Most people would rather spend their time on something other than finances and money management. Budgeting is a bane and allocating an annoyance. But as exasperating as it may be, for 99 percent of the population, it is completely necessary. And it is a necessity that only ramps up in importance when you share the finances with another person.
Money management can often make or break a relationship. Because money is typically linked to emotions, salaries and spending can be a touchy subject. However, when you are in a long term relationship, you and your spouse or partner should have the budget talk pretty early on.
Why Talk About Finances?
When you get married or enter into a long term relationship, you are now sharing a host of things. You and your forever roommate will now share bills, debts, and likely incomes. Keeping your finances separate may work for some couples, but it is not ideal nor likely to last.
In an effort to avoid arguments, unpaid bills, and financial crisis, you will need to devise a financial plan with your partner. Helping to know each other's spending habits, creating a joint budget, and having money goals will hopefully help your relationship be smooth sailing.
After all, behind infidelity, financial problems and disagreements are the main reason for relationships demise and divorce. Steer clear of these pitfalls and increase your chances for a long and healthy relationship.
Decide if you want to have a joint account. While most individuals entering marriage decide to link their bank accounts, at least to some extent, this can largely depend on what you are bringing to the table. Those with a surplus of funds, an excess of debt, or having had a previous marriage may choose to keep their finances separate.
However, as you will be sharing the bills and expenditures, in most cases it is easier to combine accounts. One popular compromise is to retain separate bank accounts but have a shared account for bills and household expenditures. This allows both couples to contribute to maintaining the necessities but retain money for their own spending habits and financial goals.
Learn the other person's money habits. This is especially true if you are combining bank accounts. Additionally, learning what is important to your partner and what constitutes as their kryptonite regarding spending will help you devise goals and a budget.
Early on, you can garner clues about how your partner spends their money. Most people don’t want to be grilled about their debts and income over sushi on the first date. But by watching what they spend their money on, learning about their aspirations, and their upbringing, you can get a general sense of how they spend their paychecks.
Once you are ready to dive into the nitty-gritty with your one true love, you can ask them the hard questions. This includes whether or not they have a budget and do they use it, do they have any debts or loans, and even (gasp) their credit score.
Even if these results are less than appealing, you probably don’t need to bail on the relationship immediately. Try to get a feel for what they are currently doing to improve their lackluster financials.
Make plans. It is probably safe to say that you both have goals; goals that will cost money. It may even be likely that some of your goals are the same, such as paying off student loans or buying a home. Sit down with your soulmate and flesh out some of these dreams and how you plan to achieve them. In the end, if you combine accounts you have to jointly contribute towards these goals.
Create a budget. Perhaps the least fun part of the whole relationship and finances hurdle is creating a shared budget. Determine what bills you have and plan for recurring expenses, decide what goals to work towards and what debts to pay down. Next, decide on your financial responsibilities. Go over incomes and who is responsible for paying what and when.
If you have a shared account, budgeting may be both easier and harder. You and your partner may have different salaries. However, this likely should not, and dare I say does not give the higher earner the right to make all the financial decisions. Both people will need to contribute to the budget in equal proportion to their income. It may be easier to designate money from a shared account towards payments, groceries, and utilities, but it will be harder to maintain personal spending.
If how your partner spends money drives you mad, you should first talk about it. But then, maybe create an allowance account. Once all of your common expenses are covered by the funds in your shared account, you can set aside a little money in your allowance account. This can be used for your personal purchases no questions asked.
Financial flare-ups in a relationship aren’t uncommon, but they shouldn’t be frequent. Be sure to have open lines of communication about your money and work together to find solutions. Nickel and diming the other person or berating your partner for overspending at the breakfast table probably won’t end well. Share all things equitably, just like you now have to share the bed or that box of Fruity Pebbles.
And away we go
This is the beginning of a beautifull friendship. In the meantime, are you curious to know what emotions drive your spending? Take our quiz to find out