February 11, 2019
While millions of people are making plans for Thursday, a much smaller number are thinking about the role finances play in their relationship. Talking about money isn’t exactly romantic, but it is a mistake to ignore the role it can play in relationships. Money is among the top reasons couples fight, and it may even prevent you from finding someone in the first place! So this morning, I want to give our listeners some tips to ensure money doesn’t come between them and love.
It certainly is, Tom. If you are trying to find Mr. or Ms. Right, your credit score might matter a lot more than you think. Since the financial crisis, numerous surveys have found that financial factors have taken on greater importance when it comes to attractiveness. Take debt: a recent survey from Finder.com found debt is a key consideration. Nearly three-quarters of American adults (72%) said they would reconsider a romantic relationship because of the other person's debt. Respondents said credit card debt was the biggest concern, with 56% citing that as a red flag, followed by student loan debt (52%), and payday loan debt (49%) following close behind.
This is not to say that if you have some student loan debt you are destined to be single, but it is a good reminder that healthy financial habits have benefits that go beyond money. So, check your credit report for errors. Pay your bills on time. Put a premium on living within your means and paying down outstanding debt. Start saving for retirement. This will put your finances and perhaps your dating life on a more secure financial footing!
Honesty and transparency are imperative when it comes to finances, Tom. A recent CreditCards.com survey found 19 percent of people in live-in relationships were hiding a bank or credit card account from their partner. That's about 29 million Americans! Considering trust is the single most important predictor of the success of a relationship, this may not be the route that you want to take.
Instead, it is typically best to get your debts all out in the open, rather than waiting until late in the game. Now I am not saying that you break out your credit history on the second date, but you do want to discuss your respective financial practices and backgrounds as your relationship gets more serious. If you have outstanding debts or past mistakes, share them with your partner. These factors will have an outsized impact on what you can achieve together, whether that is buying a house, raising children, or traveling the world. Being honest and open about your finances will help to ensure there are no surprises later, and it will mean you and your sweetheart are more likely to stay together!
For those of you out there who are ready to get hitched, you want to develop a joint financial plan before the big day. This means taking the time to define your mutual money goals and outline your shared financial commitments. Both of you should be equals when it comes to your finances. Each person should be involved in money management, understand what decisions are being made, what your cash flow looks like, and the status of any financial accounts. You should develop a joint budget and determine how each person will contribute to living expenses and other joint costs ahead of time. None of this is to say your finances have to be totally merged — in fact, it is important for each party to maintain a financial identity of their own — but you want to be on the same page when it comes to your shared money goals.
The other thing you must do before you tie the knot is get everything in writing! We have all heard the stories: two people madly in love and convinced nothing will ever come between them, so they throw caution to the wind. Then something does happen, and money issues come to the fore. While it may not be fun, or even feel optimistic, putting your financial agreements in writing is very important. Whether it is a prenuptial agreement which clearly specifies your respective assets, or a living trust or will that determine what happens to your money in the event of a tragedy, you should handle this before you sign your wedding certificate.
Always remember to keep an open financial dialogue. Plan for hardship periods, whether your family depends on two incomes or one. And work together to save for your future. I hope all of our listeners have a wonderful Valentine’s Day, Tom.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.