Do you relate to the common comedy foil of one person coming home with multiple bags from shopping sprees, while their partner grumbles? It’s true, issues of saving and spending can come between people. In a marriage or relationships, these differences can cause strain. Whether you’re the spender or the saver, you can develop strategies to balance money management in relationships. Learn how to create a system that addresses individual and joint responsibilities.
Start with the “Money Talk”
Financial differences aren’t the same as when one of you is neater than the other. As awkward as the subject may seem, it’s important to discuss, ideally when you realize your relationship is becoming serious. If you’re already well into a commitment or living together, find a time when you’re both relaxed. Otherwise, it may come out during an argument and aggravate an already emotional or inopportune moment.
Understand Spending Motivations
Start by understanding what influences spending habits. Personal experiences and upbringing may affect how thrifty or indulgent you are with money. Some people tend to make unnecessary purchases when they’re feeling upset. Others like to reward themselves after receiving a paycheck or make quite conservative purchases even when they can afford a bit more. A “money talk” should aim to mutually reduce or eliminate misunderstandings. Decide how to work together with what you can each afford.
This also sets the stage for open communication about spending. According to a CreditCards.com January 2018 Financial Infidelity survey, 31% of the couples surveyed considered hidden accounts or credit cards worse than unfaithfulness. Although you may never entirely view money the same way, honesty really is the best policy. Additionally, this applies to disclosing low credit scores, bankruptcies, legal judgments, and any other financial difficulty that come up if you apply for something together.
Review Individual Financial Obligations
A key part of money management in relationships is knowing what each person is responsible for. Make a comprehensive list of everything that applies from the following:
- Common living expenses: rent/mortgage, utilities, groceries, household items, personal items, child care, children’s school and extracurricular costs, pet care costs
- Vehicle payments, insurance, gas, and maintenance
- Health and/or life insurance
- Former debts: school loans, parking tickets
- Credit card payments
- Child support and/or alimony
- College costs, for yourselves and/or children
- Presents for family and friends
- Disposable money for each: socializing with friends, happy hour with co-workers, sports betting, hobbies
Discuss Short and Long-term Goals
After you determine all current expenses, make an outline of costs for future endeavors, such as:
- Vacations: travel, lodging, dining, activities, souvenirs, and passports
- Moving into another rental
- Buying or renovating a home
- Considerable purchases: media equipment, kitchen appliances, washer and dryer
- Having children
- Adopting pets
- Returning to school
- New/additional vehicles
- Start-up costs for a business or making changes to an existing one
Create a Realistic Budget
In addition to different spending habits, evaluate both of your earnings and job security (steady salary versus fluctuating freelance gigs and rates, for example). Design a budget that reflects realistic expectations, and is comfortable for each to maintain. There’s nothing wrong if you decide not to split expenses 50/50, or if one of you picks up the other’s payments, as long as you can stick with it. Create a spreadsheet, or use an app to help manage finances, and adjust accordingly, should someone lose or gain hours and/or employment, or receive winnings or a settlement.
Contributing to a joint account can strengthen financial trust, and hopefully ensure that bills are paid. But keep individual accounts as well, so that once you meet responsibilities, you can spend your money however you please. Separate banking, and filing taxes singly instead of jointly also protects you against the other’s debt. Try these strategies if there are concerns about how your partner incurs personal expenses.
Money Management in Relationships Includes Plans for Emergencies and Retirement
It’s never too early to start planning for retirement, emergencies, and the possibility of providing assistance for parents, children, or other loved ones. If neither of you already have investments, look into starting 401(k)s, 403(b)s, or IRAs. Or, look into earning extra income through rental properties, Airbnb, ride shares or side gigs. The recommended minimum for savings is three months’ worth of expenses; put whatever you can towards that, including part or all of your bonuses and tax refunds.
Regardless if you are spendy or frugal after paying bills, you can maintain healthy finances within your relationship. Don’t avoid the subject. Start addressing your differences right away, and look forward to a comfortable financial life, with plans built in for the inevitable rough patches. And, if you need any help organizing your finances, call us at DCA CPAs.
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