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It’s no secret that fighting about money puts a huge strain on a relationship. Studies have shown that money issues are the number one stressor in relationships; being responsible for a third of all divorces.
This may seem like a horrible outlook for married couples, but it doesn’t have to be. There are many steps that couples can take to avoid money straining their relationship.
1. Don’t start out on the wrong foot
Many couples are burdened with high debt right out of the gate spending too much on their wedding. Often that’s on top of student loan and credit card debt. Your wedding day should be a day of joy and being present with those you love, not worrying about the looming bill you will have to spend years paying down.
2. Start the conversation
This is the time to mention outstanding debts, loans, income sources, investments or other financial assets or obligations. You don’t want to be denied a mortgage after finding out your partner’s credit score won’t allow it. Sit down and review credit card statements and other bills, investment account statements, pay stubs and even a copy of your credit report.
Hiding money or debt from your partner can lead to major trust issues. Be honest and open.
3. Understand your partner’s feelings about money
Money is a very emotional topic. It’s important to have an understanding of how your partner views money and how they were raised around it. Were their parent’s frugal or big spenders? Did they live on a budget? Did their parents discuss or argue about money, or was it a taboo subject? What is your spouse’s greatest fear with finances? All of these answers will give insight on why your partner spends the way they do.
4. Remember the golden rule
Treat your spouse as you would want to be treated. It’s okay to approach your partner about something they are doing. It is not okay to use words that are use negative such as “irresponsible” to describe their behavior. This can cause them to shut down or retaliate when you want communication.
5. Create a budget
You should both write a list of all your household expenses. This includes fixed expenses such as rent and car payments. Also write a list of your joint discretionary expenses, such as eating out, going to the movies, etc. Then each make a separate list of your personal discretionary expenses, such as haircuts, clothes, etc.
Some prefer to both put money into a joint account for set bills and joint discretionary. Individual accounts can be used for personal discretionary. This allows each person some breathing room to enjoy some funds so they do not feel micromanaged.
Budgets are very subjective; there is no right or wrong way. Some families only have one income earner so the budget would look very different. Many couples come into a marriage with two very different incomes. Some couples choose to divide the household expenses evenly. Some split expenses based on what each partner earns. The key is to have a budget and stick to it so you can track if you are spending beyond your limits.
6. Set your eyes on a common prize
It’s a good reality check for a couple to sit down once a year to discuss what they are working toward, whether it’s a vacation, paying off debt, or saving more for retirement. We work hard for our money; it should be enjoyed as well!
7. Who Manages the Money?
Make sure you’re clear on who is responsible for physically paying the bills so you can avoid late fees. Consider paying bills online so you can both access and monitor your money.
8. Pay down debt
Create a plan to pay off your debts, and decide who is responsible for them. If only one spouse owes money, decide if that spouse alone will be paying it off or if it’s a team effort.
9. Emergency fund
It is a good idea to have at least three months of expenses in a liquid savings account. This is money that you shouldn’t touch unless there’s a financial emergency…cars need to be replaced, homes need maintenance, etc. Decide to set money aside each month until you hit your target amount. Many of my clients have a Tax Free Savings Account with me. If they don’t need to touch for years it is making tax free interest and is accessible tax free whenever they need it.
10. Taxes
If you owe in at income tax time you may want to look into an RRSP to offset that tax bill. If one of you are self employed and only paying income taxes quarterly or annually it is important to ensure that person is keeping on top of those payments so as not to get into trouble with CRA. This can affect your credit score, ability to borrow, garnished wages, etc.
11. Keep Talking
Life happens and things change. Check in to make sure you are still in sync with one another financially.
If you decide that one person will be in charge of the bills and the investing, be sure the other spouse knows what you have and what you owe. I have many clients who are completely lost when their spouse passes. Sometimes they aren’t aware of investments or even life insurance that is available to them. All this planning is to keep your family protected, make sure they are aware of it. When you get married or have children change your beneficiaries on retirement accounts and insurance policies. Make sure to update your will.
Michelle
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I have been guiding individuals and business owners financially for 11 years now. I chose to represent Front Gate Financial Group, a local brokerage, which offers every bank and insurance company. I do not believe in being biased or product pushing for one particular company since all companies can have competitive products at any given time. I review each individual’s entire financial circumstance, educate, then shop the market for the best in all areas. You deal with one person you trust and know you have the best in all areas.
I have built my business always making myself available at clients’ convenience, whether going to a home at 8pm after children are settled or bringing a coffee to a contractor on a job site. My favorite part of being a Financial Advisor is educating and empowering people financially. There’s nothing better than having a new client tell me they are no longer overwhelmed and confused by their finances and are excited by the game plan we have put in place to budget, pay down debts, protect their family, and reach their goal of retiring comfortably.
Over the years I have been asked to give Financial education presentations at numerous groups and events including: Fredericton Area Women’s Business Network, International Women’s Day, Mom Talk NB, the Oromocto Chamber of Commerce, Fredericton Regional Family Resource Centre, Military Family Resource Centre, Wedding Shows, Facebook groups. I am currently the Financial Pro for Mom Talk NB providing monthly articles and live discussions.
I am married and have a little fur baby. I enjoy travelling with my husband, acrylic painting, scuba diving, snowboarding, yoga, walking my pup. Quality time with family and friends is everything!
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