(Article by Zach of All Trades)
Money is a sensitive topic for most. It’s a big taboo in our society to talk about how much you make or ask others about what they make. For some reason it’s fine to talk about a stock tip or a business venture, but to actually talk about how that tip or that venture affected your bottom line? Scandalous.
Things get even more uneasy when feelings are involved. When you’re emotionally involved with someone, perhaps even thinking about spending the rest of your life with that person, it can be difficult to bring up the subject of money. At the very least it’s unromantic, but it is ESSENTIAL if you want to create the best possible life together.
Many people are afraid their financial situation will not measure up to what their significant other is looking for. In such insecurities, one might have fantastical ideas about how rich the other person is compared to them and over value what they really have.
Bottom line, until you talk about finances, it’s all smoke and mirrors and uncertainties. Just because he takes you out to a nice restaurant doesn’t mean he’s loaded. Just because she has a great job doesn’t mean she manages her money well. In this world of shifting gender roles, both sexes have the opportunity to be big earners and it’s important to consider the ramifications of income imbalance, sharing debt, sharing credit, and the nitty gritty of each person’s financial history.
Talking about money does not have to be scary. Quite often, it is relieving for both parties because it brings understanding into the fold. That is KEY in any relationship. The richer party is relieved that the poorer party actually understands the value of their money and the poorer party is relieved the richer desires a relationship with them even though their finances may not be great.
When you first get into a relationship, a lot of focus is placed on what YOU want. Does this person have everything YOU’RE looking for? Do they look right, sound right, spend right? Once you’re in a committed relationship, the focus has to change. It becomes “Are WE right?” Do WE look right? Do WE spend right? You’re a team! Two are always stronger than one and often the two sides can balance out where the other is lacking.
By getting together, you can cancel out one another’s draw backs and arise on the other side stronger than you were. This is why being open and communicative are so important when talking about finances in a relationship. Don’t think about what is best for YOU, think about what would grow your future together in the best way for BOTH of you.
Setting Ground Rules
Once you know where both of you lie on the financial spectrum, talk about where you’d like to be, what financial roles each of you are comfortable with playing, and then set up some rules for each party to adhere to. OOooh, Rules! That sounds so romantic!
Eventually you have to ask yourself if you want more drama in your entire life though, or if you want to grow up and be fiscally responsible. The romance is still there, but if you don’t get serious about every part of yourself, how can you truly be serious about the relationship?
Here are a few great rules:
- Set a limit on spending. If something costs more than $200, then it must be discussed with the other person first before a purchase is made. You can set whatever limits work for you guys, but this is a good ground rule for shopping and understanding how the other person thinks about value. (Editor’s Note: This number is $100 in the J$ household, although J$ tends to forget sometimes ;))
- Come up with a joint savings plan. Review what both of you have in the bank and talk about your plans on saving for the future. When do you want to retire? How much cash flow do you need? You’re now calculating a budget, cash flow, and net worth for two!
- Rejoice in goals reached. Creating milestones for you to make as a couple allows you to celebrate when those goals are reached. You’re not celebrating for one or the other, you’re celebrating for the BOTH of you. You, as a couple, have managed to make it!
I hope you found this post useful!
Guest Post by Zach of All Trades over at The True Generalist. I’ve been following J Money’s blog for a while and was inspired to start my own PF blog over a year ago. Now I’m moving everything over to a new site with a new goal. I’ll still talk a lot about finance, but also about Travel and Writing and doing many things in life at once. For those of you who find it difficult to FOCUS on one project for a length of time or pick a path in life, I want to help YOU. Come on over to The True Generalist, we just got started. You can also follow me on twitter @Zoracle or Like us on Facebook.
(I also made that heart dollar up there, do you like it?)
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I think the hardest thing with dating is if one person tries to impress the other and goes way over their normal spending budget to do so the other person may think you’re loaded or constantly expect that. While I think splurging on a nice date is fun every once in a while it is probably best to let them know this is unusual and special because you normally can’t afford something like that so they don’t come up with unreal expectations.
Luckily my girlfriend and I were dating in college so we fully discussed everything as far as money goes with our loans and our first jobs pay etc. There are no surprises and we are fully aware of each other’s financial situation!
Any relationship, to be successful, needs harmony on three or four key issues. What those key issues are might vary from couple to couple, but everyone has a short list of key non-negotiables. Anything not on the list is subject to negotiation of some sort.
My wife and I are very fortunate that for both of us money is on that list, and we both fully subscribe the the classic model: modest expenses and no debt. She’s a lot more conservative when it comes to money (explain to me again: just exactly what is wrong with an envelope under the mattress, dear?) but she has come to the point where she realizes I’m not going to invest it all in Enron or some get rich quick venture, and so she does the household finances and I do the investments. And we’re both happy – next month is our 40th.
But we’ve seen other couples who never figured out (a) money is one of the hot issues for them and (b) they are not on the same page. Some of those relationships have survived but, sadly, not the majority.
So, if it’s going to be a deal killer, better get it out in the open as early as possible.
That said, I love the three rules you listed! Like J, our number is $100, except when I buy her gifts. Then I can shoot the moon with no consequences! ;)
I think you assumed here that couples will want to have joint finances. That’s true for me but as I’ve learned by writing about it on my blog, many others prefer partial-pooling (and a few separate).
My husband and I never make purchases outside of our budget without consulting the other person! (Effectively, that means anything other than groceries and gas.) An errant $100 could easily break our budget. Really, we just don’t spend much money electively and when we do we talk it over and find how to pay for it.
I wish we could do more financial goal-setting (and celebrating) now, but the main goal for both of us is GRADUATE and then see where we have to move / what we’ll be making.
I think it’s so important to talk about your finances and tackle money as a TEAM if you’re married or in a serious relationship.
I generally disagree with married people having separate finances, although I understand that there are times when it makes more sense to keep separate accounts. Still, you’re a team, and that money should be managed together.
I always wonder how a person would react if their spouse with a separate account ran into money troubles. “Oh well, too bad for you. I’m going out to eat.” Seriously, I think most spouses would help the other person out anyway, so why not combine?
The money talk came really early for us, I think we had that first talk when we were still dating, even before the relationship turned serious. It’s a subject that’s been always important to me and it was also important to him, so we didn’t consider ourselves in a grown up relationship until we got “the talk”.
Our budget is so carefully design that includes how much money we both can spend on gifts to each other, we do not need what he’s getting for me but sure I know how much he spent on it and if the gift exceeds the budget for some reason, then it counts per whatever celebrations we have ahead until it’s covered by the budget (my ipad counted against mother’s day, anniversary and my birthday)
We still splurge from time to time (hello 1k birthday party for our baby’s first year!) but we’ve been keeping our finances on track.
I think two people in a relationship should talk about money and know how much they have and where it goes. How each person handles their money is their own decision. I love money/borderline obsessed with money, so that means I get to pay the bills and watch savings. It doesn’t mean my hubby doesn’t know what’s going on, it just means we choose to have me handle everything. Yes I like to know where all of the money goes, but I won’t ask specifice questions if it’s for a gift or night out with friends. I usually don’t even know about gifts or things of that nature because my hubby likes to have a paypal account for that stuff. Makes it easier for both of us :)
I think it is crucial to talk about money with your significant other. And most importantly be honest about it. Of course, I don’t think this should be a first date topic but when the relationship gets serious and there is potential for marriage, you need to talk about it. I know that money is a sensitive topic for a lot of people but if you can’t openly talk about your financial situation before you get married, well there’s going to be a lot of surprises in your marriage.
This is a great post! Money can be a very uncomfortable subject for couples to talk about, particularly if you are only dating. However, if you are planning on becoming serious with your partner, you have to talkl about it – particularly if you are going to get married. Money problems are the number one cause of divorce. I’m sure that many of these problems could have been avoided had the couple been more open about their money before marrying.
@Lance Way to go on staying open with your finances in your relationship! Alot of guys do fall into that trap of trying to impress, but by being impressed with the surroundings and other subtle actions, you can let her know this isn’t an everyday thing for you.
@William 40th! Congratulations! With money being one of the top reasons for divorce, you guys have been able to realize what the majority have missed.
@Emily While I do think combing finances promotes a closer and stronger relationship overall, there are some things even I want to keep separate. For instance: my student loans. I have been chiseling away at those puppies for years and I feel it’s MY beast to slay!
@Erin A great point! You’re a team now and the wide receiver needs to know what the quarter back is doing otherwise that hail mary pass is going nowhere. (anyone else excited for football season?!)
@m1nts Sounds like you have quite the system there! Without the system, if he would’ve just given you a gift and said this is for mother’s day and your birthday, you might’ve been a little hurt, but because you have a SYSTEM, you both knew what it would entail and it keeps people from getting upset.
@LB This is another way to do it: assign roles for each person. This is actually how my parents do it: my mom pays all the bills and tracks their spending, while my dad does the investing. They are constantly discussing where they’re at as they head into retirement.
@J C alot of surprises indeed. “Oh, btw, it was all a trust, I’m actually broke.” ;)
@Greg Thanks! It’s so essential! Trying to be an example for Money-Openess, I follow J Money’s footsteps by posting all my finances each month to TheTrueGeneralist.com
Great suggestions. I think talking / dreaming together helps you figure out if the person you are with (dating-wise) is on the same page as you when it comes to financial goals. Then you can figure out where you can trade ideas and compromise.
@Jenna Totally! I like the addition of “dreaming together”
Combining finances in a committed relationship is not always easy–especially if one person is a “spender” and the other is a “saver.” You touch on really good points, such as coming up with a joint savings plan. This doesn’t always mean joint acounts. Retirement accounts are not joint. I can’t tell you how many times, I’ve explained to women that your husband 401(k) is not YOUR 401(k). You don’t have access to it.
I thought you offered some great tips :-)
@Ornella Thanks! And yes having a “spender” in the relationship can be tough. By planning together for your future, that person can at least see how much money is needed for retirement and perhaps curb some of those overspending habits. Good Point!
We use a family meeting where we look at the bills, investment statements, and goals together. This helped us open up about money and talk freely. It also made it so that we weren’t in “Fantasyland” about what the other was doing. Great tips here!
I basically manage the finances in our house. I set aside money for savings, bills, etc. My husband knows a high level strategy, but I am the strategist and executor. I would try to go over bills with him, but I’ll bore him to death. He has access to accounts, etc. Everything is open. We might have to relook at this system in a year, but so far it’s working.
@AverageJoe I like the family meeting approach. Yep, never good to be in FantasyLand when it comes to numbers. They give you no leeway!
@Savvy Sometimes this is the case, one person is just not interested in the finances. It’s good that you are and I think you’re right on relooking at it later. As soon as he wants something you guys can’t afford, he’ll probably start taking a second look at the bills and expenses. ;)
I think it’s absolutely essential for couples to thrive that they have to be pretty close to the same page financially. They don’t have to make the same amount, but they need to have essentially the same spending and saving habits, otherwise there can be major tension. Just like a lot of aspects in a relationship, communication is key.
@Budget I think life IS easier if you have similar habits but it doesn’t HAVE to be that way. Regardless, communication IS ALWAYS key. That alone can be tough for some. Sometimes it helps to ask the question, “Okay, what did you just hear me say?” ;)
Wow, this has been a great day of comments and interesting discussion. Thanks to J Money for allowing me to guest post on his blog and thank all of you for reading it and having some great input!
Love and Money both are fair. Talking to your partner and planning together will always help in setting your financial goals.
Thanks again Zach! Great great discussions going on for sure – appreciate the time you spent in both writing it up AND responding to everyone. Gave me a nice break this week, appreciate it :)
And glad y’all enjoyed it too! Thanks for always coming to my site!
I was supposed to be a bridesmaid for an old college friend a few years ago when she called off the wedding – they’d never talked about finances, and when they did, it was a deal breaker for her!
@Neel, Agree 100%!
@J, My Pleasure! Hope all is going well with the $pawn and no more trips to the hospital! :)
@Elizabeth, oh my! Well that’s unfortunate, but at least they talked about it BEFORE they got married and realized they had completely different financial goals. Breaking up is a lot messier post-nuptials.