Filed under: Personal FinanceWant to know if you'll have a happily ever after? You may not want to hear this, but one of the things that will determine your success as a couple is the way you handle your combined finances.
I know, how unromantic, right? But of all the things couples fight over, money is one of the issues that consistently makes the top the argument list. Ignore this arena, and you're just asking for trouble.
How can you tell if you and your beloved are on track for a happy financial future together? Follow these five tips.
1. Know Your Money Personality
We all have a money mindset that influences the way we feel about money and spending.
There are the classic types: the tightwad who hates to spend a dime, the shopaholic who spends with reckless abandon, the frugal fiend who just can't resist a good deal. These personality types guide the way we manage our money on a day-to-day level.
There are also different types of investment personalities, which dictate the way we chose to handle our money when we invest in things like stocks and bonds. The Vegas gambler, for instance, loves to "bet it all" on the next hot stock. The scaredy cat is terrified of too much risk and plays it cautious, sticking away from huge losses but also avoiding any huge gains. And there's a whole spectrum in between.
Understanding your core money personalities will shed insight into why you make the spending decisions you do. It can also help you to see where the other person is coming from.
You don't need to have the same personalities to build a solid future together, but you do need get to the bottom of what matters most to you both. Otherwise, you'll just keep butting heads over the same things without understanding why or how to resolve them.
2. Talk It Out
Communication is key. The only way you and your partner will avoid killing each other (or getting into some vicious standstills) over your finances when you have different money personalities is to talk openly and honestly about where you see yourselves in the future and how you plan on using your money to make that happen.
Ask yourselves the following questions, and work through them as a couple:
- Where do you see yourself in five years? 10 years? 20 years?
- What major life goals do you want to accomplish? Do you want to own a large house? Travel extensively? Send your kids to private school?
- How do you feel about debt? Would you prefer to pay off the mortgage early or invest the extra cash?
- How much of your income do you want to save?
- What kind of investments are you interested in, and what is your risk tolerance?
- If you're planning on having kids, how much do you want to save for their education?
- What kind of retirement do you envision?
3. Prioritize Your Savings Goals
You probably won't be able to save for everything you want all at once, so focus on the two or three goals that are the most important at this stage in your life.
If you're just beginning your life together, this may include saving for a wedding or a down payment on a home. If you've got a growing family, it could include saving for your kids' braces or setting up their college funds. At all stages of the game, retirement savings should be among your top priorities.
Having just two or three big goals in mind will help make it easier to decide how to prioritize your savings and decide how to handle extra cash like a raise or holiday bonus.
4. Focus on Solutions
Stay away from finger-pointing, blaming and judgments. If one of you has accumulated debt, how will you pay it off-together? If one of you has made a foolish spending or investment decision, what will you do to set things back on track? If you disagree with your partner's point of view, how can you say it in a way that presents your viewpoint as different, not better?
Whatever financial baggage you each bring to the relationship, it's best to face it as a united team. Stop dwelling over past mistakes and focus instead on how you can solve them. Stop trying to be "right" and focus on finding compromise.
5. Do What Works for You
When it comes to combining finances, there are as many different paths as there are different couples. No one way is more effective or better than another; the most important thing is finding an arrangement that works best for you as a couple.
Do you want to combine everything or keep separate accounts? Will one person be the bill payer, or will you each pay certain bills? Will you live on one person's income and bank the other income for your savings goals?
Only you and your partner can answer these questions. Do whatever works best for your goals and makes you both feel the most comfortable.
Paula Pant quit her office job in 2008, traveled to 32 countries and became a successful real estate investor. Her blog Afford Anything is the groundswell of a rebellion against standard, tired old financial advice that says you should skip lattes and chain yourself to a desk for 40 years. Afford Anything is dedicated to crushing limits, creating riches and maximizing life.