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We all know that being a part of a couple takes work and that open, honest communications is key! We read an interesting article that spoke about how individuals choose their partners and that often times, we match with those who have similar interests and values as ourselves. However, while this may be true, Jenny Olson, an assistant professor of marketing at Indiana University who studies couples’ financial decision-making, found that “when it comes to money-management styles, opposites do attract.” As financial advisors, we have seen many cases where two partners have different backgrounds and relationships with money. It is very common for partners to have different approaches to their finances, but it’s important in how they to approach the merge them.
In order to have a relationship that is strong financially, as well as emotionally, remember to regularly discuss and review your finances and goals to help make sure that you and your partner are not only on the same track, but on the right one for you as a couple. When you become serious with your partner or even get married, many couples have to sit down to talk about both their relationship with money and how the merging of finances will work. While we know its not easy, its important in order to avoid financial lies. In fact, we read an interesting article that said financial lies between partners are way more common than you’d think. The study from Forbes Advisor found that the top three financial lies American’s tell each other are relating to debt, spending and large purchases, and spending patterns. While you and your partner may not have the same spending habits or relationship with money, but finding a happy medium or compromise to allow honesty is extremely crucial.
At Sherman Wealth, we work with many newly weds, young professionals and couples on the merging of their finances and how to find a medium that works for both parties. As we have said time and time again, communication, transparency, and honesty is key to a healthy relationship, especially as it relates to finances. We know money conversations can be awkward and uncomfortable, but they really are necessary for couples wanting to build a financial roadmap.
So, let’s take a look at some important topics couples should regularly review and discuss.
- Retirement Plans – If you’re a young couple, retirement may not be your top priority, but remember – through compounded interest – a small amount invested now may go a long way in the future. Be sure to reexamine your goals and your portfolio to make sure that you’re both saving enough for retirement and your asset allocation is appropriate given market fluctuations and volatility.
- Life Insurance – While not a pleasant topic, it’s important to discuss with your partner what will happen in the event that one of you passes prematurely.
- Wills and Trusts – Like life insurance, wills and trusts also are important for protecting your loved ones. They’re especially critical if you have children, or a significant amount of assets.
- College Funds – If you have children, or are considering having children, you definitely want to discuss your thoughts on college and how much you as parents want to fund it, if any. Discuss a saving strategy to help pay for college tuition.
- Health Insurance – Make sure that you and your partner are both covered, and that you understand the differences – and overlaps – in your plans. Is there any unnecessary overlap? Should you purchase more coverage to protect yourself?
- Major Purchases – If you are planning to make a major purchase such as a home, or a new car, you’ve probably already talked with your partner about it. You may not have talked about how you’ll pay for it though! Talk through these goals together and set realistic strategies to achieve them.
- Monthly Expenses – Review your expenses each month to see where you can make changes and cut back. Consider making a budget together to make sure that you are allocating your income in the best possible way for both of you.
While financial topics can be difficult to discuss, they’re an important part of a happy and successful relationship. As mentioned prior, here at Sherman Wealth we help couples facilitate these conversations, especially when it comes to merging finances and creating combined goals. Make sure that both you and your partner are on the same page when it comes to finances, and set short and long term goals together to help keep you both on track.
If you need help going over your finances or coming up with a plan, you may want to seek working with a financial advisor to help point you in the right direction, based on your own goals, and help facilitate difficult, but important, discussions.
Related: Wealth Building for HENRYs: Strategies for Saving and Growth