When you start dating someone, it’s common to talk about career, family, and hobbies. Money, on the other hand, often feels like a taboo topic or something that simply isn’t that fun to discuss. I’m a financial expert and even I’ll admit that.
However, as uncomfortable as it is at first, it’s important to talk about finances with your partner. Big relationship milestones - some of which you may have already taken together - like deciding to live together, getting married, and having kids all affect your personal finances. Having unspoken money issues can cause intense stress in a relationship and can negatively affect money goals you have as a couple if not dealt with out in the open.
No one wants to fight about money, right? The best way to avoid it is to sit down and have an honest conversation about each of your finances – no matter what stage of your relationship you’re in. A discussion about money could last all day (literally), but I’ve narrowed down the most important topics to tackle first, in my opinion. That way you’ll have plenty of time to engage in activities that are a little more lighthearted.
1. Budgeting in a Relationship
Let’s start with the basics. Discussing budgeting with your partner is important for two reasons. One, it lets you know what expenses you each have and two, it is the first step before you combine your finances (if you choose to do so). If you don’t already have a set budget, I recommend writing down all of your expenses and your income to figure out what you’re spending and saving.
This is also a great time to choose how much money you are going to save. Are you focusing on building an emergency fund? Do you already have three to six months of living expenses saved and are focusing on maxing out your IRA? Figure out what your budget is and how that fits into your overall financial goals with your partner.
2. Spending Habits
This is a big one. We all have different money mindsets that were established in our childhoods. Oftentimes, it’s necessary to unlearn beliefs about money as much as it is to learn about money. Is your partner prone to spending or saving? What are each of your values and how does money affect those values? It’s wise to foster open communication about how you’re each spending money.
If you want to take an annual vacation, maybe set aside a portion of your spending money toward saving for it. If you're foodies, decide how often you will go out to eat. Each couple is different and there’s no wrong way to spend money as long as you’re not spending above your means and still saving and budgeting responsibly.
3. Savings Goals
Building an emergency fund is one of the best financial decisions you’ll ever make. Putting aside three to six months of living expenses in your emergency or “rainy day” fund will save you if your car breaks down, your kid needs surgery, or any other costly and unexpected life event happens. The alternative is potentially having bills go to collections or using your credit card for emergencies, which you want to avoid at all costs.
Once you save an emergency fund, you can start focusing on other savings goals like buying property, a car, or even taking a lavish anniversary trip.
4. Life Insurance
I’ll be honest with you: Sometimes I get pushback when I try to talk to people about life insurance, especially from people who don’t already have families. People have a tendency to want to avoid it because it can seem depressing or overly complicated. But, guess what? It’s not! Choosing a life insurance policy may help provide you with peace of mind knowing that your family will be financially secure if you’re gone. You may rest easier knowing you made the responsible decision to invest in their futures.
Plus, choosing a life insurance policy is less intimidating than it seems. I recommend Ladder to the Her First $100K® community because they make choosing one of their flexible plans simple and straightforward.
5. Retirement Plans
If you’re like me then you have a fantasy of relaxing in a European villa during your retirement. Regardless of your personal retirement plans, you likely won’t be able to stop working without investing. Whether you’re using an employer-sponsored retirement account like a 401(k) or contributing to an IRA (or both!), you need to have a plan. You also should discuss it with your partner so you can get there together.
The idea of growing old together is lovely and the idea of growing old together while getting rich is even better. That’s totally possible if you start investing early and make a plan so that you can achieve the comfort and independence that only comes with financial freedom.