With Valentine’s day approaching, we decided to give some financial tips for people in a relationship. Most couples don’t need a couples counsellor, they need a financial advisor. Couples who work together on their financial plan tend to have healthier and stronger relationships. The most important place to start, and the way to avoid arguing about money, is to get clear about your values, both individually and as a couple. Identify what your goals are and what is most important to you. Establish what you both consider to be good with money. Everyone’s situation is different and unique to them but we hope that you gain something from this article. Here are 3 factors to consider when trying to build a financially healthy relationship.
1. Identify Joint Values & Goals
Most people want to know that they are financially secure so that they won’t lose the roof over their head. If your number one financial value is security but your partner is spending more than they make a month, then there is a conflict of interest and something needs to change. The key is to build your financial life around your values and create a specific action plan to get there. It’s all about simplifying. You and your partner’s goals don’t necessarily need to be the exact same, but there does need to be some level of compromise.
Be clear on where your money is and where it’s being spent. Many couples don’t know where their money is, or what their net worth is. You have to measure where you are today so you can make progress. Is your money in the right place? Is your money working for you? These are the things you need to organise. A good way to do this is to create separate savings pots for different scenarios. These include;
- A Security Pot – Set aside enough money to cover your expenses for a certain period of time so you have an emergency fund to rely on if needed. For example, this can be 3 to 6 months of living expenses.
- Retirement Pot – Having a pension fund is becoming increasingly important as the years go by with the retirement age increasing and the increasing cost of pensions on the rest of the workforce. You and your partner need to identify the life you want to live in retirement. This is a scenario where you pay yourself first. Whether that is with a company pension plan or individual contributions, you should both have a retirement plan in place.
- Dream Pot – This is the account you will use when considering what you want to do between now and retirement. For instance, you may want to go on a dream holiday, pay off your mortgage, buy a second home etc. This funding can cover short-term, mid-term and long-term goals. Set up an investment account for these dream goals and work with your financial advisor to make your dreams reality.
2. Work Towards Owning a home
Owning a home is the single most important financial decision couples can make. If you’re a couple who continue to rent, the only person you’re making rich is your landlord. What I see happening often is that couples commence renting with the intention that they’ll only be there for a few years – then they turn around and ten years have passed. Meanwhile, rents continue to escalate. It is really important for couples to make it a goal to buy a house. If you have to pay off loans before getting a mortgage, make it a goal to pay it off as quickly as possible. When you pay off your loan early, it gives you so much financial freedom.
3. Dealing With Your Partner That Is Your Financial Opposite
If you are in a relationship where you and your partner are on the same page when it comes to spending and saving then this doesn’t apply to you. However, many couples are attracted to their financial opposite. A lot of people tend to be either spenders or savers, with a few being a well-rounded combination of both. If you are in a relationship with your financial opposite, how do you overcome it? The only way you can overcome this issue is by going back to your values and getting them aligned as close as possible. The quickest way to address this is to agree to pay yourselves first. Put your money automatically into an emergency account, a retirement account and a dream account.
Be clear about whether you and your partner’s values are aligned. This doesn’t mean that you shouldn’t be with someone who is your financial opposite or has credit card debt, but you do need to know if they want to get out of that debt. Talk openly about these things. How do you want to manage your money as a couple? You need to have your eyes wide open so that your relationship doesn’t fail due to arguments over finances. Thereafter, you can work towards all your goals together with a team effort.
If you would like to discuss further, please call us on 025-30588 or book a complimentary chat here. We are always happy to help whether it is in our office, via zoom or over the phone.