Sorting Out Your Finances With Your Partner: A Guide

Money is often a touchy subject, especially for couples. You and your partner may have different money backgrounds, spending habits, and philosophies about money.

You may want to use a sudden windfall to start paying off your loans, for example, but your partner may want to go on a vacation. And because we all have a relationship with money that is often rooted in our family of origin so it’s important to discuss these differences.

This is because money is one of the most common reasons for divorce in the US. But it doesn't have to be that way. With a little patience and understanding, you can sort out your finances with your partner without any drama.

This primer will help you and your partner have a productive conversation about money, figure out your financial goals as a couple, and develop a realistic plan to achieve them.

1. Lay the Groundwork

Many couples consciously avoid talking about money, and it's not hard to see why. Money often equates to power and control, so it's no wonder that discussions about money can quickly turn into arguments.

It's important to set the stage for a productive conversation. First, it’s important to ask one another when a good time to talk would be to make sure you're both in a good place emotionally. If you're feeling stressed or angry about money, that's not the time to have a discussion. Wait until you're both feeling calm and collected.

Next, set some ground rules for the conversation. Agree to be respectful and open-minded, and avoid making any assumptions about your partner's views on money. This is a conversation, not a debate, so there's no need to try to convince your partner of anything. Just listen to what they have to say and be respectful of their point of view. If you are getting upset or emotional, decide in advance that you will take a ‘time out’ and hit the pause button. Agreeing to this before the conversation will help prevent it from becoming an argument.

2. Talk About Each Other's Money History

Before you can start planning your joint financial future, it's important to understand each other's unique relationship with money. What were your early experiences with money? How have they shaped your attitudes and beliefs about finances? Discussing your money history can help you to better understand each other's perspectives and start the conversation on a more personal level.

Their answers to these questions will give you some insight into their views on money. It can also help you be more sensitive to your partner's triggers and hot buttons when it comes to money.

Knowing, for instance, that your partner grew up in a family that was always struggling to make ends meet can help you to be more understanding when they're hesitant to spend money on non-essential items. Or possibly you grew up in household where money wasn’t an issue and you got everything you wanted or needed or your family lived beyond their means, had a lot of credit card debt and didn’t put an emphasis on being fiscally responsible. All of the different scenarios affect our relationship with money.

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3. Define Your Financial Goals

Now that you have a better understanding of each other's money history and views, it's time to start talking about your financial goals. What do you want to achieve together? Go on a luxurious vacation? Start your own business? It is common for people to have similar long-term goals but how they get there and implement the short-term goals is just as important.

It's important to be realistic about your goals. If one of you wants to retire in five years and the other wants to start a family, you'll need to find a way to compromise. The same goes for less extreme differences, like one person wanting to save every extra penny while the other is more comfortable with a little more spending.

Part of being realistic about your goals is being honest about your financial situation. Take a look at your incomes, debts, and expenses, and come up with a realistic plan for how much you can save each month.

Clarity about each other's financial goals can help you decide whether separate or joint accounts make the most sense for your situation. Having your own money is important but, if you're working towards common financial goals, pooling your resources can help you to achieve them faster.

4. Make a Plan

Once you've agreed on your financial goals, it's time to make a plan to achieve them. This will require some tough conversations about budgeting and spending. But if you've laid the groundwork and are honest with each other, these conversations can be relatively painless.

Start by creating a joint budget. This will help you to get a better understanding of where your money is going and where you can cut back. You may be surprised to find that you're both spending more than you realized on non-essential items.

Once you've created a budget, stick to it as much as possible. This may require making some lifestyle changes, like eating out less or cutting back on shopping. But if you're both committed to your financial goals, these changes will be worth it in the end.

Next, create a savings plan. Decide how much you want to save each month and put that money into a joint savings account. 

The next steps you take depend on your financial circumstances. If you're carrying debt, you may want to create a plan to pay it off as quickly as possible. Or if you're behind on your retirement savings, you may want to increase your monthly contributions.

5. Talk to Your Partner Regularly About Money

It's important to have regular conversations about your finances, even after you've made a plan. Things change, and your plans may need to change with them.

Having large one-and-done conversations about money can be overwhelming and even a little intimidating. Breaking things down into smaller steps and checking in with your partner from time to time can make a big difference in avoiding resentments that weigh both of you down.

If you and your partner are having a hard time communicating about money, there are plenty of resources available to help you. Aside from books, videos, and articles like this one, you can also find a financial advisor to help both of you understand your options and make the best decisions for your future.

Sorting out your finances with your partner doesn't have to be painful. Money brings out strong emotions in all of us, but if you're honest with each other and face those challenges together, you'll both come out better in the end.

No matter what your financial situation is, it's important to be on the same page as your partner. With a little effort, you can learn to communicate about money in a way that strengthens, rather than weakens, your relationship. Having open conversations and exploring the different themes that come up around money will help you continue to grow both individually and as a couple, so you can live out the life you want and one you both envision.

Photo: by Jack Sparrow