The following is an excerpt from my soon-to-be-released “Couples Guide to Personal Finances”.
After thirty-plus years advising hundreds of couples, it has become evident that when couples have problems, invariably, disagreement about finances is in the mix. Therefore, if you can solve the money equation, you can go a long way towards creating and keeping harmony in a marriage. If you’d like to work on family money matters but don’t know where to start, here are a few suggestions:
Step 1: What You Own, What You Owe
Start by making a list of what you own (your assets) and what you owe (your liabilities).
Assets Your assets are everything that you own, such as money in the bank, automobiles, investments and real estate.
Liabilities Your liabilities are everything that you owe, such as credit card balances, car notes and home mortgages.
Step 2: What You Make
To start the budget process, you and your fiancé need to share information about your incomes. The bottom section of the Asset-Liability Review form provides space for this. By sharing this personal information now, you will eliminate a potential surprise. Nothing gets a marriage or partnership off to a bad start like finding out that your partner has serious financial problems.
Step 3: Dream Big Dreams
Imagine for a minute that there are no limits on your time, abilities or financial resources. If you could have it all, what would you want? Take out a blank sheet of paper and list all the things you would do, the places you would visit, and the things you would buy. You should add to and review your Dream Inventory periodically. It helps to have dreams. Each of you should do this separately then share your dreams. I encourage couples to see if they can each come up with at least 100 items on their dream list. Most couples will find this both eye-opening and insightful.
Step 4: Specific Financial Goals
Use this exercise above to identify two to three common goals you’re willing to begin working on together. Short-term goals are those that are attainable within a year’s time and might include paying wedding expenses, saving for a honeymoon trip, building up a savings cushion or saving for some new furnishings. Longer-term objectives take from one to five years to achieve and might include saving for the down payment on a home or saving to pay cash for a new car.
It’s essential that both of you have input on the broad decisions and that each of you respects the other’s opinions and feelings on money matters.
Step 5: Your Worst (Financial) Nightmare
In this exercise, you and your partner should have an open discussion regarding your feelings about money. What are your concerns? If you identify problems, discuss possible solutions. For example, if you discover that neither of you has much experience in dealing with money matters, you can take a financial planning course, work together through a financial planning guidebook or hire a fee-only financial planner for a couple of hours to make sure you’re headed in the right direction.
For some couples it’s hard to have an honest discussion about money and finances. However, it is important to create a trusting relationship so you will be able to talk about money in both good and bad times. Begin now and you will reap the benefits for many years to come.