Q: My boyfriend and I have been together for some time now and we are planning to get married soon. Aside from budgeting our wedding and honeymoon expenses, what other money matters do we need to discuss before settling down? – Hope, by email
One of the leading causes of stress to a “happily ever after” married relationship is fighting about money. Managing money with your spouse can be challenging because you may have different values about how to save and spend.
You may be the conservative type who likes to research every purchase in order to find the best price to save money while your spouse may be the type who is easily triggered by emotions to spend impulsively.
Or you may be the type who likes to avoid risk when it comes to investments while your spouse may be the aggressive type who likes to gamble on any promising investment venture.
Differences in attitude towards money can cause serious problems in your relationship. You need to achieve a certain level of financial compatibility in order to have a secured and harmonious marital relationship. Here are five money tips every couple must follow in managing their personal finances:
1. Get to understand each other’s financial personality
People who come from different family backgrounds have different money beliefs. It is not easy to change another person’s belief by imposing your own unless there is understanding and acceptance.
Many couples argue about money because they don’t recognize each other’s values. You may believe that you have to budget a certain portion of your savings for travel every year because you value building memories with your family, but your spouse may believe that traveling locally will already be sufficient in order to save money.
Understanding each other’s money values can help solve potential conflicts in relationship. When you understand each other’s mindset, there is room for cooperation.
2. Get to know each other’s financial situation
Some couples don’t practice true transparency in their relationship. They keep some personal finance issues close to their chest, which often becomes a cause of larger marital problems later on.
For example, you may have borrowed some funds from friends to finance a small business project that did not succeed and you don’t know where to source the cash to pay off your loans. Instead of telling your spouse, you choose to keep it to yourself and pretend that everything is normal. Soon, your spouse finds out and tension begins to threaten your marital and financial security.
Being open and honest about all aspects of your financial situation helps build trust and confidence with each other. Practicing true transparency requires that you need to be financially naked to your spouse at all times.
3. Get each other’s commitment to follow a financial budget
While it is important that couples spend time to talk about their finances, couples should know how to talk about money. Talking alone may not be enough because, sometimes, some spending may be subjective, which can trigger an emotional reaction.
The way to discuss money properly is by coming up with a financial budget. You can agree to budget your household expenses, which you can both monitor and review later. You also budget your one-time family expenses such as travel, birthday parties and the like for the year. Once you have drawn up your budget, you can agree on how you will share in financing it.
If you and your spouse are both income earners, you don’t have to maintain joint accounts at all times. You can keep a personal account for your own expenses and another account for the family. When you keep a family budget, you will be more objective as a family when you discuss how you plan and manage your finances.
4. Get each other’s support to invest for retirement
Many young couples hardly save for their retirement. They spend most of their savings for short-term consumption needs such as buying a family car, renovating the house or spending for children’s education.
While there is nothing wrong with planning your finances to achieve certain goals for the family, it is important that couples need to seriously plan their retirement in the future.
How much money do you need to sustain your living expenses as a couple when you both stop working someday? How much money should you invest out of your savings for your retirement? How much risk are you willing to take as a couple to achieve your investment returns?
Your investment for retirement can range from investing in real estate to stock market. Planning your retirement can be better managed when you have a personal financial plan where you can detail your financial roadmap.
5. Get financially educated to make better investment decisions
Making money decisions for the family will be an integral part of your daily lives. It will be helpful if you both understand how a certain investment works or a financial plan functions. Together, you can share ideas and work as a team to achieve your financial goals.
Try to get opportunity to attend trainings and seminars on financial education. You can also read personal finance books and share your insights to each other. The more you learn, the more you become financially literate.
Sometimes you also learn by getting a Registered Financial Planner to mentor you. It helps a lot when you not only read and listen, but get to discuss your issues and concerns with someone competent to give you advice. In the process, you also learn as a couple.
Henry Ong, RFP, is president of Business Sense Financial Advisors. Email Henry for business advice firstname.lastname@example.org or follow him on Twitter @henryong888