When it comes to resolutions, many of us work hard to commit to exercising more regularly, eating better, reading more and spending more time doing the things that make us happy. An oft overlooked aspect of our lives is how we communicate with our loved ones, most importantly spouses, with regard to money and finances.
One of the leading causes of divorce (or at least discord) in relationships is finances. One of the best remedies for this particular marital challenge is communicating more honestly and more regularly about money and finances. According to a study, nearly half of all spouses interviewed have no idea what their spouse makes on an annual basis, one third doesn’t know what their monthly expenses are, and fifty-three percent do not know what they owed in taxes last year.
Money can be a major cause of stress, and lack of planning for both the short and long term can exponentially add to that stress. We have put together a “Top Five Tips” list of how you and your spouse can improve your communication around money and perhaps get organized and enjoy your relationship without financial burdens (or the unknown) slowing you down.
Understand the Other’s Money Story
It is important to understand that each of us has a very different relationship with money and finances. Our money story begins in childhood and continues throughout adolescence and into adulthood. The lessons we learned when we were very young mold and shape how we think about and react to money as adults. If there were habits formed in youth that were not so great, those are difficult conventions to break. Difficult, but not impossible. Having a partner who will listen and with whom you can be honest can help people make changes and improvements in their money habits without feeling like they have to hide it if they fall into a familiar habit from time to time.
Respect for another’s history and understanding of finances and money is the first step in forming a cohesive money story together. This exercise can help couples write their own money story and break the chain of behaviors that may not be conducive to their shared goals or the future they would like to create.
Define Goals with Your Spouse
In the process of writing (or rewriting) your marital money story, it is paramount to define goals that you would like to accomplish for both the near and long-term. Not all of these goals have to be directly related to finances. Understanding each other’s passions, ambitions and vision for the future will help facilitate better ongoing communication in your relationship.
For example, if your spouse wishes to turn his wood carving hobby into a side business after retirement, you will know that he will need the time to spend cultivating the business and perhaps a little money to get it off the ground. If your goals in the first years of retirement were more along the lines of traveling and visiting friends and family, then you have the basis of a good conversation. Understanding what you each want is the first step in figuring out how to make some compromises and figure out how to make both goals work.
Beyond goals like this are also longer-term goals: What do you want to do with the money that is left when you pass away? Do you want to help pay for your grandchildren’s schooling? Do you want to downsize your home? Do you want to buy a vacation home or perhaps a boat? Whatever the goals you have in your head, share them with your significant other or spouse and ensure that you are both on the same page about what the other wants from life and retirement.
Have a Monthly, Quarterly, or Semi-Annual Money Meeting
When it comes to setting and reaching goals, nothing can get in the way more than not sticking to the budget or the plan that you created to get you there. Having a periodic (and scheduled) budget/finances meeting can help you to regroup, stay on track and make adjustments to your plan or spending in order to address your needs or goals. The only constant in this world is that things change. Sometimes they change more frequently than other times, but change is all around us. Having family money meetings can help you address the changes that may have taken place and help you continue on the path that will ultimately lead to accomplishing your short and long-term goals.
Become a Good Listener
Hearing your spouse is not the same as listening to them and, when it comes to money and finances, we sometimes don’t want to hear what anyone else has to say, so we don’t listen. Communication is less about solving problems at the outset and more about understanding the entire picture before setting out to solve anything at all. When we talk about the things we want and need and how we feel about certain things, and another person is truly listening to what we have to say, it is empowering and comforting all at the same time. Some of the best conversations about money and some of the best solutions to money issues come from discussions where everyone’s guard is down, everyone is being honest, and everyone is listening to one another.
Set Some Individual Spending Limits
No matter how much money you make or how much you have saved, setting limits on how much you spend, and on what is paramount to having a cohesive marital view of money and finances. In every marriage, there are things that someone buys more frequently than they should, or money that is spent by one spouse and the other spouse disagrees with the importance or necessity of the purchase. In most cases, there is no right or wrong in these scenarios, just differences of opinion, but this difference can run deep.
There are a great many marriages that have suffered from differences of opinion in how and where money is spent. One way to address this is by setting individual spending limits and, perhaps, including specific item spending limits if there are particular things that cause discourse.
It is important that your spouse feels like her/his voice is being heard and concerns are being addressed. By having some agreed upon limits in place along with consistent conversations about money and a defined budget and set of goals, money, and marriage can be more blissful than not. As financial advisors, we work with couples and individuals to help them define their relationship with money, saving, spending and investing. Communication is the tool that best addresses anxiety, stress and ill-conceived notions around money.
Though these conversations can sometimes be the most difficult ones to start, we find that, once the floodgates open, we hear and learn so much and our clients learn so much about themselves just by saying things out loud that they have been keeping in their head for years if not decades. We encourage you to embrace the opportunity to foster money conversations in the New Year!