Joining finances represents a critical juncture for financial decision making that has a lasting impact on a couple’s future financial position and impacts the future stress and tension money can have on a relationship. Here are considerations for couples combining finances .
Sharing a Macro Perspective (Seeing the Same Big Picture):
Money. It’s one of the major societal taboos, and many of us are even reluctant to bare the details of our personal finances with those closest to us. One possible reason for this is the societal pressure to tie our value as human beings to our financial position. The media is fixated on “the rich” (ultimately also making many of them “the famous”). The truth is: we are not our money, and it doesn’t buy happiness. If anything, managing more wealth may prove to be such a distraction that it becomes difficult to pay attention to the things that bring honest joy to our lives. This isn’t to take away from the fact that wealth can provide increased opportunity, but it’s important to understand that it’s our job to give money value, not the other way around. From this perspective, it becomes dramatically easier to discuss our current financial situations as plain fact. No need for judgement. What defines us are our ambitions and the actions we chose to pursue them. Dreaming up a shared vision of what the ideal life together looks like can be really fun, but it’s also a critical element to how financial decisions are made together.
Speaking the Same Financial Language:
Now that it’s time to talk about finances as facts, it’s critical to establish clear communication. What is Income? What are expenses? What are assets? Liabilities? These are core concepts that must be mutually understood in order to move forward. Once an understanding is reached, we see how these items fit together to form snapshots of financial standing (balance sheet, cash flow, etc.) “This is where OUR finances currently stand.”
Choosing a Path:
With an open and honest accounting of shared ambitions and current standing, it’s time to figure out the best way to get there. There will always be options- in fact, sometimes so many it can seem confusing. Now it’s time to blend the rational brain with the creative brain to develop the right plan to pursue. How much should be spent on the day-to-day? How much should each person be contributing to retirement savings? What happens if something bad happens, like one spouse can’t work anymore? These are the kinds of considerations that go into a well thought plan of action.
Implementation, Accountability & Adaptability:
Once a path has been selected, so begins the pursuit. What exactly lies in the future is unknown (besides death and taxes). Has everything gone exactly according to the plan? What new forks in the road have to be navigated? Are the shared ambitions and priorities still the same? Adjusting goals and the plan of action are going to happen. There’s no value in a plan that isn’t implemented. It’s critical to be held accountable for what needs to be done and revisiting why that’s important.
Sharing something as intimate as personal finances is a major milestone in any relationship. Understanding their impact, getting on the same page, and working as a team to pursue shared goals can turn the entire process from awkward and embarrassing to motivating and even fun.