I admit that this step should have probably been way earlier on in the list, since if you share your household and finances with your partner, then discussing money matters and making sure you have the same short-term and long-term goals in mind is essential to not only achieving your financial goals but also keeping your relationship healthy and happy. At the end of the day if you are trying to save, invest or grow your capital whilst your partner is more of the “let’s spend it all now” school, you likely both wind up frustrated with each other, meaning both your financial goals and your relationship happiness will take a hit and suffer at some point.
Sad but true: finances and a lack of shared financial goals or financial compatibility are not uncommon reasons for people to end a relationship, so let’s get this sorted once and for all and make sure that you and your partner discuss your individual and joint financial beliefs and goals. You might not have exactly the same ideas about how to spend or save your money, but discussing will at least create more understanding and hopefully pave the way to an agreement that satisfies both and leaves some (financial) room for both to do your own thing.
Of course it might be that your partner is not into finances at all and is happy for you to take control of the (majority) of the money decisions and responsibilities. If that is the case, it might sound easier in the short-term to simply assume that role not inform or even consult your partner, but remember that long-term this might not be in the interest of neither your relationship nor of your finances.
If your partner doesn’t know much about finances at all, consider showing them these steps so they too can familiarize themselves with common and important money themes and become more financially literate, which will only help both of you when it comes to discussing your money matters.
Step 55 – Discuss Finances with your Partner – in detail:
So you have decided to discuss and bring up some money issues, questions or goals to further discuss them. But where to start and how to proceed? Here’s your step-by-step guideline on how to make this a successful and worthwhile conversation:
- Start by proposing a day and time for a meeting. If you feel this might be met with resistance by your partner, consider making it into a nice event by doing it over dinner. Offer to cook and buy a nice bottle of wine, but tell your partner what you’d like to discuss so they aren’t disappointed if this doesn’t turn into a romantic dinner by candlelight (although you can still light up some candles if you want of course!).
- Prepare the topics you’d like to bring up.You might be really inspired to discuss everything you believe to be important, but maybe you don’t need to comment everything in great detail. There might be no need to discuss the concept and balance of your net worth if you feel the biggest area that needs to be commented on is your debt spiralling out of control. Choose what does and doesn’t need discussing, especially if you haven’t spoken about your finances for a long time together.
- Below are some important areas to consider discussing:
- Net worth – what is your joint net worth? What assets and debts make up your current net worth? What are your short-term and long-term targets? How can you both work towards increasing your net worth?
- Expenses – what do your joint monthly expenses look like? Do you have a budget? How much money have you allocated to each category and is your partner in agreement with this or do they feel that some categories need more or less assigned? Can you come to an agreement in terms of your spending goals or do you need to consider for each to have free “spending money” that both of you can use however you want?
- Debt – how much debt you both have, individually and together? Do you want to pay off debt faster? Do you or your partner need to stop accumulating debt? Can you set a goal together on when to pay of your debts? How will you achieve this? Is your partner on board with this or is it worth discussing how compounding interest affects your balance each year?
- Savings – how much do you currently have in savings? What are some of your short-term, mid-term and long-term goals when it comes to building up savings? How can you hit those targets faster? Do you have any big expenses you need to save for: a new house, a wedding, children? How will you get ready for this?
- Income – what’s your joint annual income at the moment? Do you both feel content with this? Is your income likely to change any time soon? Would you like to increase your income in some way, either in your current job or in other ways? Think of the 7 income streams discussed earlier and comment whether either of you might want to pursue any additional ways of generating some extra money.
- Pensions – what are the pensions that you are both building up at the moment? Do you both have a pension plan in place? Should you or your partner make any more or less contributions to a workplace or private pension? Are you concerned you might not have enough pension built up for your (early) retirement?
- Investing – do you or your partner want to invest and do both of you feel comfortable with this? Can you discuss options, risks, possible returns? Can you read more books together about this topic? Could you agree on a very small initial amount to start investing with?
- Make this financial discussion into a regular event, ideally weekly but minimally monthly if weekly is a little too much to ask for right now. Agree on a set day and time when you will do this again. Make it fun and enjoyable either with a nice bottle of wine, a fun film night after or by doing mini challenges during the week leading up to your next meeting, seeing who can save the most, find the best offers on sales or who can come up with the best plan on how to create a side income. Money talk should be fun not feared!
Of course all of this talking can be as detailed as you want. Especially the first time you might want to take it easy on your partner and remember that even though you might be totally feeling like a finance ninja, your partner might not and might feel overwhelmed, intimidated or scared of anything to do with money. But remember that only together will you be able to work towards the same goals and enjoy the journey along the way. So bring on that bottle of wine and get cracking!
Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.