Let’s be honest: money is emotional and complex. It impacts nearly every aspect of our lives, and it most certainly impacts our relationships with our significant others. Since money is still such a taboo topic in our culture, miscommunications can create small cracks in the bonds of our relationships. Like a small crack in a windshield, it can expand over time and damage the entire relationship. However, it’s also true that small cracks can be repaired simply if they are identified and corrected early.
When thinking about finances as a couple, we must understand that we’re partnering two people with different backgrounds, experiences, goals, and values when it comes to money. A couple partnering their finances is essentially entering into a business partnership, with the exception that businesses typically have a formal written contract which stipulates the rules each partner must abide by. Most couples don’t have a written contract. In absence of one, we need to come together to have a common understanding of some fundamental questions.
Before we get into those fundamental questions, let’s be cautious about how we set up these conversations. Personal finance is just that — personal. When we’re having conversations about money, they can be extremely intimate. Inadvertently or not, they can bring up feelings of shame, defensiveness, guilt, and even anger. Do NOT corner your partner in an interrogation room Law & Order-style with a bright light to probe them with intimate financial questions. You want to create an environment that is safe, positive, private, honest, and free of judgment.
This is also not just one conversation, but it should be several and ongoing. Make it a finance date! We’ve created a checklist of items to discuss to make sure you can cover all your bases.
So let’s get to the questions! The following are five topics couples should agree on financially.
1. What are our financial values and priorities when it comes to money?
As we mentioned before, we have different priorities and values when it comes to money. One partner may view money through the lens of power and control. For example, they may be a meticulous planner and want to maximize every penny. The other partner may believe money enhances their experiences and relationships. They may see money as a means to see and do more. In this situation, one partner may view their partner’s financial behavior as controlling/limiting, and the other partner may view their behavior as undisciplined and wasteful. If we only view our partner’s behaviors through our own framework, we can create a purely biased and unbalanced view that can puts many small cracks in the bond. It’s important to discuss these views openly and come to terms with what your joint values and priorities are.
2. What are our individual and joint financial goals?
After discussing your values and priorities, then you can discuss financial goals. Goal setting is important individually, but it’s even more important as a team to ensure you’re both rowing in the same direction. Your goals have to be specific, written, and shared. An unwritten goal is called a wish. Can you think of any successful teams, businesses, or organizations that don’t have specific written goals? Come up with your financial goals individually and then bring them together to set joint financial short, medium, and long-term goals.
3. What is our plan for managing debt?
Misuse of credit is one of the largest contributors preventing people from building wealth. Debt is essentially present borrowing against future income. Unfortunately, too often people find themselves in a situation where their future catches up with them, and their new present is unbearable. Living paycheck to paycheck can create ever-present stress because financially, they are just treading water, knowing that one uncontrollable change could cause them to start drowning. Working hard just to pay off debt from the past and not be able to take advantage of opportunities in the present or save for the future can put a serious strain on both the individual and the relationship. Discussing current debts, and being on the same page in terms of debt that you may incur in the future (mortgage, business loan, student loan), is vital.
4. What is our plan for handling emergencies/loss?
You know the saying, $%*? happens! The question is not whether it will happen, but rather whether you prepared for it when it does. Having an emergency fund is vital for anyone, but that’s just a first step. Once you’re in a committed relationship and are partnering your finances, you need to discuss how to handle a situation in which one or both of you are disabled or passed on. If you think those are difficult conversations now, think about how much more difficult it would be with the absence of having had these conversations afterward. Don’t add financial stress to grief.
Life insurance, Disability Insurance, Living Will, Healthcare Power of Attorney, and organizing confidential paperwork and passwords. These are examples of items you can take care of relatively inexpensively which go to peace of mind.
5. What is our plan to build wealth?
So you’ve sorted your values, set goals, managed debt and planned for contingencies — now let’s talk about wealth building. Most people who work simply exchange their time and skills for money. At some point, they may no longer want to continue that exchange. Some people call it retirement or financial independence, but the goal for most people is to amass enough financial resources to have independent control over the use their time and/or talent at some point in life. The best way to do that effectively is to plan, save, and invest as early as possible. There are a zillion routes to get there; combinations of employment, entrepreneurship, equity investing, real estate investing, and inheritance, just to name a few. But you and your partner want to be on the same page in terms: what is the end game, how much do we need, and approximately how long will it take?
We created a checklist of items for your finance date. and we are also developing an online course with live coaching to help couples dig deeper into some of these topics to get on the same page financially.
The Money Speakeasy is about breaking taboos and tackling money topics for young professionals with no BS and no jargon. Money isn’t everything, but mismanaging our finances can impact nearly every aspect of our lives. Their mission is to create savvy consumers and wealthy producers who can become the CFO of their finances and achieve their goals. For more, check out their website and follow them on Instagram, Facebook and Twitter.