Couples Need to Talk Money

Couples Need to Talk Money

When two people are thinking about living together or getting married, they should have a conversation about money first. Couples will talk about their families, their views about the wedding and desires to have children but they almost never discuss how they each feel about finances and money. Once they're living together finances will become intertwined and money issues will crop up on a daily basis.

Studies have shown that conflicts pertaining to money are a leading cause of divorce, so it makes sense to sit down before you take the plunge and ask each other these questions:

1. What are your feelings about money?

People feel a specific way about money and handle finances differently, in part because of the way they were raised and how their parents or role models managed their finances. One person may be a spendthrift and the other a tightwad. You might keep very close tabs on income and expenses with a budget while your partner may live paycheck to paycheck. Understanding each other's spending and saving behavior is very important early on, because harmony in your marriage will be greatly influenced by the strength of your financial partnership. Both of you need to work together in order to meet your day-to-day needs and achieve your financial goals.

2. What is your net worth?

Each of you may have possessions or savings coming into the relationship and also individual debts or loans. This will affect the financial health of the relationship going forward, therefore, the other person should be aware of your financial situation. One person may have student loans, personal credit card accounts, a car and car loan which will affect the cash flow of the household once you're together. Your ability to pay your share of the overhead bills such as rent and utilities may be hampered if you have a pile of students loans that are about to come due or big credit card balances that you have pay down.

3. The big question: What is your credit score?

Your credit report and score rule over most areas of your own life and your future financial success as a couple. They determine your employment eligibility, ability to get an apartment or car lease, the down payment for a utility service, rate of interest for any loan (including school loan, credit card, line of credit), and the premium you’ll be charged for insurance. Your report reflects how you have handled your financial responsibilities. If one or both of you have had regular problems paying your debts and your score is low, again, you should each be aware of it and work together to improve your personal financial profiles. The foundation of your financial partnership needs to start off on a strong footing.

You should shoot for a FICO score of 725 or better to get the best treatment and rates. Go to AnnualCreditReport.com for a free report; your score will cost between $8 and $12. depending on the credit bureau.

4. Can you maintain an open financial partnership?

When each of you makes saving and spending decisions independently, the household budget can’t function properly or efficiently. Frequently one person will be in charge of the couple’s books and bill-paying but there has to be a regular meeting, ideally once per month, when you both can review the budget, go over specific spending in each category and make adjustments. Unexpected expenses always seem to occur. If you’re a stay-at-home mom you still add value to the financial partnership by performing tasks that you don’t have to pay someone else to do (like cooking, childcare, laundry, shopping, transportation, etc.) A good relationship requires an open financial dialogue and concerted effort to move you closer to achieving your financial goals.

5. Okay, what are your financial goals?

What do you want your money to do for you? This circles back to how you each feel about money. You may have individual goals such as getting a new car or going on sabbatical to Bora Bora, but you will also have joint goals like buying a house, saving for your child’s college education or saving for retirement. Talk to each other about these dreams and create a plan together. Prioritize your goals then tweak your household budget accordingly. It will take time and teamwork to save for the big dreams but budgeting and tracking your spending will be easier to do if you both know it will help you realize your goals.

Written by Hollis Colquhoun

Learn more about Hollis Colquhoun