By Ryne Vickery, CFP®
Brad and Jeff recently got engaged to be married and decided to move in together. As an officially committed couple, they took pleasure in picturing their future life as a married team. While enjoying a glass of wine one evening, Brad brought up the topic of money, one of the subjects they hadn’t discussed in detail. They’re both high earners who persistently save, but it’s common knowledge that Brad tends to have a flair for the finer things in life. In fact, the disparity in their attitudes toward spending was on full display as Brad scrolled through luxury home decor products on his brand-new iPhone while Jeff looked into investments and budgeting on his six-year-old laptop.
In relationships, it’s common for one partner to be more of a spender and one partner to be more of a saver. Neither is better or worse than the other, but it does make strong communication more important to ensure each partner is on the same page regarding short- and long-term goals.
For Brad and Jeff’s relationship to be long-lasting and fruitful, they’ll need to have some vital discussions about how they plan to manage their financial life together. Here are five conversations they should have:
What’s our current financial situation?
Money talks can be uncomfortable, but partners must be open and honest if they want their relationship to succeed. Once you get over that initial awkward stage, the conversation should flow more smoothly. Start by putting pen to paper on where you both currently stand: cash on hand, current retirement or investment accounts, approximate monthly spending, and outstanding loans or liabilities.
How can we improve our financial situation?
It’s important to look for ways to maximize your combined net worth. Start by combing through expenses and ask yourself if any unnecessary spending can be cut back or eliminated. Next, assess your ability to expedite the payoff of any outstanding debts, especially those with a higher interest rate. Finally, look at increasing your retirement savings by contributing more to your 401(k) or IRA or by starting to save in a general brokerage account that can be accessed at any time.
What are our career goals?
Understanding each other’s career aspirations will help give insight into how your finances may look long term. You should know if your partner has hopes of earning another degree, which may require emotional (and possibly financial) support. Or, maybe one partner earns less now but expects to earn significantly more in the future. How might that affect the way you spend and save for retirement as a couple now and down the road? Getting on the same page early is imperative.
How should we split our expenses?
As time in a relationship goes on, it’s easy to foster resentment over things like money. Having a discussion about how you will split your expenses can help prevent that resentment. The two most common ways of splitting expenses are to divide them 50/50 or to divide them by an amount that is proportionate to each of your incomes. A great way to pay for joint expenses is to establish a joint account and regularly contribute a pre-determined amount to that account. Setting the boundaries up front will put you both at ease when it’s time to pay the mortgage, bills, or even for a night out.
How do we plan for big-ticket items?
It feels as though there is no shortage of expensive items that we “need” to have. But major goals like a new home, a fancy wedding, or surrogacy/adoption must be discussed and planned for to ensure you can achieve them in a financially responsible way. Start by fully understanding the costs of each goal and the timeline to fund it. Then, open separate savings accounts for each goal and contribute to it on a regular, automated basis.
These certainly are not the only money-related conversations that Brad and Jeff should have, but they are a great start. Seeking the guidance of a qualified financial professional may ultimately be in their best interest. As time goes on, and life happens, they will need to revisit and expand upon these discussions to keep their financial house in good order.
About the author: Ryne Vickery, CFP®
As a Wealth Advisor with Buckingham Strategic Wealth, Ryne Vickery, CFP®, works with his advisory team to develop comprehensive financial life plans for professionals, retirees and near-retirees, and same-sex couples who want to align their money with their goals and values.
Important Disclosure: The opinions expressed by featured authors are their own and may not accurately reflect those of Buckingham Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. Individuals should speak with qualified professionals based upon their individual circumstances. The analysis contained in this article may be based upon third-party information and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. IRN-20-1734