When you find yourself in a relationship you often think of your future with that person. You love this person and you want to build a life with them. You may want to buy a home, get married, have children, and ultimately grow old together.
But once the honey moon stage wears off, and these important milestones become a reality, a lot of couples can find themselves in a bit of a financial pickle.
Finances are the number one source of tension in relationships. According to a survey of people in a relationship by SunTrust Bank, 35% of all respondents experiencing relationship stress said money was the primary cause. Money and stress go hand in hand. A study by the American Psychological Association found that almost 75% of Americans are experiencing financial stress. So it’s no wonder that when two completely different people, who might already be stressed out about money, get together and combine their finances they might start to stress a little bit more.
So I have created a list of tips on how to manage money in relationships:
1. Talk About Money
Get “financially naked”. When you are in the dating stage and you feel like your relationship might be worthy of making it to the serious stage it is imperative to discuss your views of money, your money goals, and your plans to reach those goals.
Debt should not be a dealbreaker but honesty and behavior should be. So make sure that you take into account not just what your partner says, but how they act when money is involved. It is very important to beware of financial incompatibility from the beginning. If your spending habits, saving habits, or money goals differ drastically from your partner in a way that you feel might really affect your relationship negatively in the long run, then maybe you should consider whether or not you want to continue dating them.
If you make it past the dating phase and you realize your significant other is someone you could live with or marry then it’s important to graduate to “full frontal financial nudity.” We are not talking about simply discussing your views and goals anymore, we are talking about bearing it all. You both need to fully disclose all of your debts, credit score, and net worth. It is important to discuss how you came into your debts and why your credit and net worth are the way that they are. It is also important to discuss how you both, as a team, will tackle your debts and improve your credit scores and net worths.
It is imperative that once you are both on the same page you set rules and limits so that you can reach your money goals together. My boyfriend and I have a budget that we stick to that limits our spending. We also have and a "max money number" of $50. This is the maximum amount of money that we can spend without consulting the other one first. Having a max money number keep us open, honest, and on track to meet our money goals. Having a max money number is also good to limit impulse spending because your partner can tell you whether or not this us not a rational use of your hard earned money.
Also, we like to have money dates, at least once a month. On these money dates, we review our goals, spending, and saving to make sure that we are still on track to meet our money goals and encourage each other to keep working towards them.
2. Do Not Commit Financial Infidelity
Be honest about all accounts, cards, and purchases. Hiding money or purchases from your significant other is wrong. Any concealment is the equivalent of a lie. And as everyone knows, lying to your partner is one of the worst things you can do to them. Every lie is another nail in the coffin of your relationship. Because what healthy relationship can be built on dishonesty?
One way to prevent financial infidelity is to have separate “play money”. So whether or not you both decide to have separate or joint accounts you should allocate a certain amount of play money to do with as you please. This is money each person can use, no questions asked. This play money should be accounted for in your budget. So whatever amount of play money you spend or whatever you spend it on is OK. There can be no judgments with play money because it is allocated to eat shit with. If you like shoes and you want to buy a pair with your play money than that is your prerogative. If your partner likes sports and wants to buy tickets to a game with their play money, you can’t be mad at that. As long as your play money is budgeted for, and you do not spend more than your allocated amount than do with it as you wish. Play money will alleviate the need to hide purchases or money.
3. Don’t Hold A Higher Income Over The Other’s Head
For most couples, one of them probably makes more money than the other. Instead of seeing the full pot as “our money,” you might think you have leverage over the other if you make more. Sometimes the partner bringing in the most money can feel entitled to the most say. But that’s just asking for more money and relationship troubles.
On the other hand, the partner that makes less can feel like they are not entitled to their money or may not have a say in how it is handled so they will be less willing to participate in the money discussion. This is can harbor feelings of uselessness and resentment. You never want to feel that way or make your partner feel that way.
It’s not “yours” or “mine”, it’s “ours.” You’re on the same team. Start acting like it.
4. Work As A Team
Usually, in a relationship the one that is “better” with money than the other that one handles all the money, such as paying bills, allocating to savings, investing, etc. But research has found that when couples place financial responsibility on one partner the person who tended to take responsibility for finances was the person "who hated it the least, and who was doing less other stuff for the relationship.” That’s pretty scary. The idea that the finances are just left to whoever isn’t doing anything else seems not very thought through.
Plus, this is not the proper way to do things as a team. Both people in the relationship need to participate in handling the money, both need to know what is going on, and both opinions need to be taken into account. You can designate one person to take the lead if they are “better” with money, but you need to work together.
One reason that one person handling the money usually doesn’t work in the long run is the need for balance. If only one of you are handling the finances then the other one’s strengths are not being put to use. If one of you is the “saver” or more conservative one and the other one is the “spender” or the risk-taker then even though the saver sounds like the more logical one to handle your finances that might not be the case. The risk-taker is usually the more creative one, they might be able to think outside of the box to cut things in your budget or earn more money so that there is more money left over for what you want to spend it on. They also might have a higher risk tolerance so they might be the more logical choice to handle your investments if you are young and the “saver” is too risk-averse to allocate money into riskier but more rewarding investments.
Another reason one person handling the money is not a good idea is because it can cause a rift. Having one person in charge can cause unwanted tension. The one that is not in charge might feel like they have to ask permission to use their money or like they cannot voice their opinions on money matters since they have seemingly been deemed “unfit” to handle it. This could cause frustration long term. Or the one who is in charge of the money might feel entitled to more money or more say since they are the one “handling the finances”. That’s not how a relationship works! You guys are a team and should act as such.
One final reason one person should not handle all of the finances by themselves is because with great power comes great responsibility. When you allow your partner to take on all the financial responsibility you are giving them permission to do as they wish. Sometimes it goes well. Other times the partner handling the finances racks up credit card debt, or doesn’t pay off loans, or doesn’t save what you assumed would be saved. That is not OK! However, when you hand the reins over completely to the other partner you are just as at fault for what happens with your finances as they are. Feigning ignorance is not justification. Also, when you give one partner free rein to do as they wish with your money then they may stop consulting with you about money decisions altogether and leave you totally in the dark.
Side Note: Financial secrecy can lead to much larger cases of infidelity. I have heard of several cases where one partner handled the finances completely and the other was unaware that the “handler” had racked up massive debt, or had an affair, or even had another child that they paid child support for because they were so uninvolved with the finances for so many years that they never found out. You should never be so out of the loop that you allow those things to occur without your knowledge.
5. Discuss A Prenup:
A prenup is a contract that a couple signs before they get married to figure out their finances in case of divorce or death. Contrary to popular opinion, prenups are not just for the rich. More and more “regular” people are opting for prenuptial agreements these days. Some reasons that some people want a prenup are because at least one of them has been married before, they have previous children, one person is much wealthier than the other, one person has a lot more debt than the other, one or the other are small business owners or entrepreneurs, they want to ensure their finances and marriage stays private, they were engaged for a very short period of time, or one person doesn’t work or doesn’t plan to work. Ultimately, it is up to both of you whether or not a prenup is right for your situation, but what harm can it do to explore the option?
6. Do Not Let Your Kids Run The Show:
I know that not all couples have children, but if you do, do not let them run things! It is so easy to just buy your child something when they ask for it. We all want to spoil our children and give them all of the things we never had, but that is the wrong way to behave when taking into account your financial futures. It is OK to buy your child things, but make sure that you budget for that. Do not put yourself into debt because your child wants the latest video game or smartphone. Instead, decide together how to budget for the things your children need and want. Discuss the possibility of establishing chores and a commission for the work they do. This can help them establish a great work ethic all while teaching them money management!
So the shortest answer on how to handle your finances in your relationship is… it depends. Every relationship is different. Discuss with your partner your views and goals so that you can come up with a game plan together. Whatever you two decide is best for your specific situation is cool. Just make sure that you talk openly, honestly, and often about your finances and work as a team to reach your financial goals.