Moving forward in a relationship includes surmounting a few hurdles along the way. It is said that if the two people are financially compatible, among other things, they are ready for the next level in a relationship. But what does it mean to be financially compatible? Your relationship with money will significantly influence all your other relationships. If you wonder how highly effective couples manage money in a relationship, it may not surprise you that it all comes down to knowing each other well. And what better way for that than an open conversation.
Money Talk or Pillow Talk: Can You Have Both?
Whether they admit it or not, most couples are reluctant to bring their relationship to another level because of money concerns. Here’s a hard truth: money makes every commitment more serious. Even though the marriage may not be among your short-term goals, moving in together does bring you closer to it. And that is often the moment when couples feel the need to present a token of trust in each other, starting with The Conversation. After all, what can go wrong? If the moment is not right, well, almost everything.
However, make an effort to create an opportunity to talk about your financial plans, home budget, joint bank accounts, and other ways to manage money in your relationship. A time when you’re both relaxed and in no hurry would do. Avoid talking about finances when you go to bed, though. It’s always better to start the day with an important conversation than to end it.
Communicating about finances doesn’t have an alternative, whether you live in abundance or not. Agreeing on daily expenses matters as much as agreeing on capital investments. Also, accepting your partner means accepting their money personality. If you don’t make talking about finances a taboo, you’re on an excellent road to building a strong, committed relationship.
For example, have you talked in your relationship about how to borrow money if it is required? Would you borrow from friends and family or from a financial institution? What are interest rates and how does that work? These are important things to consider when you are having a money talk with your significant other.
Ways to manage money in a relationship
There are no two relationships alike. The deal that two people make is unique to them and them alone, and it extends to their financial arrangement. How you’re going to manage money in your current relationship depends on several factors.
- How well you know each other
- Inherited financial values
- How much you both earn
- Your previous experiences
Even before you get married, financial considerations are important and will set up the tone of your relationship. It is better if you make them once you get to know each other well. Until you do, keep your finances separate.
If you have decided to bring up the money talk, you likely already have a clue of what kind of money personality sits across from you. However, it would be a good course of action to suggest a few agreeable ways to manage money together and see where it takes you.
If we needed to generalize couples’ financial management habits in a relationship, we’d say there are three types.
Two bodies, one account
A joint account is an option for generous people whose only concern is the wellbeing of the other person in the relationship. When two individuals see themselves as a part of a whole, they decide to join incomes into one account. Most of the time, the focus of the relationship is not on the money itself but on what you can buy to make each other feel comfortable, happy, and appreciated.
Problems may arise if there’s a significant disparity between the two incomes. A party that earns significantly less may feel burdensome, or the other party may feel exploited. However, bear in mind that circumstances change and that there is always a possibility that the once breadwinner may start to depend on the other person. If you look at joint accounts as a way to support each other through everything that life may bring, your overall financial (and romantical) balance will be easier to achieve.
Finally, before you decide to authorize each other for your bank accounts, double-check which payment type will help you stay within budget as it may happen that out-of-sight-out-of-mind isn’t the best option for you. Namely, as long as you’re not taking money directly out of your wallet (using the shared account for online purchases, for example), you may feel detached and less concerned about your spending habits.
Don’t care to share
Sharing an account is not the only way to show trust in a relationship. Sometimes it is not even healthy. When two individuals decide to keep bank accounts apart, it may even be for the best. Owning an account gives a person a sense of control over things they can influence, and there is nothing wrong with that. When a significant other enters the picture, some important adjustments are in order, but they don’t necessarily need to involve combining finances.
Specifically, if one party’s credit score leaves a lot to be desired, joining accounts might negatively affect the other party’s otherwise acceptable score. This becomes extremely important once the couple decides to jointly invest in a property. As uncomfortable as it may be, talking about debts, poor money management, or low income will help you make the best possible decision as a couple. And most importantly, it will make a solid basis for your relationship you can build upon.
The Contributors
Keeping your personal bank accounts separate but creating one that you both can access is a way to utilize the pros and avoid the cons of both previous options. A fair option would be for each partner to contribute to this shared account in proportion to their monthly income. It is good because both parties feel equally burdened and thus more appreciative of each other’s contributions. Moreover, it makes for a much easier way to manage money in a relationship if you change jobs.
You’ll both be able to participate in the bills and other mutual expenses, sharing the burden fairly. What remains in your separate accounts you can use for the things that matter to you only. At the same time, you invest in your relationship and its future and keep an important sense of personal freedom. If joining income makes you feel like your final bastion of independence is falling, remember it’s always possible to find common ground.
When you sign the deal
Getting married shouldn’t change your relationship in any significant way. What happens after you sign the papers stems from the understanding you had before getting married. Although, you are likely to experience some (un)planned expenses. What are the most common financial challenges you might face as a married couple?
Buying a home together
The biggest, most vital, and financially challenging investment in a marriage is a home purchase. Putting your savings in a joint account will allow you to invest in a property together, find movers to help you have a successful relocation without breaking the bank, easily pay off a mortgage, and feel more financially equal than ever as you start your life together. After all, it’s all about balance in a good lasting relationship.
However, you need to be aware of each other’s credit scores and how they may influence you getting an adequate home loan. If your combined credit score does not suffice, it may delay your purchase. At worst, you may lose your dream home to someone else.
The kids
Starting a family should be a financially educated decision. Talking to other couples with kids will help you figure out how much of your monthly income you will need to set aside. The only way to make sure your little ones have everything they need is to formulate a sound financial plan before they arrive. So, what should you include in your budgeting?
The most significant part of your monthly expenses will be daycare, in case you’re both working parents. It’s followed by diapers, clothing, food, toys, and child accessories, in no particular order. Splitting the costs may involve proportional contributions or fairly deciding who pays what.
Who takes care of the household expenses?
Being aware of your spouse and family when making any critical spending decisions is pivotal in making sound financial calls. But you don’t have to be both financially savvy to properly manage money in your marriage or a relationship. Only one of you will need to manage your household budget and steer your spending in the right direction. If one of the spouses doesn’t have enough skill in managing the home budget, it’s better if the other one tracks the flow of money in the house.
You should keep all purchases in the open or, even better, in an Excel spreadsheet. For that purpose, it is vital to be familiar with the family incomes, spending, and savings. You can authorize each other for your separate accounts, too. Even in this case, individual accounts work fine as long as you openly communicate.
To properly manage money in a relationship, you need to invest – in your relationship
A good marriage/relationship is based on mutual respect of your personalities, needs, and effort in maintaining a healthy bond. If you recognize all these elements in your current relationship or marriage, talking about finances won’t be as stressful as you might think. If you both invest in openness and fairness, your relationship will reap hefty rewards.
Life can be challenging. Managing money in a relationship can also be challenging but it doesn’t have to be. Understand these 6 tips to help you manage your money together.
