It probably wouldn’t surprise too many people to learn that money and finance are at the top of the list of reasons why marriages break up. If that is such common knowledge, it would make sense that most couples would communicate carefully around money, right?
Wrong. A recent Harris poll conducted for the National Foundation for Financial Education found that one in three adults in a committed relationship say they have concealed financial information from their partner or committed financial deception. Not only that, but 76 percent of those surveyed say that when financial deception has occurred, it has had a negative effect on the relationship.
With so much at stake, it is vital for married couples and others in a committed relationship to learn and exercise good communication around finances. Here are some tips I’ve gleaned from my years as a financial advisor:
- Money means different things to different personality types. This isn’t just a male/female thing, either. Knowing your partner’s “financial personality” is a crucial first step toward good communication. The Financial Times of London recently published a free online “money personality test.” Using a tool like this together can be an important first step in starting or improving financial communication in a family.
- Put the numbers on paper (or screen). Construct a family net worth statement that lists all assets that you know about and all debt that has been incurred, either individually or jointly. Write it all down and look at it together. Similarly, put together a statement of monthly income that shows exactly what comes in (and from where) and what goes out (and to where), every month. I use Quicken to track my spending but the free website Mint has a great toolkit to help families learn exactly where they are financially and also for keeping track of monthly expenses. Using this together will help couples “get real” with each other, financially.
- Learn to be a good listener. Especially with an emotional subject like money, many of us listen in order to reply, or, even worse, win an argument. Instead, learn to listen with acceptance, realizing that until you really understand what is important to the other person (and see #1, above), you cannot work together on a mutual goal.
- Define mutual goals, and put them in writing. If you both agree that having a comfortable retirement is a priority, write it down. If funding a young child’s college education is your shared front-burner item, put it in writing. If the thing you both want most is an amazing vacation in ten years, put it at the top of the list. Keep the resulting document in a safe place in your files or on your computer, and refer to it during financial discussions.
One more tip: even if one of the partners in a relationship is the “designated money person,” it is important for both partners to know some basics: account passwords, where main accounts are located, persons to contact for emergency assistance. (Note: If you want some guides or worksheets to help prepare such a document, contact me with your request.) When both partners are in the game, everybody wins.