Couples and money: 6 topics to discuss
If you want to plan a future as a couple, you should start with a good look at where you both stand financially (Getty Images/Maskot)
As potential areas of disagreement in couples go, money has long been close to the top of the list. In one study, almost one third of all respondents experiencing relationship stress said money was the primary cause of friction. And another study showed that couples who fought about money more than once a week were 30 per cent more likely to get divorced.
It’s certainly easy to understand why finances could become a flashpoint for couples. You might have differing savings habits and spending styles; your incomes might be mismatched; or one partner could be hiding a mountain of debt or other facts about their finances.
Often, too, friction could stem simply from the fact that expenses are greater than income. “That would be the case particularly if one of the spouses suffers an unexpected job loss, which is very common,” says Clark Craig, a lawyer and certified financial planner in Burlington, Ont. “Suddenly the couple who had two incomes now has one.”
No matter where you stand with your finances, however, there are several subjects experts say all couples should find the time to broach. Here are some of them.
1) WHERE DO WE STAND FINANCIALLY?
It only makes sense that, if you want to plan a future as a couple, you should start with a good look at where you both stand. But that is much easier said than done, says CPA David Trahair, a financial trainer and author of several books, including The Procrastinator’s Guide to Retirement.
“As an accountant, I would naturally opt for the ideal solution—both partners would provide full disclosure, including a net worth statement. And each would have a nice spreadsheet showing what they earn and what they spend,” he says. “But as we know, that never happens unless you have two accountants who are married to each other.”
Still, Trahair thinks it would be a good idea for most people to list everything they own at market value as well as the balance of their debts. “The last time I researched the subject, 50 per cent of undergraduates were graduating with student debt,” he says. “And the average balance was about $25,000. So it’s important to get those figures out in the open.”
2) WHAT DO WE SPEND?
Once you have a good idea of where you stand, you can each have a look at your spending habits. And a good way to do that is to track one month’s spending.
“You can download the information from your bank or credit card company onto a spreadsheet or use a website like mint.com or a program such as Quicken,” says Trahair. “That gives you a pretty representative summary of what you spend money on. And you just compare the total to your take-home pay. It’s easy to see if the inflows exceed the outflows.”
3) ARE WE SPENDERS OR SAVERS?
If you have done a good job of tracking your spending, you should know whether you are a spender or a saver. But it’s still worth having a discussion on the subject, says Craig. “Some people will reach retirement and they’ll still be overwhelmed by debt, while others will have planned carefully so that when they reach retirement they will have paid off all of their debts. That is certainly the preferred option.”
Of course, it’s best if both partners are honest and forthcoming about their finances. But as Trahair points out, “The sad reality is that there are a lot of people out there who don’t get numbers. And if you put two of them together and if they are both spenders, they could end up with a personal financial disaster on their hands.
“Maybe the healthiest combination is having someone who is financially astute paired with someone who is less interested in money,” he says. “That would lead to a healthy discussion.”
4) SHOULD WE COMBINE FINANCES—OR NOT?
Although the decision to combine accounts is an important one, it seems there is no right or wrong solution.
“Personally, I am in favour of combining finances, but that is not for everyone,” says Trahair. “You can also have a combination solution—you would have a joint account to cover your core expenses, then have separate accounts for your personal spending.”
5) WHO IS DOING WHAT?
No matter how you decide to structure your accounts, one partner usually assumes primary control for day-to-day finances and paying the bills, says Craig. Similarly, one person usually takes responsibility for the investments (that said, the less active partner should still be aware of what the other is doing).The designated money manager should also make a file with both partners’ banking and other financial information*. “It’s a good idea to save the file on a USB, and to make sure both of you have a copy,” says Craig.
6) WHAT ARE OUR LIFE GOALS?
Early on in your relationship, you’ll have to contend with some potentially life-altering decisions: for example, are either of you interested in more education, and can you afford it? And what about housing? Are you enjoying the flexibility of being renters or is it your joint dream to eventually buy a house?
“If so, that will provide a laser focus—you’ll need to come up with a down payment and all the associated costs of owning a house,” says Trahair. “And eventually, of course, you’ll want to decide about whether you are going to have children. That is absolutely huge.”
7) WHAT ABOUT RETIREMENT?
Eventually, Craig says, you will want to share thoughts on when—and if—you want to retire. And views can vary considerably on that score, he says. While some people hope to retire at the first opportunity, others either enjoy their work or don’t have other activities to occupy them, so they carry on working.
“If you can decide on a goal, that makes planning easier,” he says. “You might even decide to sell your home, downsize or move to a retirement community. If you are both on the same wavelength, you can manage your finances accordingly.”
BE PREPARED
Read Love and money: conversations to have before you get married for more financial insights.
Plus, find out which documents everyone should have in place and check out CPA Canada’s wealth of resources—from guides to information sheets to workshops.
*This article was updated on January 21, 2022 to remove the suggestion of sharing PIN codes with your spouse. Doing so will negate your bank insurance.