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Money is said to be the root of all evil and this is the case for relationships.
Finances are still the leading cause of divorce with research showing that 37% of women and 30% of men attributed financial stress as the cause of their breakup.
In a given year, there over 100,000 marriages, and nearly half of those in Australia end in divorce.
With many marriages not working out and money often the driver, deciding how to manage your finances early on is the key building block for a long-term relationship. Rather than bury your head in the sand, start the conversation early.
I tapped my company’s advisers on this and they gave me a list of what sets-apart successful couples.
- They know each other’s money type: if one of you is a saver and the other a lavish spender, start by acknowledging the difference. It’s pointless making a financial agreement until both of you are clear on what money means: is it for instant enjoyment or should money create long-term security? This is about values.
- They make an agreement: when couples understand each other they can make an agreement that works for them. A financial agreement between couples might be totally joint finances, totally separated finances, or a bit of both. And a good agreement covers downside: if you have a degree of separated finances and assets, what happens when one person is sick or injured? What’s the agreement if you separate?
- They make a plan and stick to it: successful couples discuss their plans for the future and set joint financial goals. This covers superannuation, wills, savings, life insurance, children, careers, investments and the use of credit cards. Successful couples actively use solicitors, accountants and financial advisers to make good decisions and to resolve disagreements. Most important, once a plan is made they stick to it.
- They pay off debt: couples who have a commitment to pay their debts are happier and more successful than those who let the debt build. I think this might go back to values, agreements and plans. If you’re serious about growing your finances, neither of you want debt accumulating, especially not the expensive kind.
- They communicate: all successful couples communicate about their goals and plans, and they know as much about the finances as their partner. There’s no secrets – both know all the passwords. This is important for women: those who allow finances to be run by their partner usually feel financially vulnerable if they separate. There’s nothing wrong with one person running the accounts, but there must be equal access to the information. Communication doesn’t mean one person talks and the other passively accepts: it means everyone is informed, the information is transparent.
Money so often becomes a negative in relationships: it starts with a clash of values and is made worse by lack of communication. It doesn’t have to be a negative.
If you want to make a fist of it, talk to successful couples and seek expert advice. And start focusing on what works rather than what doesn’t.