Love can be patient and kind, and sometimes it may get a little crazy. But after that fluttery feeling gives way to the everyday back-and-forth that defines a committed relationship, you and your significant other need to sit down and discuss a serious topic: your financial future.
This conversation often doesn’t happen soon enough—if at all. One-quarter of couples wait until after they’re engaged to discuss their financial situation, and another one-fifth wait until after they marry, according to survey research from American Express.
Three in 10 couples say that money causes the most stress in their relationship, according to another American Express survey, and 91% of survey participants admitted they come up with reasons to avoid talking about money with their partner. And with good reason: Discussions about household finances lead to arguments for 45% of couples surveyed.
Not bringing up the subject to avoid a potential spat is a big mistake, experts say—even if it comes at the expense of the relationship—because it’s better to know early on whether you’re financially compatible. Topics that may cause future conflict include cash flow, debt load, spending habits and lifestyle choices.
“About 50% of serious couples who came to see me ended up not getting married,” says Amy Rose Herrick, a chartered financial consultant. “They didn’t talk about money in the past, and they discovered that their differences were too wide. They realized they didn’t really know the person they thought they knew.”
These are the five money talks you should have with your significant other:
1. Overall savings and retirement planning
The amount you save is directly affected by the long-range plan you should develop together. Unfortunately, too many couples fail to agree on and/or execute the right strategy, as nearly one-third of couples regret not putting more money into savings and investments, according to American Express research.
Setting a budget doesn’t automatically translate to “no more fun.” You still can buy things. You’re simply creating a realistic plan to afford your lifestyle while regularly setting aside a specific amount for the future.
Online retirement-savings calculators such as the NEA Income Retirement Calculator can help you set a target within a given time frame and determine how much you need to sock away to achieve that number.
“Establishing a budget allows for the long-term incorporation of both partners’ ideas and goals,” says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. “You determine priorities and, yes, make compromises. Then you agree on how much will go to that savings/retirement plan, such as a 403(b) and/or IRA.”
2. Debt management
Every couple should know how much debt each partner is carrying. That means checking out each other’s credit report. “Then you’ll know all about your partner’s credit history, which is especially key if you plan to get married,” Gallegos says. “You’ll also have the opportunity to review and correct any errors in them.”
It’s also critical to agree on how credit card bills are paid, to ensure that purchases don’t exceed what you can afford.
“It’s fine to use credit cards out of convenience, and it’s even smart to take advantage of cash-back bonuses that various cards offer,” says Ilene Davis, a certified financial planner. “But at the end of the month, a couple should pay off the balance. With a mortgage being the only valid exception, debt will destroy lives—and marriages.”
Four in 10 coupled Americans feel that their partner spends more money than they do on non-household related purchases, according to American Express, with $275 being the average threshold at which couples feel they should consult with each other before making a purchase.
Each couple must establish a comfort level on buying “stuff.” You also need a sense of what kind of spender your partner is. Early adopters snatch up every latest, greatest product that hits the market. The classic laggards must conduct research while waiting for the hefty debut price tag to head south. The two can enjoy a happy life together if rules are set and followed.
“Either way, borrowing to pay for non-essential ‘stuff’ is foolish,” Davis says. “That’s why many people grow old only to realize they can’t afford to retire and maintain their lifestyle.”
4. Banking accounts
Two-thirds of married couples keep joint checking accounts, and half maintain joint savings accounts, according to American Express. There’s no right or wrong way to do it: Many couples have a joint account, and then each person also has an individual account.
“This allows the couple to pay bills from the joint account and then have some accounts remain separate,” Gallegos says. “Generally, the paycheck can be deposited into individual checking, and, based on what each spouse makes, a certain percentage of that check is moved into the joint account every month.”
5. Vacation spending
Couples can come into a relationship with very different ideas about what a vacation is, and much of this is driven by what kinds of vacations we enjoyed (or missed out on) as children. For some, nothing less than a glamorous cruise, an exotic island adventure or a luxury trip to Europe will do. Others are happy just chillin’ out at the nearest beach or lakeside rental. Then there are those who prefer to enjoy their own backyard with a “staycation.”
Open communication and agreed-upon expectations regarding vacations are crucial. “If you do have opposing ideas about what a vacation is, you can alternate every year,” Davis suggests. “Switch off on who designs the vacation, but always agree to a spending ceiling beforehand—and stick to it.”