Moneytalks: Financial conversations to have BEFORE shacking up
By Allie Eklund
Whoever decided discussing money is taboo was wrong. Flat out wrong. Finances are a fact of life, making such conversations a necessity, especially when you’re considering shacking up with your significant other.
Miscommunication about finances is a leading causes of stress, dissatisfaction, and ultimately separation in relationships. I use the word “miscommunication” because we miss the mark in not talking about money.
It’s all too common for one unit of the relationship to take charge of financial affairs, while the other takes the backseat. This creates a perilous equation that subjects the lesser financially savvy partner to major risks.
Ladies, I’m looking at you. Why? Because too often women are the ones to take a backseat approach to the family finances. I’m not talking about paying monthly bills. I’m talking about the fully monty- all numbers, all accounts, all assets laid out.
Before shacking up with bae, consider the following financial conversations:
1) What is worth spending money on in life? What are your non-negotiables?
Once, a guy friend explained to me that there were two things worthy of spending big bucks on in this lifetime: toilet paper and socks, non-negotiable. Needless to say, we were only ever just friends. Discussing what’s worth it right up front is vital. Perhaps going on really amazing vacations every year is important to you. This is important to share. What if your partner thinks traveling is meant for later years?
Another example is the decision of buying a new car versus a used car. Some love that new car smell that permeates the nostrils, while others are sick with the thought of losing 10% of that new car’s value immediately after driving off the lot. It’s okay to have different values and beliefs about what you spend money on, but these values should be known beforehand. Set the expectations for one another by asking, “what is most valuable to you?” or “when does quality over quantity matter?”
2) How is your credit?
Thank goodness I didn’t marry in college. I will never forget receiving a phone call from an 800 number during my college graduation party. “Ma’am we are calling to remind you that you have an outstanding balance of…. and we haven’t received payment in two months.” Just when I thought I was adulting, I wasn’t. It took me over 12 months to earn my “good” reputation back with creditors for a mistake I made in 2 months. Learn from me, please.
If I were to get married tomorrow, my credit score that I have worked so hard on since graduation would now be subject to my other half’s credit as well. Once a union commences, your partner’s credit is your credit. Credit gives you options, and if your partner isn’t so great with plastic, this can make life decisions that require financing very difficult. Average American credit card debt hovers around $7,200.00, with a debt level of $8,200 being the threshold for what credit experts call “unsustainable.”
On the contrary, there is a portion of our population that refuses to deal with credit. Usually this comes from having a poor experience whether with a family member or perhaps self inflicted, and now they’ve wiped their hands clean of credit cards. Yes, having no credit is a lesser evil than being bankrupt, but it’s not ideal.
Take-away? American consumer credit behavior isn’t healthy. It would behoove you to check in about exactly what credit is used for and how much debt is outstanding before two become one. Asking to see your partner’s credit report may be the most unromantic thing you could do, so perhaps ease into this conversation by asking “how do you feel about buying on credit?” or “what have you borrowed money for in the past?”
3) How much money do you regularly save?
What if money burns through their pocket quicker than you can call 9-1-1? Easy solution: save together. Make mini-goals that are attainable for specific time frames. Saving money together can be one of the most rewarding accomplishments that couples can do together. Perhaps it’s saving for that first down-payment, or the European backpacking trip you’ve always dreamt of together, or just a weekend getaway you both need. Prioritizing your savings goals is a great way to start.
In my experience with saving money, I am more successful when I vocalize my goals to others. By doing this, I am allowing others to hold me accountable. Writing down how much I will save in a certain period of time and breaking down how it will be done is my personal formula for successful saving.
We can all attest that life happens, sometimes not on our timeline. It’s widely recommended to have 3-6 months living expenses saved as an emergency fund. Knowing you each have a specific area that is designated for life’s most unanticipated expenses will give each of you peace of mind. This conversation can be fun if you choose. Try inquiring what your partner is saving money for currently, and consider making a plan to save together.
4) What is your experience with investing?
Understanding one another’s investing experience(s) and habits or lack thereof is very important. Remember: opposites attract. This means you may be with someone who has an entirely different view and risk tolerance than you. When planning on how you and your partner will get to the white sand beaches of retirement, remember that planning paired with communication is imperative. It’s not only important to ask what your partner has in the way of investments (IRA, 401(k), annuities, brokerage accounts, etc.) but also what expectations and emotions they have regarding the investment process.
Discussing education around investing is also imperative. This is not a conversation that either of you should dip out of because you assume the other has it handled. Relying on the other is a dangerous mistake too many people make. I’ll keep this somber example quick, but no one wants to be a grieving widow who receives a letter about financial mismanagement in that their deceased spouse forgot to change their beneficiary designation and you don’t receive any retirement money that you both have been socking away for decades. This happens. Approach this by finding out what the other’s experience is with investing, and analyze together what your portfolios look like. Doing an annual review together is a great way to stay on top of this conversation.
5) How will we pay bills?
There are many considerations when addressing who and how to pay for the day to day expenses of life. Each couple has a different way of making this work, and there isn’t a clear cut answer or formula to what works best, except that you must communicate about it. Discussing whether the two of you shall split expenses write down the line 50/50, or pay for expenses proportionately to your income levels, that is a conversation that needs to be had before you sign the lease or go into escrow.
Take it from Kelly Conroy, who bought a home with her then boyfriend, now husband:
“I’ve always been very particular with my money, so when I entered into escrow with my boyfriend, talking about money was top on my priority list. Luckily, real estate forces you to be upfront with your financial status, but it took some time (and a marriage proposal) to really dive into the details.
For at least a year, we struggled through the process of forming our financial union. Everything was up for discussion – which bank we should use, which accounts we should close or open, how much fun money we were allotted, minimum savings, debt payoff plans, etc. Shortly after we began shifting our money around, we ran into problems like accidental overdrafts or forgetting that a bill was automatically charged to an account that we weren’t using anymore. These small mishaps added stress to an already frustrating process, so we decided to set regular money meetings.
Every Wednesday, we sat down with all of our financial information and reviewed every single transaction. It was annoying and painful at first, but these regular meetings forced us to plan our financial future and find our common goals (travel, mostly). Two years into marriage, we are both so in touch with our finances that we barely even have to look at our bank accounts anymore. It came with a lot of arguments and what seemed like never ending weekly meetings, but today we are on exactly the same page and working toward the future we want.”
If money is the white elephant in the room for you and your partner, consider the conversation an opportunity. It’s an opportunity for your relationship to become closer, and more connected. If you’re going to lunge into this conversation, lead with your heart. Remember that tone is everything: “10% of conflicts are due to difference of opinion and 90% are due to wrong tone of voice.” Asking the “how,” “what,” and “why” can easily be conveyed as aggressive. Try asking such questions from a place of genuine interest. Remember that we weren’t all raised the same and share exactly the same experiences and expectations.