Just as your relationship with your significant other evolves over time, your relationship with your finances should evolve too. As money is consistently a leading pain-point for relationships, the two go hand-in-hand.
We’re Brady and Hannah, CPAs, newlyweds, and founders of Financially Engaged – a company that helps couples navigate life’s major events and financial decisions, together. We started dating in college, got engaged five years later, tied the knot last summer, and are now planning the next stage of our relationship – babies!
We’ve covered all of the financial stages of a relationship, and today we’re going to share those tips with you, regardless of what stage you are in!
Finances when you’re single
You’re single and you’re priority #1. While this can be a fun and carefree time of life, it is critical that you stay on top of your relationship with your finances. When it comes to finances, time is your best friend. A few simple and smart decisions at this stage can launch you into financial success down the road.
Key financial considerations when you’re single:
- How much of each type of debt do you have and what is your plan to pay it off?
- Where is your money going and how much do you need each month?
Facing your debt balances can be daunting, but there is nothing more empowering than wiping them clean.
Bonus: Getting ahead on your debt payoff also makes financial discussions with your eventual partner way easier! Not sure how to track your debt? Download our free Debt Payoff Plan. Not sure which debt payoff method is best for you? Read our full blog post explaining the different debt payoff methods.
In order to determine how much can go to paying down debt, you need a sense of where your money is flowing. Which brings us to the dreaded B word…budgeting! We know, we know . . . budgets get a bad rap. We’re not going to sit here and say you have to budget for the rest of your life, but we challenge you to try out budgeting for three months to get a feel for where your money is going. Whether you’re new to budgeting or you’re a pro, we have free Income and Expense trackers.
Finances when you’re dating
So you found yourself in a relationship? We don’t recommend flashing your bank accounts on the first date, but eventually you can begin to tease out financial backgrounds, beliefs, and habits. The depth of your financial talks should grow alongside your relationship. Remember, money is a taboo topic for many people, so this progression should be handled carefully. However, it is important to start an open dialogue about your views on finances, because financial compatibility and communication can be a huge factor in the success of your relationship.
General financial topics as you continue to learn about each other:
- What do you want to achieve in the next few years?
- Travel, buying a car, getting debt free, etc?
- Are you more Type A or go-with-the-flow when it comes to your money?
- How did you learn about money?
- Parents, school, or self-taught?
- How did your parents handle finances growing up?
- How do you want to handle shared expenses?
- Treating each other vs. splitting
More specific topics as things get more serious:
- How much debt do you have?
- What’s your approach to saving and investing?
- Do you have an emergency fund?
- How many kids do you want?
Actions speak louder than words and many financial habits can be observed during the dating process as well. Is your partner dropping $100 at the bar each weekend or constantly buying new clothes with little going toward savings? Consider if your partner’s habits align with yours or if they could lead to bigger disagreements down the road. Use this time in your relationship to determine if you could be financially compatible.
Finances when you’re engaged
Congrats, you’re engaged! This is such an exciting time of life, but it can also be very overwhelming. We fully believe that once you’re engaged, you should feel comfortable being completely open and honest about your financial situation –– so much so, that we named our company around this idea. You’re planning to get married to another person, and (likely) combining your finances with that person, so you should understand what you’re committing to.
Don’t get us wrong, we are not saying that you should run the other direction if a person has debt, a low income, or if their financial well being isn’t picture perfect. However, you should both be armed with that knowledge and ready to tackle the situation, together.
Key financial metrics and discussions when you’re engaged:
- What assets do you have and what’s your net worth?
- Have you put any money toward retirement?
- Discuss the specifics of each type of debt
- Are you both going to contribute to paying off the debt once you get married or will it come from one person’s income?
- What’s your credit score?
- What are all of your sources of income?
- Discuss if you want to combine all finances once you’re married
If you haven’t already, now is the time for you to share the details and align on a plan for savings goals and debt payoff. Each person brings something different to the table and there’s no hero or villain. From here on out, you’re a team and it’s critical to be on the same page with open communication. It can be fun and beneficial to start watching your net worth grow together, prior to any formality of merging and sharing accounts.
It is also important to discuss your credit scores, because if you ever plan to purchase a home or take out another line of credit together, both of your credit scores are used to determine the likelihood of you being approved for a loan as well as the terms of the loan. These days, most credit cards and banks offer your credit score for free. We also love to use Credit Karma (#notsponsored) to get our free scores each month.
One of the biggest pain points for some couples is the decision to combine or not combine finances once they’re married, especially if you have a differing relationship with your finances. Money is personal and it can be very tough to open up or relinquish control for some people. You don’t want to start out your marriage in a huge disagreement, so get ahead of this conversation before you tie the knot.
Finances when you’re married
The big day has come and gone in the blink of an eye, and now you’re married! Hooray! It can be easy to be caught up in the wedding day bliss and forget to get organized with your finances, but this can be a huge mistake. Make sure you cover the below tasks early on in your marriage to allow your relationship (and bank account) to thrive!
Top financial tasks to accomplish when you’re married:
- Combine bank accounts (if that’s your decision)
- Determine if you need to update the beneficiaries on your accounts
- Discuss financial tracking, roles, and frequency of meetings
- Align on your joint financial goals
- Assess what’s working and not working, have open dialogue, and refine your approach
You can complete the more tactical items such as combining your bank accounts and updating your beneficiaries pretty easily and then you can move on to the fun part – planning for your goals!
Communication is key to many aspects of life, but especially marriage, and especially your finances. You can download our free Net Worth and Savings Goals tracker. Watch our simple tutorial, and start setting goals and tracking toward those goals each month! Maybe you want to increase your emergency fund, or plan a trip to Hawaii, or buy a car, or start to plan for items you’ll need when baby number one comes along. You can keep all of those savings goals organized in one place to make sure you’re on track!
Communication, Communication, Communication
We hope you feel armed with tips and tricks to tackle any financial stage of a relationship you find yourself in. The relationship with your finances is one of the leading causes of divorce, and if you can get ahead of that by having open communication before, during, and after you get married, you will be setting your marriage up for success.
Which financial stage are you in right now? Which of these tips do you think you can implement today? Comment below and let us know!
