Money is one of the major sources of stress in a relationship. A study released by the American Psychological Association found that almost three-quarters of Americans experience financial stress at some point in their lifetime.
What causes financial stress in a relationship? Points of contention range from monthly budgeting and saving through to retirement and estate planning.
Most people base their money management philosophies on personal financial goals, but those don’t look the same for everyone. While we often talk about the basics of money with our partner, we don’t always discuss specific and important details until after the relationship is well-established. That’s not an ideal time to find out we’re not seeing eye-to-eye. There are ways to get on the same page as your partner about long-term goals, money management, and financial decisions.
Get Involved
In many relationships, one person finds themselves in charge of the broader financial decisions. However, in most situations, each person should strive for an equal partnership.
You and your spouse should both be involved in making personal finance decisions. Here’s why:
- Transparency is key. If finances are going to affect the both of you, every party needs to know what’s going on.
- You have the opportunity to hold each other accountable.
- You’re able to encourage each other to stay educated.
Finally, an equal partnership encourages regular conversations about financial behaviors that will ultimately affect your future, like spending and saving.
Goal Setting
The money discussion is an important one to have, even though it may feel awkward. Try treating your household like operating a business. Set aside emotion in order to get on the same page financially as your spouse.
Here are a few ways couples can get in sync and avoid money conflicts:
1. Keep separate individual accounts while having one joint account
For couples with divergent money values, like one prefers to save more while the other typically spends more, consider maintaining individual bank accounts for independent use and a separate joint account for shared expenses. This leaves each spouse financial freedom while giving them the availability and security of maintaining a budget together.
2. Create a realistic budget
Simple, but not easy. For one thing, expenses vary month to month. Chances are, if your relationship is new then you may not have settled into a financial routine yet. Take a top-down approach to your budget to determine the actual amount that you plan to spend over a specific period of time. Look at how much money you earned, subtract what you paid in taxes or saved, and you’re left with the after-tax amount that you can spend within a given time
3. Set joint financial goals
Discuss your long-term goals together. You may ask yourself, “What do I want to do in retirement? Where do I want to live? Do I plan to travel or have children?” A lot of couples find they have different goals, so the earlier partners start talking about this, the more time they will have to plan their financial future.
4. Tackle debt together
Often, people bring individual debt into relationships. It’s important to tackle individual debts as a team, even if the debt technically belongs to one spouse and happened before the marriage. Debt can affect both parties by making it more difficult to get a line of credit or buy a house.
5. Create a plan of attack
Prioritize saving, even when times are tight. Some examples are: maxing out a 401(k), opening a 529 account, or taking a different approach to your investments. Whatever decision is made, it’s important that plans are holistic and inclusive.
Your financial decisions might change over time, or with major life events. Discuss these things often with your spouse to make sure you are still aligned.
Remember that you don’t have to do this all at once, or alone! You can improve your financial health by taking one step at a time, and by working with an advisor who understands your short-term and long-term goals. Get in touch today with someone from Odyssey Group Wealth Advisors to discuss your financial future.
