(6 minute read)
Money is the #1 cause for divorce (not cheating). Just thought I would toss that fact out there. And no – this blog post is not on talking wedding details. The wedding won’t exist and the marriage won’t last unless you consider greater factors first; your joint finances and how to communicate around them & consistently manage them.
I mean – congratulations, you’re engaged! Which means you are not married, and that is uh-mazing – in terms of still having your financial back as an independently operating human. You are still legally “single”, unless of course you’re in a common law relationship. Truly, this is a key point in your life to mitigate current & future financial liabilities – in addition to taking an overall assessment of your relationship in general. Note to your future self: it’s a lot easier to become unengaged than it is divorced.
Conversations only get more awkward, emotional, or financially taxing when big money talks are left to linger and never reap conversational address – so get on with them. Have big money conversations pre-tying the knot or cohabitating with one another, and learn how to handle money conversations ongoing as a couple. The topic is one thing, the approach to resolve is another – which can make or break a successful outcome.
So you’re both in positive financial positions today, maybe you have thriving careers – but things change, and they can change significantly & rapidly. Boom – one of you loses your job, and you have a child on the way. Now and for the future, adapt the below three points into your money conversations and strategy with your S/O (significant other).
Should you find you need a little guidance on how to have “the talk” and when to have it, jump here and read up.
POINT ONE: BE TRANSPARENT, STRAIGHTFORWARD, AND TIMELY
[pullquote width=”600″ float=”none”]”Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.” -Benjamin Franklin.[/pullquote]
Congratulations again, you’ve reached the point in your life where the time has come to amalgamate those good & bad habits with your S/O on paper. In other words, you are information sharing. Keep in mind, the road to sustainable financial health & well being for each member of the relationship matters just as much as the financial health of the relationship as a whole.
Financial Action Item: create three pie charts. One is yours and yours alone, one is your S/O’s, and one is for the relationship. Divide your pie chart into four sections: assets (equity), liabilities (debt), income (from all sources), expenses (total annual), and write in number values for each section, including the specifics that contribute to each.
I.e. Items that contribute to liabilities: credit card balances, student loans, a mortgage or car payment, child support. I.e. Items that contribute to income: your salary, investment income, and revenue from investment property. I.e. Items that contribute to assets: your investment portfolio, home equity. I.e. Items that contribute to your expenses: all operating items that make your life function; debt payments, rent/mortgage, car payments, hair appointments, spin class, your grocery bills, plane tickets, etc.
You’ve just created a visual snapshot of your financial pictures that you can speak to. The individual pie charts are simple in terms of identifying who has what. The joint pie chart will include the same categories, but will include things that you currently share. Do you already share a mortgage or vehicle payment? Is one of you carrying a line of credit to put the other through post secondary education? Those are things that belong in the “joint” pie chart. Now look at both of your individual pie charts and decide what you want to keep separate and what you want to adjoin upon legal union.
The key take away’s from this exercise are to be transparent, straightforward, and timely in sharing information relevant to your partnership. Be up front in the moment about your financial picture. You and your partner love, trust, and respect each other; surely you can overcome the hurdle of this conversation before it becomes an unmanageable, volcanic topic or mental block in your mind. Head to this blog post I wrote to help guide you have that initial talk.
POINT TWO: BE OPEN & EMPATHETIC
Now that you’re both aware of what the other’s financial picture looks like, it’s time to continue transparency, and be open and empathetic. The relationship has just found out that one of you has an amount of debt that requires joint handling, and that one of you is paying alimony (spousal support) and/or child support for another decade (or for-fucking-ever). How will either of these topics and realities affect your joint financial position long term – especially if you plan on having dependents, aka children, come future?
Financial Action Item: make a list of financial topics that are a impactful, and that which the relationship must address if the relationship wants to continue harmoniously for the long term, and decide that a conversation to manage these topics will be had.
Key take away: the topics you jointly identify are called either deal breakers or speed bumps, and I imagine, if you’ve said “yes” to your engagement, that these topics are speed bumps that can be dealt with. Always put yourself in the other person’s financial & emotional shoes – if you want to be understood just the same.
POINT THREE: CREATE A PROCESS AROUND RESOLVING ISSUES
Neither of you are perfect! For as much as you agree on, there will still be things you disagree on – and being able to meet in the middle via compromise or understanding will be relationship saving.
Financial Action Item: learn to identify when you’ve hit a roadblock on your list of topics, and when one of either of your “triggers”, aka buttons, have been pushed. Can you feel your body chemistry change? Has either of you suddenly become defensive? Those are two of many indicators. From there, devise a calm, logic-oriented process to work through the topic at hand using the process you have jointly created, and resolve the issue as timely as possible. Literally write the process down on paper.
For example, identify: 1) the core topic & hurdle, 2) the urgency around time, 3) the level of critical impact, 4) what you want the best case scenario outcome to look like, 5) how person A can contribute to reach the desired outcome, and 6) how person B can contribute. Be as straightforward as possible and remove emotion to the best of your ability when appointing items to and walking through this list. If you have a mini-roadmap guiding you, at minimum, you can detect where you are falling off the rails and what specifically needs addressing.
Key take away: learn to speak with each other amicably. Treat your relationship like a business in terms of finances and devise an operations plan, and pick & choose your battles. Save your energy for points of contempt that will significantly impact your life should they not be addressed; a la the topics you’ve acknowledged exist in step two.
The common thread to all relationship-types possess the above three points in terms of relationship management en route to the most successful “joint venture” possible. Some play smarter in the sandbox; others don’t know how to play at all. Choose a partner who you can work together with, not against. Share each other’s best interest, and make that the core goal.
Point the finger at yourself first and have your own financial affairs in order. Jump here to see what I’m talking about. The guide I’ve written (for you) is an introduction to a handful of money fundamentals titled: “Nine Save Your Ass Financial Rules (everyone should know)”. Simply request the guide and I will email it to you straight away. It’s FREE, and will hopefully save you time, money, and a little heartache.
Happy Valentine’s Sweet Soul! Know that the universe and I both have your back.