Time to read: 4 Minutes
Financial planning and financial challenges are common sources of stress for many people, including high earners. It comes as no surprise that financial stress can negatively impact couples regardless of their stage of life.
Oftentimes, problems stem from people who think about financial habits differently. Other times, they prioritize different goals, have different ideas about how much income should be saved vs. invested, disagree about what a reasonable amount of spending is or what money should be spent on.
With finances affecting every area of our lives, differences in philosophy and habits are an incredibly common reason for relationships to face conflict or even fail.
Couples often avoid talking about finances early in their relationship because they worry its taboo or feel uncomfortable broaching the subject. Others may be aware they aren’t on the same page as their partner and avoid a conversation rather than face conflict.
All too often, people wait to have a discussion until a problem does arise – which makes approaching a conversation calmly and constructively even more challenging.
Luckily, the secret to avoiding financial stress in your relationship can be summed up in one word: communication. Keep reading to learn more about how you and your spouse can effectively communicate about finances.
Align Your Goals.
Before you do anything else, it’s important to make sure you and your partner on the same page. Why? Because it will be impossible to effectively communicate about your finances if you aren’t aligned on what you’re working towards.
Sit down with your partner and map out different goals you have, both in the short-term and in the long-term.
For younger couples, more immediate goals may be buying or upgrading a house, saving for children’s educations, or regularly taking vacations.
For couples nearing retirement, goals may shift to paying down debt to reduce expenses in retirement and ensuring you have enough money to live your ideal life after you’re done working.
For retirees, focus turns to supporting day-to-day expenses while growing wealth and legacy planning.
However, these are just big picture items, and more specific goals will vary couple to couple and person to person. Not to mention, the time horizons for each goal will vary based on what stage of life you’re in and what is realistic for your lifestyle and circumstances.
Regardless of what your goals are, you should be in agreement on the majority of what you’re working towards and when you’re hoping to get there.
However, not all goals have to be joint. One of you may have an individual goal, like purchasing a vintage sports car, funding a business, or charitable contributions. There’s nothing wrong with having individual financial goals – in fact, it’s often healthy! However, you and your spouse should be in agreement about what goals are joint ventures and what goals you’re working towards as a team.
Come Up With a Plan – Together.
Both of you need to be onboard with your financial plan, which means one person shouldn’t be dictating the direction. If one person is responsible for coming up with the plan alone, they may feel overwhelmed and frustrated that all of the responsibility falls on their shoulders.
Alternatively, if one person unilaterally dictates the direction, the other partner may feel like their input doesn’t matter and be less committed to following the plan. Regardless, somebody will feel resentful.
Because your financial plan gives both of you clear directions for how to manage money, it’s important that you both agree on it. This plan will dictate how much of your income should be allocated to expenses, savings, investments, paying down debt, and discretionary spending, and how this structure will support your shared goals.
This helps to set clear expectations, which gives you a clear place to start a conversation if one spouse fails to uphold their end or believes adjustments need to be made. It’s easier to address and course correct potential issues when you start on the same page.
Consider How You’ll Handle Unexpected Circumstances.
A plan is great – but to think you’ll always be able to follow it to the letter is simply unrealistic.
There may be an unexpected job loss, unforeseen medical expenses, household emergencies, market changes… the list goes on and on.
You won’t be able to anticipate how every unexpected event will impact your finances, especially as you don’t know how big these circumstances may be. What you can do, however, is create a plan for how to address them.
In the wake of a large, unexpected expense, how will you adjust your spending? Which financial goals do you feel comfortable delaying? How will you manage your budget? Perhaps most importantly, how will you go about making a new plan?
On the inverse, it’s important to consider how your plans and habits may change in the face of a boost in income or a windfall. If one of you receives a large promotion, how will you reallocate your spending? What goals or timelines do you want to adjust? If an inheritance or other large sum of money is received, what is the ideal use for it?
Having a framework for the things you can’t plan, good or bad, helps you avoid playing the blame game, having avoidable arguments about your priorities, and failing to adjust in the wake of challenges. It also keeps you from making irresponsible or emotionally charged decisions that squander financial opportunities if they do arise.
Communicate, Communicate, Communicate.
Each one of these steps revolves around open, respectful communication. Of course, talking with your partner isn’t just important when creating or adjusting a plan. It’s vital at every moment in between.
If and when goals shift, communicating will help you create and manage next steps. If somebody stops following the plan, communicating early, before resentment builds, keeps everyone from reacting defensively. If one spouse realizes that day-to-day implications of the plan may not be realistic, voicing that, rather than simply not following the plan, keeps trust in one another strong.
During those unexpected circumstances, the first step should be sitting down and discussing next steps, even if all that can be determined is how to proceed until you can get your bearings enough to come up with a more permanent plan.
While communication around finances shouldn’t need to be formal and quick, frequent updates should be a normal part of your daily lives, consider having annual meetings with your partner that are dedicated to discussing finances. During these meetings, you can look at the status of all of your accounts, debts, assets, and progress on your goals. You can ask each other if the plan is working, voice any concerns, and make any adjustments.
Proactive communication helps couples avoid challenges before they happen.
While financial stress can place tremendous strain on a relationship, it doesn’t have to. With the right planning, open communication, and dedication to supporting shared goals, financial alignment can actually strengthen your relationship. It can help you both feel confident in the future. It can turn you into a team.
For help navigating these conversations and to make sure your financial planning is optimized to help you reach your goals, schedule a complimentary consultation with a financial advisor on our team.
All securities through Harbour Investments, Inc.. Member FINRA / SIPC. Investments are not FDIC/NCUA insured. No bank or credit union guarantee. May lose value. Harbour Investments, Inc. is a Registered Investment Advisor with the SEC. The Tranel Financial Group is an independent firm not affiliated with Harbour Investments, Inc..
Note: This content is for informational purposes only and should not be considered financial or tax advice. Please consult with your financial or tax advisor for guidance tailored to your specific situation.