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Money can be a major point of stress between a couple. But if you want to maintain a happy relationship, the two of you have to agree on some key points when it comes to handling finances.
Handling money in a relationship isn’t easy, but with some patience and compromise, you can do it.
Everyone Has a Style
We all have our own thoughts, behaviors, and styles around money, how we spend it, how we save it, and how important it is to us.
So it’s natural that when we are in a relationship, our money style may clash with our partners. That doesn’t always mean one person is right, and one person is wrong, just that two people do things differently.
But being in a relationship means two people will have different ideas about lots of things, and those things can be worked out. Issues around money don’t have to be any different.
What You Have to Agree On
No couple has to agree on every aspect of money and handling finances, but there are some things that two people must agree on.
Everyone needs to have financial goals, and when you are in a relationship, you have to have similar goals. Do you want to buy a home or do you prefer to rent?
Do you want to take regular vacations and if so, what kind? Do you enjoy roughing it at a campground or will nothing less than a five-star resort do?
If you choose to have children, do you want them to go to public school or private? Will you help your children pay for college or will you expect them to take out student loans on their own?
Do one of you plan to quit your well-paying job and go back to school to pursue a passion that doesn’t pay well? Does one of you dream of starting your own business?
These are all things a couple must discuss and come to some agreement on because these are significant issues that don’t make for easy compromise.
Ideally, both of you will be savers, but we all know that not everyone saves money. This is perhaps the most contentious issue when it comes to handling money in a relationship.
If you’re a saver and your partner comes home regularly with shopping bags filled with new clothes or thinks nothing of picking up the check for those guys night out dinners, you can imagine the resulting frustration and fights.
And it’s not a lot better from the non-savers point of view. They may come to think their partner is cheap and controlling.
If the two of you are fighting over saving money, go back over your financial goals together. You’ve agreed that you want to work towards specific goals together and the only way to achieve them is to save money.
It’s not enough to agree that you should be investing, you have to agree on how you are going to invest too. Why? Because some forms of investing like day trading are very risky and others like bonds, are not aggressive enough.
Investing has to be a balance between keeping your money relatively safe (no form of investing is 100% free of risk) and investing in a way that is aggressive enough to grow your wealth.
A portfolio that is 90% stocks when you are in your 60’s is too risky, and one that is 90% bonds when you are in your 20’s is too conservative.
There are rules of thumb on how to set your ratio of riskier, higher returning investments to lower risk, lower return investments according to age that you can use as a guide if the two of you are far apart on this topic.
Of course, everyone will agree that debt (at least high-interest debt like credit card debt) is something to be avoided, but people can differ over how much of a priority paying off debt should be.
Some people cannot tolerate any debt. Maybe they grew up in poverty and having debt makes them feel like they will end up like their parents.
Or perhaps they once had a lot of debt themselves and don’t ever want to have debt again because it’s so hard to climb out of.
But for some people, debt, even bad debt, is not that big of a deal. As long as they can keep tossing those unopened credit card bills into the junk drawer, they don’t give debt a second thought.
Being too afraid of debt may mean that the two of you will never buy a home because not many of us are going to be able to pay cash. Being too cavalier about debt can eventually lead to filing bankruptcy.
If you and your partner can’t come to an agreement about debt it may be best to keep all of your finances separate and to not marry because in many states, both spouses are responsible for debts even if one person did not take out the debt.
Money is not the most romantic topic of discussion, but it is something that needs to be discussed openly and regularly.
Money is also not the most exciting topic to some people while others like to discuss it as often as some people like to discuss the weather.
You and your partner should set aside time at least once a month to sit down and talk about money.
Go over your budget to see where you stayed on track and where there is room for improvement. Discuss any large, upcoming expenses like holidays and vacations.
Check in on your investments and see if your portfolio needs to be adjusted. Don’t wait for a problem to crop up before having a money discussion.
Discussing money often is what will prevent problems from happening or at least allow you to catch a small problem before it gets out of hand and causes stress and fights.
How to Share It
The two of you have to decide how to share your money. Will you keep separate bank accounts, one joint account or each have a separate account and a joint account?
If you are both more or less on the same page about money, a single joint account will probably be sufficient.
But if you aren’t quite in agreement on some things, it might be best to have yours, mine, and ours. The “ours” account is the account from which shared expenses like rent, mortgage, or utilities are paid from.
The individual accounts are for things like car payments, student loan payments, and personal items like clothes and dinners out with friends.
Some people may choose to keep all money completely separate, but that makes paying joint expenses more complicated, and if you’re married, it’s sort of against the spirit of joining your lives together.
How to split expenses is an issue if you have more than just a joint account or if one partner makes a lot more money than the other.
In the case of disparate incomes, you can each pay a percentage of expenses in line with your income. Each person is paying their “fair share,” but fair isn’t determined by dollar amount.
Some couples with wildly different incomes will use the higher earners money for bills and the lower earners money as “fun money” for things like going out and vacations.
If you come home with a new 65-inch television, your partner is probably not going to be thrilled, no matter how much they like television.
Everyone is entitled to buy things without having to get “permission” but it’s reasonable to agree on a dollar limit. If one of you wants to buy something over $X, you must discuss it first.
If this rankles, you can use the yours, mine, ours system of bank accounts and agree that there is no dollar limit on how much each of you can spend from your individual accounts.
Lending and Borrowing
Families and friends can cause a lot of tension in a relationship, and when they get involved in a couple’s finances, things can get really nasty.
You can’t agree to loan someone money without the agreement of your partner. Any money you are giving someone else is money that you are taking away from your own family.
Nor can one of you take money from a family member, perhaps parents are offering to give you money for the down payment on a home, without the other person’s consent.
It might seem crazy to turn down free money to buy a house or for any other reason but some people don’t want family involved that way in their finances and may fear parents using that gift as a means of control.
None of us like to think about it but the day could come when our parents can no longer care for themselves, or they may not have enough saved for retirement.
If those things happen, what will you do, move in with them, allow them to move in with you, put them in a nursing home or assisted living facility, pay their bills?
As taking care of aging parents often happens at the same time a couple are still caring for children at home, it can be an especially stressful time in a marriage. It’s a discussion you want to have before you need to have it.
Handling family finances is a big job, and it’s unfair to put the entire responsibility on one person. It’s also unfair for one partner to be kept in the dark about money.
If one person enjoys handling finances (they’re out there!) more than the other or is simply better at it, there is nothing wrong with that person taking the lead. But the other partner must have some responsibility and involvement too.
What You Don’t Have to Agree On
If you thought a couple had to agree on everything, you’ve never been in a relationship!
Where to Save
Some people want to put their emergency fund in coffee cans and bury them in the backyard. That seems ludicrous to most of us but to some people, that is the safest place to keep it.
They know right where it is, they can get it whenever they need it and it makes them feel safe to have it so close. They don’t care that the money is earning no interest.
Some people want to keep their emergency fund in a savings account, again because it’s nice and safe and easily accessible. They don’t care that it’s earning 0.01% interest.
Some people want to put their emergency fund in the stock market where it’s relatively safe, relatively accessible but making an average of 7% a year. They can’t imagine letting that money sit around earning nothing!
So many people don’t have an emergency fund that if you and your partner do, don’t argue over where to keep it.
No one should be scolded for making small purchases, and no one should be required to ask permission before doing so.
It doesn’t matter if you think $10 bars of soap are a ridiculous waste of money or that no one could possibly need another pair of sneakers when they already have a closet full of them.
If you grouse at your partner for making these little purchases, not only do you come across as Scrooge, but they may start to hide purchases from you or make larger and larger purchases just to spite you.
Hiding things and spite have no place in a loving relationship.
You have your little indulgences, let your partner have theirs so long as none of these purchases cross your previously agreed upon dollar threshold for “big” purchases.
This one goes for couples who are doing well financially, don’t have credit card debt, all the bills are paid on time, etc. If those things don’t apply, you can’t make these purchases, or at least not very often.
Yes, it is cheaper to pack your lunch and bring it from home than to order lunch in or go out. Yes, it is cheaper to make your own coffee at home.
Yes, it saves money when you wash and iron your dress shirts rather than sending them out to the dry cleaners. Yes, yes, yes! We all know these things.
But some people just don’t like eating leftovers or cold sandwiches. And some of us like the routine of stopping by a local cafe, being waited on by the same person, and ordering the same coffee every morning before we go into our office.
And some of us hate ironing with the fire of a billion suns (that’s me).
If your spouse spends money on convenience purchases, they are doing it because it makes life easier or a little more enjoyable.
You might be appalled at what to you seems an enormous waste of money, but so long as the bills are paid, these sorts of expenses are not worth arguing over.
It’s Not Easy
Being in a relationship isn’t easy, and most of us go in knowing that. There are going to be a lot of things the two of you will disagree about and flat-out fight about.
And sometimes money will be one of the things you fight about. But if you and your partner can agree on these fundamental things, you will save yourselves a lot of fighting.
And a lot of money. Divorces aren’t cheap!