In the United States, discussions about personal finance often seem to be plentiful in a broad sense – with talk shows, self-help books, and a fascination with tax loopholes and extravagant purchases. Strangely, however, these discussions become notably scarce when it comes to personal specifics. People are often more inclined to share other intimate details of their lives than to disclose their income levels or account balances to friends and family. This trend doesn't magically disappear when individuals decide to commit to a lifelong partnership.
Money-related disagreements remain among the most common causes of stress and conflict in relationships. According to a recent article from CNBC, a new survey reveals that 64% of couples admit to being financially incompatible due to differences in spending, saving, and investing philosophies. This leads to financial infidelity, with almost 45% hiding purchases. In this article, we will delve into essential practices for fostering financial harmony in relationships.
Establishing Shared Financial Goals:
A fundamental step towards financial harmony involves establishing shared goals. Couples should discuss both short-term and long-term objectives. Whether the focus is on saving for a home, planning for children's education, or preparing for retirement, having common financial goals helps align priorities and nurtures unity in the relationship. Discussing individual financial goals is also important, especially when one partner has more debt or assets than the other.
Setting Priorities and Budgeting Together:
Collaboration is key when creating a joint budget that reflects both partners' priorities and financial obligations. This joint effort ensures that both individuals have a say in financial decisions. Prioritizing spending based on shared values and allocating resources to meet essential needs before discretionary expenses are crucial steps in maintaining financial balance.
Managing Accounts within a Partnership:
Deciding how to set up accounts within a marriage or partnership is a personal choice that varies for each couple. However, one effective system involves opening a joint checking and credit card and individual checking accounts and credit cards. Income from both partners flows into the joint account and the joint credit card is used for shared expenses like dinners, home-related costs, and joint vacations. This simplifies managing community expenses and the joint credit card is paid from the joint account each month. In addition, determine a budget for “personal” spending and automatically transfer those amounts into each person’s individual checking accounts each month. Maintaining separate individual checking accounts and credit cards for personal spending ensures that each person has their own funds for hobbies or personal enjoyment without judgment.
Designating Roles and Responsibilities:
While one partner may naturally take the lead in managing finances, it's essential to establish clear roles and responsibilities. Both individuals should actively participate in financial planning and decision-making to maintain a balanced and fair approach.
Scheduling Regular Financial Check-Ins:
Consistency is vital for healthy financial habits. Regular monthly financial check-ins provide an opportunity to review the budget, track progress toward goals, and discuss any changes in income or expenses. These meetings offer a platform to address concerns, celebrate achievements, and make necessary adjustments.
Prioritizing Open Communication:
Open and honest communication remains the cornerstone of a healthy financial relationship. Couples should feel comfortable discussing their financial situations, including income, debts, and spending habits. Regular check-ins on financial matters help prevent misunderstandings and build trust within the relationship.
Cultivating financial harmony in relationships requires a thoughtful blend of communication, collaboration, and shared responsibility. By establishing common financial goals, budgeting together, and maintaining open communication, couples can navigate the complexities of managing money as a team. Designating roles, setting up practical account structures, and conducting regular financial check-ins contributes to a balanced and fair approach to financial management. If you have any questions about how to create a family budget or would like to talk through your financial goals with one of our CERTIFIED FINANCIAL PLANNER™ professionals on staff, please give our office a call.