money-talks-for-couples-blog

Money Talks Every Couple Should Have

February 10, 2017 in Financial Planning by

Some of the most famous lines from one of history’s most well-known love stories involves a young woman asking her love interest to cut off his family. If he refuses to do so, she’s prepared to disown her own family and identity, based only on his pledging his love to her.

But what if the conversation had been more like this?

“O Romeo, Romeo! Wherefore art thou Romeo?
Deny thy father and refuse thy name;
Or if thou wilt not, be, but financially independent, with regular contributions to a tax-advantaged savings account and hold only low-interest credit card debt,
And I’ll no longer be a Capulet.”

If they lived, would Romeo and Juliet have discussed finances? Money is not on the list of romantic topics. But it is the leading cause of stress in a relationship. So if you’re interested in lasting longer than the star cross’d pair, there are some basic money talks we recommend having with your partner as you move through different life stages together. These can be uncomfortable conversations, but being open and honest about money is a key to a happy successful partnership.

Determining financial compatibility

There’s no denying you’re compatible – you both love indie films, rock climbing, quotes from “The Office,” and dancing in the rain. But are you compatible financially? There are some basics you should learn about your partner before you start thinking seriously about a future together.

  • Debt numbers – Does your partner have any debt, and if so, how much and what are their rates? For instance, having $50,000 in high interest credit card debt is a lot worse than having a $50,000 mortgage.
  • Income picture and job stability – While you know the struggling artist or the beautiful actress-turned-waitress are true artistes at heart, are they bringing in viable income now, and in the foreseeable future? Can you count on them to contribute to a long-term financial future, or will you be shouldering the main load?
  • Savings patterns – What does long-term savings look like for your partner? Do they look to the future and pattern their savings habits to meet that future?
  • Spending patterns – Saving can only be accomplished in context of spending; after all, spending drastically impacts what you can save. Your partner might make six figures, but if he or she is spending 99% of that income, then there’s no way to viably save. Our free online tools, like our Personal Capital dashboard, helps you think through your finances, allowing you to link all your financial accounts so you can see a complete picture of your spending and savings habits.
  • Long-term financial goals – At the end of the day, these conversations should support a long-term financial goal. Does your partner’s idea of a long-term financial goal mean blowing off retirement savings in favor of affording the new Tesla? Or does it mean he or she is planning their personal finances to support a solid retirement lifestyle? You can use our Retirement Planner to see if you and your partner are in sync and on track with your long-term financial goals.

Moving in together

Before you move in together, it’s a good idea to talk about who pays for what, so you’re not figuring this when you’re committed to living with this person for at least a year or more. Will you be splitting rent equally? What if there’s a mortgage and you have property taxes? How about divvying up utilities or groceries? Do you have a car? What about a pet? These factors that play into your daily life cost money – and it’s smart to think through whose dollars support which part, especially if you have variable incomes.

Getting Married

Getting married means you’re now legally bound to a person in a way that’s different than any other partnership. But before you tie that knot, there are things you need to consider. The first concerns the wedding itself. The average wedding cost in the United States is $26,645. Tack on an extra $5,000 for the average cost of a honeymoon, and you have some serious things to consider even before you walk down the aisle. At these prices, what kind of wedding do you want, how much are you willing to pay, and who will pay for it?

The money conversations doesn’t end just when you say “I do.” As you think about combining two lives – and that includes financial lives – you should also be thinking about combining assets. Do you want to keep them separate or will you blend them? And while no one likes to think about, you do need to consider about what happens if “‘til death do us part” becomes “‘til divorce do us part.” For example, if you live in a community property state, getting married basically combines everything – do you need a prenuptial agreement, especially if one of you has a higher net worth?

Having Children

Having children is pricey. According to CNN Money, the cost of raising a child from birth to age 17 these days is nearly a quarter of a million dollars, which grows to $372,200 if you’re part of a high-income household. With such a hefty price tag, you and your partner should be talking about how many kids you can afford.

Education is a big discussion as well. Do you want your children to be privately or publicly educated? The national private elementary school average is nearly $9,000 per year, and the private high school average is close to $13,500 per year. And education doesn’t just stop at grade school level. College is another hefty number to consider – remember how we said that it can cost up to a quarter of a million to raise a child? That’s before college costs. Today, the average cost of tuition and fees for a private college is $33,480 per year. For a public college, the number comes down to $9,650. How much toward college are you wanting to contribute, and are you able and ready to start saving toward that?

And there’s a more high-level point of view to take when it comes to your kids: What types of money attitudes and outlooks are you planning to pass on to your children? How will you teach them about money?

The Takeaway

It’s anyone’s guess whether Romeo and Juliet would have ended up together had fate not intervened the way Shakespeare wrote it; after all, they only had their families to feud about. But in the real world, money and love should go hand in hand if you want your relationship to, unlike theirs, survive past the fifth act.

Schedule an appointment with an advisor to see if you and your loved on are on the right financial path

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Michelle Brownstein, CFP

Michelle Brownstein, CFP

Michelle Brownstein is the Senior Vice President of the Private Client Group at Personal Capital. She is a Certified Financial Planner with a wide range of Investment Management experience.
Michelle Brownstein, CFP

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One Response

  1. Tyler Meredith

    It’s interesting to read about all the major financial situations that a couple will run into. It makes sense that things like getting married and having kids could be very expensive. It’s something to keep in mind because having a professional advisor could be a great way to make sure enough money is available for a healthy lifestyle along with these decisions.

    Reply

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