From deciding who pays for the first date to planning out a lifetime together, money plays a big role in every couple’s relationship. Money can also be a bit of a taboo topic, so it’s understandable if conversations around it feel a bit difficult. But at some point it’s a good idea to for partners to have financial conversations. That’s especially true when a couple is ready to start combining their finances. Here are some key questions that can help couples get on the same page about their money.
What are their financial goals?
Couples who set their financial goals in advance often have an easier time reaching them. Figuring out what’s important in the short term and in the long term, as well as how much it might cost, are the first steps.
“Short-term goals might include building an emergency fund, paying off a credit card, or saving for a vacation,” said Andrés Ledesma, financial representative with Northwestern Mutual. “Long-term goals might involve putting money toward retirement, paying off significant student debt, or buying a home. Couples should think about partnering with a financial advisor when their combined finances create complexity.”
What are their career goals?
Where does each person see themselves in five, 10, or 20 years? How much money might they earn? Will they need more education to advance their careers? Questions like these can help couples figure out if their career goals match up with their financial goals or if they need to make adjustments.
How should they combine their finances?
Some couples put their money into one joint account. Others may have a joint account for household expenses and individual accounts for personal things. It’s all about what makes them feel comfortable and how they want to share expenses. Here are a few strategies:
How it works: Each person puts in an equal amount of money to cover shared expenses.
Pro: It’s easy.
Con: A lower-earning partner could feel financially strained.
Splitting costs based on income
How it works: Each person contributes an amount toward shared expenses comparable with income. So, if Partner A earns 20% of the couple’s combined income, Partner A will pay 20% of the expenses. Partner B will pay 80%.
Pro: It helps level things out if there’s a big difference in finances.
Con: The higher earner might feel penalized for making more money.
Going all in
How it works: Each person deposits their entire income into one joint account to pay all bills.
Pro: Money becomes “ours” instead of “yours and mine.”
Con: Could cause tension if the couple have different spending habits.
What will their budget look like?
The budget talk is a good way for couples to understand their overall financial picture and to agree on a plan for their combined money. Figuring out these essentials together can get the conversation started:
- How much money they earn after taxes
- How much their necessary expenses are (food, rent, utilities, insurance, etc.)
- How much they need to save for financial goals
- How much they have left over for extra things
- How to stick to the plan
What about financial security?
Financial security can mean getting to a point where a couple doesn’t have to worry about money. And couples can challenge themselves with a long-term plan to achieve it.
Couples may want to consider things like how to steadily increase their income and reduce debt. Do they plan to start a retirement fund, have personal investments, buy real estate, all of the above? Perhaps they buy life insurance to make sure that their partner is taken care of if one of them passes away.
Whatever they decide, the most important thing is to do what is right for them. Open, honest, and frequent conversations about their finances can help them achieve success.
Source: Northwestern Mutual
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