There are several issues that can create trouble for a couple's relationship, from their interactions with friends of the opposite sex, to issues with stepchildren. For many, the greatest stumbling block can be financially related. Money can quickly become an issue for any couple, be it reckless spending by one person in the relationship, or a lack of financial strength. Large debt loads can also become stressful for a couple, and prove detrimental to their relationship. As you couple up with your partner, here are four tips to keep in mind to help you combine your finances while you combine your lives.
Talk About It
Bankrate is quick to point out that finances are a big issue for many couples, but far too many of those couples fail to recognize the important role that finances play in their combined lives and their relationship. The first step to take in any coupling of finances is to sit down and talk about your finances. Explore your combined incomes and fill each other in on your expenses. From there, you are able to move on to discuss shared financial goals you two have for the future.
While saving for your future child’s college is important to you, saving money to purchase a home might be a bigger priority for you partner. It is important to understand that compromise on spending and saving is going to be required at some point.
Setup a Joint Account
Transparency is vital to any relationship. If you are hiding anything from your partner, it blocks you from having a deeper relationship. The same applies to coupling your finances. Establish a joint account and determine how much each person is putting into that account. You can decide to each put equal monetary amounts into that account, or opt to put an equal percentage of your incomes into that account.
The latter approach helps if one person in the couple makes a significant amount more than the other, as it ensures each person is paying their fair share in meeting familial financial goals. At the end of the day, a joint account helps you avoid keeping secrets in your relationship.
Set Aside an Emergency Fund
A lot of couples fail to plan for financial emergencies in the future, such as the loss of a job by one partner or the onset of a significant illness. These issues present a double whammy for many couples, because not only is one income stream lost in both cases, but in the event of a significant illness, couples often face the loss of one income stream and an increase in financial spending.
Merge Your Lifestyles
The most significant step you and your partner can take is to merge your lifestyles. In the event that one individual earns significantly more than the other, the partner earning less money might feel as though they are taking financial advantage of their partner by living a higher lifestyle than they could have afforded on their own. As the higher earner, it is possible you could feel taken advantage of as well.
There are few couples who coexist under the same roof while living different financial lifestyles. Forbes notes that couples in different situations (engaged, cohabitating, married) need to adopt different approaches to combining their finances and merging their lifestyles to successfully navigate the coupling of money in their relationship.
When it comes to combining your finances, the biggest factor to success is communication. Be open with your partner, understand where they are coming from on finances, and work to find solutions that both partners can live with now and in the future.
For more information on this and financial planning, please contact Manhattan Ridge Advisors.