On TV it’s rare for couples or even roommates to fight about money. Reality isn’t always entertaining.
Arguments about finances are often what lead to the end of a relationship. Money matters are always a top reason for marital discontent. That’s because when it comes to money, opposites often attract.
It’s kind of a universal dynamic in relationships, says Olivia Mellan, a couples therapist and money coach. She’s seen all sorts of combinations: money hoarders marrying free spenders, or money worriers hooking up with avoiders who hate to talk or think about it.
Such combinations present challenges when the two individuals become a couple.
If you’re in a relationship whether married or not, and your significant other says one of the following, you may be on the road to one of the four biggest money mistakes that couples make.
1. “LET’S TALK ABOUT IT LATER.”
Problem: Conversations about money are few and far between.
Solution: Before sharing a home together and combining your bills, discuss a few key financial points. That should include how much debt each person brings into the relationship. Share credit reports and credit scores to learn how each person has managed money in the past.
Talk early on about how shared household expenses will be paid. If one partner earns more, will that person pay a higher percentage of the bills? Will there be one joint account or will each person maintain a separate bank account?
You’ll want to talk about major purchases and spending priorities. Are stainless steel appliances a must for you, granite counters?
It’s important for couples to have ongoing money discussions in order to stay on track. Some advisers say a weekly discussion around a table where paperwork can be laid out is best, while others recommend at least a monthly sit-down to talk short-term and long-term goals for retirement, education, major purchases, and vacations.
2. “SO WHAT IF I HAVE SOME CASH HIDDEN IN THE BACK OF THE CLOSET?”
Problem: Partners keeping money secrets from one another. Secrets could range from buying the occasional irresistible on-sale sweater to hidden stashes of cash.
Solution: Don’t combine all income together. Allow each partner to have his or her spending money.
“I don’t think couples should ever merge all their money,” says Mellan.
Combine enough income to pay the household bills. Try drafting separate lists of what expenses each partner thinks should be paid jointly then work together to merge those lists. The combined expenses should be paid from a joint account to which each partner contributes based on income or some agreed upon formula. Each partner then maintains a separate account to save or spend as he or she wishes.
For single-income families it’s important to realize that both individuals should be familiar with the budget and bills. It’s also a good idea for nonworking partners to have a bank account of their own.
3. “IT DIDN’T COST THAT MUCH.”
Problem: There’s no household budget.
Solution: A budget agreed upon by both partners will help pay down debt or avoid it in the first place. Debt is one of the most common flashpoints for disagreements over money. Budgeting also helps plan for that new car, a home, a baby, or retirement. To help keep debt under control, it’s important to budget for an emergency account. That way you can pay for the unexpected, like a broken water heater without scrambling. No one likes cold showers.
You can find a home budget calculator and other helpful financial tools at http://credit.org/blog/calculators .
To avoid missteps, couples should look into some of the latest tools, like Chext. It’s a text messaging service that’s allows couples to keep track of all expenses out of their account instantly, http://chext.net . The tool keeps a running total of an account’s balance and subtracts any spending either partner posts — sending a text message to both the spender and the partner’s phone so both are always up to date. It’s a step toward total transparency.
4. “I DON’T OWN ENOUGH TO NEED A WILL.”
Problem: When you’re young and single, life insurance is hardly a top priority. But even when young people start to pair up, too often they don’t think about an unexpected crisis.
Solution: Couples should talk about their expectations if something were to happen to one or both of them. Who is the beneficiary listed on insurance policies and retirement accounts? If someone forgets to update these documents, money could go to a former spouse or another family member. A will, a power of attorney, a health care directive, and other documents that ensure financial and other matters are dealt with legally are important plans to stay on top of.