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.