Our relationship with money can be a complex one. When you add love to the mix and lack of communication, it could be a recipe for a financial disaster. That is why it is important to find your financial compatibility early on in the relationship. And to do that, you need to start talking early as openly and honestly as you can about money as a couple.
Oftentimes the misconception is that because you love one another, automatically you will handle your finances together without any friction.
Here are some important factors to keep in mind as you begin to fuse your financial lives.
1. LEARN ABOUT EACH OTHER’S MONEY PERSONALITIES
How we handle and manage money gets cemented at a very young age. It has a lot to do with our upbringing and the people who surrounded us. This means that every person has a distinct way of thinking about and dealing with their finances.
In a relationship, those distinctions can be the difference between being on the same page about your household finances or having money as a constant source of conflict. There are five money personalities that people can identify with:
The spender loves to make money and spend it. They convince themselves that they work too hard and therefore they deserve to enjoy their money. They give little to no thought about savings or investments.
They are all about instant gratification. They assume “something will come up” as they spend their last few rands! They are normally in debt and even if they manage to pay off their debts, they find themselves in the same situation a few months down the line.
They fail to cultivate good money habits.
There is nothing that gives the saver more pleasure than knowing that they have money at all times.
They live for balancing the books, patting themselves on the back for saving more money than they did the previous month! They feel secure only when their savings are at a specific level.
They become miserable and a bit grumpy if their savings are not at their preferred minimum amount.
Savers are mostly risk-averse. Although they save, they do not go further and invest their money in income-producing or growth assets.
They find putting money in the bank more secure. They do not want to lose any money.
The avoider would rather not discuss money at all. They can talk about anything and everything money can buy, but will never talk about money itself.
They work, earn an income, spend it and prefer not to be involved when it comes to meaningful purchases such as investments, retirement or insurance policies.
They are indifferent to their own financial life. They do not actively look at ways in which they can improve their money management skills. They live by the mantra: “As long as I can put food on the table, I am fine.” But they are really just afraid that they are not where they want to be financially, so they ignore their financial situation.
As the name suggests, the money monk has mastered their finances. They have a good balance between saving, investing and spending. They are comfortable to talk about their finances. It gives them great pleasure to look for new opportunities to make their money work for them. They are prudent but they also enjoy their money. They are normally focused on increasing their net worth.
These people think there will always be someone to take care of their bills. They cannot fathom making a financial decision for themselves – as they expect someone else to do that. They are not concerned about budgeting, what is a budget anyway! They have not the slightest interest in learning about their personal finances or how they can improve themselves financially.
They spend recklessly and they can never have enough money because when it’s there, it all gets spent.
2. DECIDE HOW YOU WILL SPLIT UP BILLS
If you live with your partner, decide on how you will split your household expenses. Talking about this helps eliminate expectations that might end up causing fights about money. This requires that you both sit down and draw up your household budget together.
Disclose the different financial commitments you have – debts, family tax and other commitments. Then decide how much each can contribute towards the combined expenses.
3. SET YOUR EYES ON THE (SAME) PRICE
Life can be unpredictable and sometimes throws curve balls at us. It is important for you to communicate and come up with a plan of how you will tackle a tough financial situation.
Financial strain is cited as one of the biggest causes of divorce. At the core of it I believe, is the couples’ inability to have an honest conversation about money and come up with a plan before the situation gets out of hand.
Setting goals together, whether it’s to get out of debt, build an emergency fund or save for a family holiday, can have a powerful effect on the relationship as you achieve your goals together over time.
Ultimately, to build a well-rounded life as a couple, money conversations need not be a taboo. You should be accountable to one another for all your money decisions and communicate your wants, needs and expectations.
Mapalo Makhu is a personal finance coach