in your income, one solution is to have one partner pay the larger expenses, and the other the smaller ones.
However, a lot of couples decide it works well to pay bills from a shared account, and then allow each partner to have a designated amount of “fun money” to spend any way they choose.
5. Make sure you have adequate insurance.
Life insurance is a wise purchase as couples start their lives together to ensure your family is taken care of. Talk to a professional about the right kind for you and your goals. If you already have a policy, even a small one through work, make sure you have updated your beneficiary. In fact, this is a good time to go through all your various accounts and make sure you have added your spouse.
You should also compare health plans to find the one that’s most cost-effective. If your employer provides insurance, run the numbers on the cost for each person to stay on their respective plans or cover both through one employer. Do your research to find the one that provides the best options at the most affordable price.
6. Celebrate your money wins and keep the conversation flowing.
While it can be hard to talk about money, starting your future on solid financial footing will be a gift that keeps on giving. Put a regular money date on your calendar and plan a fun activity, like dinner at a new restaurant or take-out in front of the fire, and put a few minutes of money talk on the agenda. Discuss any budget changes or new financial goals and bring up any issues that have arisen, like that parking ticket, so you know you’re addressing them on an ongoing basis.
Successful money management involving bank accounts, credit cards and even personal loans should be the cornerstone of your relationship as it allows you to do all the things you want to do today and in the future.