Talking about finances with your partner can be daunting, but it is an important conversation. As a financial advisor, I often encounter couples who struggle with managing their finances together and can often be used as a mediator in these scenarios. In this blog, I will provide some tips on how to talk to your partner about finances and hopefully help you if this is something that you need help with.
The first step in talking to your partner about finances is to set a time and place that works for both of you. We often talk about having a financial date night, and it’s great to discuss the following. Choose a time when you are both relaxed and not likely to be interrupted. According to a study by the Financial Planning Association of Australia, only 26% of Australians feel confident managing their finances. This underscores the importance of taking the time to have an informed discussion about your finances. Ensure you are both comfortable and in a private space where you can converse honestly without distractions.
Start the conversation by discussing your goals as a couple. For example, do you want to buy a house, go on a holiday, or plan for retirement? Understanding each other’s goals will help you make decisions together and stay on the same page. Make a list of your short-term and long-term goals, and discuss which are most important to each of you.
The goals are exciting as well. Having something exciting to work towards can create extra incentives to work together on your finances. For example, at Pekada, we do a Values & Goals session where each couple member has a chance to talk without interruption about their values and what is most important to them, and then we start to work on some joint goals together. This can be a great starting point for working on common goals together.
Being honest about your financial situation with your partner is essential. This includes your income, debts, and expenses. Be open and transparent about your finances, and encourage your partner to do the same. It may be uncomfortable to discuss your debts, but it’s essential to get everything out in the open to work together to address any financial issues. For example, one particular partner’s debts may stop you from doing things such as purchasing a home together, so it is crucial to have everything out in the open.
Creating a budget together is an excellent way to manage your finances as a couple. Start by tracking your expenses for a month or two to understand where your money is going clearly. Then, create a budget that includes your income, expenses, and savings goals. Finally, please ensure you are both on board with the budget and committed to sticking to it.
Everyone has different spending habits, and it’s essential to understand how your partner spends money. According to the Australian Securities and Investments Commission, many Australians struggle with credit card debt, with an average balance of $2,577. Discuss your spending habits and concerns about each other’s spending. It’s essential to be respectful and non-judgmental during this conversation and work together to find a compromise that works for both of you.
This is often where a ‘yours, mine and ours’ approach can work well. Each partner has a separate bank account for their discretionary spending. Free to spend those funds on whatever appeases them whilst maintaining a joint account for joint expenses and future goals you may have. This can stop a lot of arguments around what the other may be spending. Having an account where you can spend guilt-free and maintain some form of financial independence is also essential.
Emergencies can happen at any time, so it’s crucial to have a plan in place. Discuss what you would do in an emergency, such as a job loss or a medical emergency. Make sure you have an emergency fund set aside to cover unexpected expenses.
It is also a good idea, especially if you have a mortgage together to review your insurances. Discuss what would happen in the worst-case scenario if one of you were to pass away. Would you want the mortgage covered? Decisions like this are essential to ensure that no one is left with financial stress in the event of a loss.
While discussing depressing things, having a good estate plan and will in place also be essential to ensure that your wishes are carried out in the event of your passing.
In conclusion, talking to your partner about finances can be challenging, but it’s essential for a healthy relationship. Setting a time and place, discussing your goals, being honest about your financial situation and planning can alleviate many of these potential issues. If you ever have any questions or are interested in doing a Values & Goals session as a couple, please reach out!
Zac is a qualified financial planner at Pekada and host of the Wealth Collective Podcast. Living in Melbourne, Zac has six years of experience in advice and specialises in wealth accumulation and protection strategies. He loves to keep his finger on the pulse for the best strategies for wealth accumulators looking to build and protect their wealth tax effectively. Zac has been featured as an expert in Money Magazine.