Dating & Finance (Part 2)

By Amy Andersen, Founder and CEO of Linx Dating

Tough conversations for couples can vary depending on their specific circumstances, but one theme that we hear about regularly is MONEY. Over 50% of couples do not communicate anything about finances. According to AICPA research, nearly three in four (73%) married or cohabitating Americans say financial decisions are a source of tension in their relationship. 

Let’s get real….hashing out finances, including budgeting, spending habits, debts, and long-term financial goals, can be very challenging. These discussions may include decisions about joint bank accounts, saving for the future, or managing financial disparities between partners, among other things.

At Linx, we see this is as a heavily recurring theme in our couples and have taken the initiative to recruit a top SF Bay Area-based financial professional to answer some questions and provide general guidance on navigating potential landmines.  Our expert works in private wealth management and brings deep experience and a broad perspective to relationships with a select group of families, individuals, and entrepreneurs of all backgrounds, ages, and stages in their lives. 

Q: Do you recommend that newly married couples merge their finances or keep them separate?

A:  I personally recommend a combo.  Assuming, from Part 1 of this series, that you both “know your numbers,” then when you start living together, whether it’s pre-marriage or upon being married, there should be a healthy discussion about the household budget.  It should list all the expenses, and how and who will finance them.  A good step forward might be keeping your finances as is, but also opening a joint account, the so-called household account, where each person deposits a portion of the monthly expenses (rent/mortgage, food, dining out, utilities, car, insurance, etc.).   This division should reflect what each person can realistically afford and should include a discussion about what types of expenses require a joint decision (e.g. buying a car, getting a pet).  This allows everyone to keep their autonomy, credit history, etc. but allows each party to contribute to the household budget in a prudent manner.  

Keep in mind, this process can also flesh out all kinds of emotional issues around money – for example, maybe one partner feels strongly about bearing more financial burden whereas the other handles other household responsibilities.   But no matter what, the idea is to open the lines of communication, early on, about any issues around finances to avoid trouble down the road.

Q:  Can you explain what prenup and postnup agreements are and what the potential benefits might be?

 

Prenup

Using a definition from the dictionary, a prenup is an agreement made by a couple before they marry concerning the ownership of their respective assets should the marriage fail.  Here is the legal explanation courtesy of Wikipedia

A prenup is used to provide clarity to couples as to what would happen to their assets if the marriage fails.  There are many reasons for a prenup.   Some people are required to have prenups because of the legal structures of their family or work situations (e.g. trusts, partnerships, etc.) That said, I think everyone should have a prenup no matter your asset level because it provides clarity as to what will happen if you do decide to separate.  Money does strange things to people and the time to think through and decide such matters is at the beginning of the relationship when both parties tend to be calm and rational vs. at the end, when hurt or seeking revenge.

Postnup

Again, courtesy of Wikipedia

Postnups are usually used because the financial situation of the couple has changed drastically since marriage, even if they have a prenup in place.  Examples could be that one of the spouses decides to stay home with the children to allow the other spouse to achieve their career objectives, or a spouse is invited into a work partnership and the existing partners of that entity seek assurance that the Partnership will not have to be dissolved in order to ‘cash out’ a Partner who is divorcing.  We often hear about postnups from celebrities… even one surrounding an ex-President and his wife.  It’s all about providing clarity ahead of time in case of the dissolution of the marriage.

Bigger picture, I honestly believe in prenups and even postnups as they increase transparency and reduce uncertainty which, even if awkward in any way, can pay huge dividends down the road financially and emotionally.  The wealthier the couple either individually or collectively, the more detailed a prenup agreement should be.  You can look to qualified legal counsel and financial advisors for ideas.  Postnups become necessary if, say, one partner decides to stay home with the kids and is no longer contributing financially.  This does not diminish their worth because usually they contribute in every other way to make sure that their spouse is able to be successful – e.g. their time, volunteering, showing really well as a partner at work events, looking after children, the dogs, etc.)

Dating & Finance (Part 1)

By Amy Andersen, Founder and CEO of Linx Dating

Tough conversations for couples can vary depending on their specific circumstances, but one theme that we hear about regularly is MONEY. Over 50% of couples do not communicate anything about finances. According to AICPA research, nearly three in four (73%) married or cohabitating Americans say financial decisions are a source of tension in their relationship. 

Let’s get real….hashing out finances, including budgeting, spending habits, debts, and long-term financial goals, can be very challenging. These discussions may include decisions about joint bank accounts, saving for the future, or managing financial disparities between partners, among other things.

At Linx, we see this is as a heavily recurring theme in our couples and have taken the initiative to recruit a top SF Bay Area-based financial professional to answer some questions and provide general guidance on navigating potential landmines.  Our expert works in private wealth management and brings deep experience and a broad perspective to relationships with a select group of families, individuals, and entrepreneurs of all backgrounds, ages, and stages in their lives. 

Q: Thank you for being here with us today. How do you advise a couple, who is in the courtship stage, to begin bringing up the topic of finances? This subject is so important and one that so often people shy away from, because it’s uncomfortable, scary, or threatening. 

A: I think it first starts with the concept of getting familiar with your actual individual numbers, if you aren’t already.  Knowing your numbers means understanding what your post-tax earnings are (what comes “in”), what your monthly spending is (what goes “out”), and what your assets (property, investments with positive value that you own) and liabilities (and debts, for example) are, if any.  The fancy terms for this are your “income statement” and “balance sheet.”  Only then can you start thinking about your disposable income and begin to have a conversation about finances with anyone.

The finance “conversation,” even if not explicit, starts from the first time you go on a date.  Someone must pay for it!  When you plan for a trip, there should be a conversation as to who will pay for what.  We can often get a good sense of someone’s attitude towards money starting very early on in any relationship.  

Now, if you know your numbers, as you continue to discuss these kinds of couples’ activities, you will be able to decide what you can and cannot afford, what your spending priorities are, and begin to get clear about your partner’s financial situation and priorities. 

It might be less threatening and more organic of a conversation about finances if it naturally evolves as the relationship evolves and you begin to need to make even basic decisions together about navigating these daily realities of life.

Q:  For a single professional woman navigating her future, what should be her top financial priorities? 

A:  Once again, whether it’s a man, woman, or a couple, the top priority is knowing your numbers.  These days, with technology in the palm of our hands on a smart phone, for example, there is simply no excuse for not being able to access your numbers quickly and intuitively.  Every major financial institution (banks and others) provides you with a breakdown of your spending every month if you just learn the app, website, or whatever.  And never forget about taxes!  If you owe taxes each year when you file your taxes, then those should always be factored in.   Without a command of your personal “income statement” and “balance sheet (i.e. an accurate snapshot of your current financial picture) it can be hard to even consider your priorities moving forward, such as spending choices, savings, credit cards/debt, investments/asset allocation, retirement planning, etc.

If you need help with any or all of this, then engage a Financial Advisor who leads with financial planning, as opposed to investing, which might come a bit later.