In today’s “Money Mondays” segment, Mellody Hobson discusses balancing love and finances.
In the spirit of Valentine’s Day this Friday, I am here to talk to you about love and money. In particular, how to make sure that when you get serious with your better half, you are able to get your finances right and prevent some fights!
What are some tips to prevent money from causing fights in our relationships?
Yep, this will definitely prevent some fights. Multiple studies show that money or finances are the Number 1 reason that most couples fight. And given that money can be a really emotional and personal thing for people, it is no surprise. But we don’t want fighting, so let me give our listeners a few tips. The first thing everyone out there needs to know is what not to do! First do no harm, as they say! There are 3 things I want people to remember not to do, Tom.
1) Don’t ignore the money talk until you are in deep
Here is the deal: Most couples just don’t talk seriously about money issues until very late in the game, and that can be dangerous. In terms of picking that significant person in your life, it is important that you have an idea of their financial practices and background. Now I am not saying that you need to make sure your sweetheart has a minimum credit score, but you should know ahead of time what each person brings to the table. Outstanding debts or past mistakes will affect what you can do together in the future. Which leads me to the next issue…
2) Don’t keep financial secrets
This is a HUGE problem, Tom. Not only do people not like to talk about money, but they are also embarrassed about money problems, and tend to keep them secret. If people have several thousand dollars in student loans, very bad credit scores, or credit card addictions, it can be very difficult to talk about. But you have to! In order to have a strong relationship and financial partnership, you have to be honest with your mate about your WHOLE history.
3) Placing blame is not the answer
After these first two problems, the biggest issue for couples is assigning blame for past or present financial hardships. Phrases like ‘your student loans are the problem’ or ‘I am always saving while you are always spending’ – while they maybe have some truth to them – do not help the situation. In order to get on sound financial footing, you have to recognize these obstacles and work to resolve them, rather than simply pointing the finger.
What are some positive money tips for our relationships?
You got it! After you have made sure you have open communication on the financial front, and you are aware of what each person is bringing to the table, there are some simple things to keep in mind to help you and your partner be sweet on each other year round!
First, you both need to be equals on the money front. I am not talking about what you bring in, but the role you play in dealing with money issues. Don’t turn all financial responsibility over to one person. Both of you need to know and understand the decisions being made, inflows and outflows, and the status of accounts. Not only will this make sure that the trust and transparency you have built remains, but it is also important in case of emergencies.
Secondly, develop a cooperation strategy: I recommend couples sit down and figure out how each person will contribute to living expenses and other joint costs, whether that be according to the ratio of income, or another formula you come up with on your own. This will allow you to get beyond the ‘mine’ and ‘yours’ aspect of money.
Next, make sure you have everything in writing! We see it time and time again: Couples get together and put off the paperwork that surrounds assets and money, and it comes back to bite them later. It is certainly not glamorous and can be touchy at times, but it is really important! This includes things like prenuptial agreements, which clearly specify assets ahead of time, or living trusts and wills that determine where assets go in the event of accidents and emergencies. No pair of love birds like to think about it when they are happy, but sometime things don’t always turn out the way we want them to, so its important to make sure both of you have your affairs in order early!
Any other tips to help keep lovebirds from making money mistakes?
I have one more thing I want to emphasize that will help people keep a happy financial household, Tom. Effective money management is all about planning, whether it is for that romantic getaway or saving for a comfortable retirement. One of the main causes for financial arguments is about spending habits, and the main way to prevent this is to set goals and budget for them. So you want to go to Paris? Sit down and look at your finances and commit to a plan to save for it. You both bonded over retiring in Costa Rica? Make sure you are BOTH putting money into your 401k so you can do that! Being on the same page, and mutually committed to these goals will keep you happy in the short AND long term.