Whether you have been married for a long or got recently married, or thinking about tying the knot, now is the time you should talk about finances deeply if you have not done so already. It has been observed that money is one of the topics that is not discussed as much and has been the cause of stress in relationships.
In any relationship, communication, trust, and understanding are paramount, and the same principles apply when couples decide how to merge and/or organize their money lives.
Below are some points that can help you to start the process of discussing finances and possibly merging finances with your partner.
- Honest communication – Be frank with each other when sharing your financial situation. Discuss your spending habits like impulsive spending, late bill payments, or missing saving goals if any. Discuss preferences such as ‘prefer being safe with money’ and other such preferences. Discuss how money was handled when you were growing up, as you could have imbibed those behaviors during your early years. This conversation will be the fundamental basis for setting the tone for future money conversations. This will also help the new partnership to strategize its finances in order to meet shared goals.
- Sharing life and debt – Legally each person is responsible for his or her debt. However, as a couple, in order to create a strong financial foundation, you can help your partner in paying down their debt, if any. Helping your partner to re-pay debt will help to improve their credit score, which will also benefit both of you in the future when planning for major loans such as home loans. Remember, in case the partner has missed sharing their debt repayment details, do discuss that to track whether that debt is being repaid on time, especially in the case of jointly held assets.
- Numbers – Disclose your income, cash, and investments and deduct debt from that to understand about net worth. Financial net worth is one of the most important indicators that help to judge your financial health. Avoid being judgemental about financial decisions as more facts are disclosed by your partner. Remember that you are now a team and both of you may have money strengths and weaknesses.
- Budgeting – Many a time we hear couples say “We don’t know where our monies go”. Draw a savings and spending budget together as this will help you plan savings and track finances. Make a list of expenses and discuss with each other who will pay for what. This will ensure that both of you are equally responsible for kickstarting a joint savings plan. Evaluate your budget on a periodic basis and adjust accordingly.
- Assessing insurance needs – Assess your life insurance coverage as you are a family now. Evaluate whether the life and health coverage is sufficient or not, especially if one partner is planning a sabbatical. One should look at health insurance at an earlier age, as many health insurance companies provide maternity coverage riders. Assess the finer details like a waiting period, maternity coverage, and pre-and post-maternity expenses.
Merging finances is a major step for your partner and you, take time to understand each other’s financial preferences and talk it through. Sharing your money life with a partner may be daunting, but making a safe space for your partner to discuss money, is a good Valentine’s Day gift to give.
Happy Valentine’s Day!
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