One of the last things we want to discuss when getting into a new relationship is money. Money is a topic most of us want to avoid anyway. Not many people can claim complete mastery over their own personal finances, and there’s always the fear that someone may reject you if they find out about your debt load, credit history, spending habits, or other financial skeletons in your closet.
However, you have to look at the flip side of the coin. Getting married, or even living together, may be romantic and wonderful, but it is also a business transaction.
When you commit to someone in a relationship, you’re essentially committing to a financial partnership with them as well.
This can affect very big things like your retirement, whether you will be renting or buying, and your general quality of life. This means that you should definitely have a talk about money with a serious romantic partner.
When to Have the Money Conversation
So how do you approach this topic without sounding like a complete jerk? First of all, don’t bring it up unless you seriously see yourself tied domestically to this person in the future, otherwise you really will sound like a jerk. Nobody wants to discuss finances on the first, or even third dates, beyond reassuring each other that you have jobs and are financially stable. However, it should be done before you actually move in together. So somewhere in-between the “commitment talk” and hiring movers, you should be talking about finances.
And while you are having the awkward conversation about money, consider having a conversation about a cohabitation agreement, here is a great video by Melissa Leong of the Financial Post
Full Disclosure and Honesty are Essential
Realistically, many Canadians carry a certain amount of debt, whether it is from a car loan, student loans, credit cards, or whatever. If you’re on the right track with personal finances and carry a minimal debt load, you may be understandably freaked out by a partner that is more careless with money than you are. However, if you don’t have a talk about it early on, you could find yourselves as one of the 22% of Canadian couples who aren’t honest with each other about money, and as everyone knows, money can be one of the biggest problems in relationships.
According to dating expert Christine Hart, values surrounding money are actually more important than the actual numbers themselves.
But this doesn’t mean that your values have to line up exactly with your partner’s. It just means that you both have to be willing to compromise and learn from each other; a more miserly type should occasionally spring for a nice night out, and a spender may want to take a course with their partner at a local community college to learn more about good financial habits. You’ll also want to make shared goals, such as saving together for a trip, or saving up for a down payment for a house. That way you’re working towards common goals together rather than living separate financial lives.
Running the Numbers
Once you’ve talked about your values surrounding money and what your shared goals and dreams are, it’s time to run the numbers. Here’s where the scary part comes in – you should tell your partner exactly what your debt load is and what your plan is to get rid of it. Getting out of debt can become one of your shared goals as a stepping stone to some of those larger dreams you have, such as buying a house or going on a trip that isn’t on a credit card.
You’ll also want to share full details on bank accounts and household accounts. This doesn’t mean that you have to have one bank account, but rather that you give each other access to your finances when asked. This helps spenders be more accountable and gives savers relief that money isn’t flying out the back door. Catch up monthly on where your money went, and consider an app like Mint.com that helps you budget and track your expenses.
Take it Step by Step
If you’re just moving in with someone, it’s understandable that you don’t want to share finances completely just yet. You’ve both worked hard and are entitled to control over your own money. However, one person shouldn’t be responsible for joint finances, because that can lead to friction. Have a joint account for all household bills that you both pay into, and this will help you grow trust for eventually tying your finances together.
Don’t Freak Out Over Spending or Saving
Obviously, it’s understandable to be upset if your partner opens and runs up a $10,000 credit line without telling you. But the key to not having that happen in the first place is to be mature and reasonable when reacting to a partner’s financial habits early on in the relationship. If you get angry or upset over minor purchases, your partner may be scared into driving their spending underground, and the problem can become worse.
If you want to spend money on things, and your partner is constantly telling you “no” for even small purchases, this can lead to resentment and a feeling of loss of control. The solution to both problems is to set aside a certain amount of money each month that both of you can spend on whatever you want, no questions asked. If the saver wants to sock it into their RRSP, and the spender wants to buy some clothes, it’s their business and it doesn’t get questioned.
If one of your shared goals is to buy a house, come on in or contact First Foundation to talk to one of our mortgage brokers on how to get yourselves into financial shape so you can get there faster. When it comes to buying a house, a mortgage broker knows exactly what lenders want to see from potential buyers, and better yet the advice is free.