A friend of my sister’s, who is a newlywed, recently told me she really loves this blog (thanks!) and asked me to do a post on financial issues for newlyweds.
Given that money problems are the #1 cause of stress in a relationship and the #1 cause of divorce/relationship breakdown, this is definitely an issue that couples should tackle right away. To be honest, I think talks about money issues should happen before taking the walk down the aisle, however I do believe that there are always going to be disagreements about money – and it’s good to have a strategy in place to deal with them as they come up.
Here are some financial issues that I believe that all couples – whether getting married or already so, should discuss:
- Financial background
Especially if you are older and have supported yourself, disclosing your financial background to each other is a must. Do you have any debts your partner isn’t aware of? How much have you saved, how much have you invested? Have you ever declared bankruptcy? Coming clean about where you stand financially is incredibly important, just like coming clean about your sexual past and medical history are.
Next you need to come up with a way to pay off any debt you have. And if you have a problem with taking on your partner’s debt and incorporating it into your lifestyle, this is a red flag that you shouldn’t be getting married, or at least not yet. If your spouse has a lot of debt – for whatever reason – you need to be able to let go of any resentment from the beginning, because otherwise it will kill your relationship.
2. Financial administration
Do you plan to pool your finances or keep them separate? Personally, I think once a couple makes a commitment to one another, whether it’s through marriage or starting a family or whatever, I really feel that pooling your finances and treating all money as “ours” (vs. “mine” and “theirs”) is the way to go. Even if you start off earning the same amount, this WILL change over time. It would be a red flag to me if my partner was possessive over the money he makes. Because what happens if one of you loses their job? What if one of you gets a huge raise? Gets sick and can’t work? Takes a step back in their career to care for children, or elderly parent? It can get very complicated and create a weird power struggle too. I hope if you get married, you plan to be so for life and I can’t see a situation where each partner has to “pay their own way” through it will work in the long run.
In my opinion, once you decide to marry/start a family you are in an equal partnership. Who earns what is not important – it becomes what the family earns and what the family spends and both partners should have equal say. A great place to start this is by checking out my budget guide.
Now, I’m not saying that couples shouldn’t have any of their “own” money – some people like to have their own account and have an agreed upon amount set aside for them to spend on whatever they want (whether its for being able to surprise their partner with a gift or buy themselves something frivolous without feeling guilty). As long as this is fair (just because the husband “earns” the money doesn’t mean he should get $1,000 per month “blow money” while the stay at home mom gets $20) and that both agree on it and revise it periodically to make sure it is still working for the family situation.
I do recommend one person being “in charge” of managing the finances but making sure they touch base with the other person on a regular basis to keep them up to date.
The ONE exception to this is if you marry a person/start a family and realize later that they have a problem with money (gambling, excessive spending etc) and you need to separate your finances to protect the family. But this is a huge red flag and should be dealt with with the same seriousness as an alcohol addiction or drug addiction would be.
3. Financial support of other family members
I think it’s really important to discuss who you, as a family, are willing to provide (and accept!) financial support from. For example, some people strongly believe that parents should pay for their kids post-secondary education while others believe kids should make their own way.
This becomes an especially tricky subject when one family is in a worse financial situation then the other (say your family are super-duper wealthy, but your in-laws are barely scraping by).
What about helping parents who are in a worse financial situation? Siblings? What kind of help are you willing to provide? A one-time loan? A lump sum gift? An allowance? Obligation to pay for a specific bill for a specific period of time (or indefinitely)?
Look, you don’t have to agree right away but you will need to compromise at some point. Maybe you agree to help your kids by paying their tuition but they need to come up with living costs on living. Maybe you agree to pay your parent’s medical insurance or for their utilities but not give them a lump sum to pay off their mortgage. Maybe you pay for your brother-in-law to fly over for Christmas but you don’t offer to pay off his credit card (even if you can afford it).
Whatever you decide though, you need to remember that you and your spouse have to come first and that you need to be able to afford the help you are providing. Under NO circumstances should YOU be going into debt to pay for your child’s university or to pay off your sister’s car loan or paying your mother-in-laws mortgage. You should not be sacrificing your savings or retirement to pay for your daughter’s wedding.
In any case, whenever you are faced with a family member in need, you both need to sit down and come up with a plan that you are both ok with and you need to stick to it.
4. Financial personalities and importance of communication
Remember that at the beginning especially, there may be some conflict and coming to terms terms with your partner’s money personality. That’s ok! But hopefully the person you are with has similar values and goals so you shouldn’t be too different when it comes to being responsible with money.
There will often be one person who is more of a “spender” and one more of a “saver” (if you are both “spenders” it is that much more important you both learn to stick to a budget). It may also be hard on someone who has been managing their money themselves for a long time to share that power and suddenly need to have to discuss purchases they wouldn’t have thought about in the past.
So I highly recommend sitting down periodically and discussing things that are important to each of you and make sure you work them into your budget.
If you want to travel and your husband loves having a new car every few years, figure out how much you can realistically afford and if it meets your overall long term goals. Do you want to buy a house? Retire at a certain age? Pay for your kids university? You may have to compromise on things that you want and you both need to be on the same page about what those compromises will be.