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: I know that you represent high net worth families, individuals, and entrepreneurs. I would imagine that you have encountered situations where two individuals in a romantic relationship love each other, but might be forced to address a significant disparity in financial income, assets, or both? How does one bring up this topic with ease and confidence?
A: Not to sound like a broken record, but we are back to knowing your numbers.
If everyone knows their numbers and is forthright about their numbers, then household financial planning can proceed in a thoughtful manner, taking into account what each person can afford and reflecting any disparities in income or assets. The realities of life require this planning and create a natural “excuse,” if one is even needed, to have any hard, adult discussions.
Ambiguity is what usually breeds resentment and causes problems. It’s hard not to be resentful if you are spending what you cannot afford to keep up with a wealthier partner. Moreover, if a wealthier partner cannot understand that, then you have a major red flag in the relationship. Even with that said, if a wealthier partner starts receiving unrealistic financial demands from the less wealthy partner, then that is an equally big red flag. Perhaps worst of all, if a partner is not receptive to hashing these issues out with you, even if awkward or difficult, that could be the biggest red flag of all.
Q: In your experience, what are some other “hot button” issues for a newly exclusive or recently married couple? Are there any stories or scenarios you can cite from your practice that could be beneficial as “lessons learned” for our readers?
A: Communication is super important.
I watch a couple’s body language all the time when we are planning or doing portfolio reviews. You usually can tell which ones have a healthy relationship by how they communicate. Strangely the ones that argue the most (respectfully on both sides of course) are usually the ones with the strongest relationship. They talk through, and hash out, everything. Something I have seen work is having a state of the union discussion about the relationship at least once a year, maybe on the couple’s anniversary.
Money if often the biggest hot button issue with couples, so don’t feel like you’re alone in this.
Unfortunately, regardless of how evil you feel money is, the only way most things happen in life is if you have the financial resources to make them happen.
Everyone’s relationship to money is unique to them. There are very wealthy people who hate spending money and get really upset if they have to pay $10 for parking. (My spouse is a horrible tipper whilst I am more generous. We solved that issue by deciding that if you are paying the bill, you decide the tip). We all can admit that we usually have an idea of someone’s approach to money from the first few dates. I call it their financial DNA. You recognize it from their restaurant selection, what kind of tipper they are, etc. I see it with clients all the time, there is one spouse worried about every dime and the other who is happy to spend. You cannot and will not change someone’s feelings about money. Usually it has a lot to do with their family situation growing up. What I have seen work is to, again, know your numbers. If you know your numbers then you will be able to make informed decisions and talk about what is acceptable individually and collectively. This is usually why having your own accounts makes the most sense as opposed to combining everything. It makes you feel less like everything you spend on is in the spotlight and must be accounted for to the other spouse.
I have even seen non-working spouses being paid a salary by the working spouse so that they can have independence. One couple even went so far as to have the non-working spouse paid a salary and bonus, taxes and all included. We can use celebrity prenups as examples (because they are usually made public when a divorce occurs) to see what some arrangements look like. Examples are lump sum for each year of marriage, percentage ownership in a business if started during the marriage, etc.
Some other issues are:
Schooling - private/public and this includes local vs. boarding school.
Where to live. Women tend to want to be close to their families especially when they have children.
Family, especially if a spouse is supporting members of his/her family financially.