The Love Show
With Valentine’s Day on Friday, love is definitely in the air this week, and although I don’t like to spend a lot of money on Valentine’s Day, I do like to share love. There is nothing better than falling in love and staying in love. And with love on the brain, I thought I would focus on relationships and money this week. As a financial planner, I am afforded a front row center seat to my client’s life journeys and it is one of the joys I have in what I do. I love watching two people work together as a team and accomplish what they want in life. And no one is a bigger cheerleader for their successes than me. Sometimes, though, my seat is not always of a fun and joyous show. Sometimes, I get a front row seat to the hardships and challenges couples face as they try to work through their financial struggles and differences. While I don’t enjoy witnessing the difficult times, I have learned many lessons from observing others.
Open Your Heart and Your Balance Sheet
One of the biggest financial challenges I see in relationships is a lack of openness in their financial communication. It would always surprise me that people felt more comfortable sharing bodily fluids than they did sharing their balance sheet information. For a number of people, getting physically naked is a much easier choice than getting financially naked. And I understand this feeling. When we open ourselves up financially, we are opening ourselves up to scrutiny and judgment, and if we love the person we are with, the last thing we want is their judgment or ill-regard. What we neglect to realize is that if this person is worthy of our love and our physical trust, they need to be worthy of our financial trust as well. When you decide to spend the rest of your life with someone, you will learn that you are in store for good times, but you are always going to share hardships and difficult periods as well. You will both change and evolve over your time together, and if you do not have full trust and no judgment, these hardships become even more difficult to overcome. Before you think about making a commitment to anyone, you should think about if you feel comfortable sharing the following information. If you don’t, then you should evaluate the strength of your relationship.
5 financial facts you should share with the one you love
- Income – How much do you make? It’s funny because my clients who do not make much money feel completely comfortable sharing this information with the people they date. It’s my clients who make more money who struggle with sharing this information. Even if you have separate bank accounts and credit cards, you are still working toward one financial goal, and both members of the team need to understand what the team is capable of achieving. I met with a couple that had a marital challenge because the wife spent too much which angered the husband, but when I asked the wife how much the husband made, she had no idea because she never asked and he never told. Well, if she has no idea how much he makes, how can she know if she is spending too much or not? Once she knew her limitations, she was able to control her spending, which not only saved them money, but it saved them fights about her spending “problems.”
- Bank account balances – Even if you plan to maintain separate bank accounts, if there were some financial struggle, you would ultimately rely on both accounts to help you through it. It is never a good thing if both people assume that the other has more money than they do only to find out the opposite.
- Retirement account balances – If you are in a relationship for the long run, eventually retirement will be something the two of you discuss, and it is important to understand how much each person will be able to contribute to the retirement lifestyle.
- Credit Scores – Above anything else, I probably feel as though this is the most important piece of financial information to share. Your credit will be important for securing credit cards, but more importantly your credit will impact your mortgage rates, insurance rates, car financing, ability to secure utilities, and job applications. Typically credit providers will utilize the lower of the two credit scores when calculating your options. You want to make sure that you can plan appropriately when you make credit decisions and not be surprised when you are ready to pull the trigger. I had two clients decide to re-finance their mortgage, and we started the process, but needed to stop it when we realized the husband’s credit score was lower than he had let on. It didn’t seem like a big deal to him, but it was a big deal to the bank and prevented them from being able to re-finance.
- Debt – This is like telling someone your weight. It is definitely a very personal piece of information. Most of my clients love sharing what their assets are and they hate sharing what their debt looks like. Your debt just like your weight is a fact of life. And just like your credit score can prevent you from taking advantage of certain financial options, your debt level can as well. No one wants to give or get an STD (sexually transmitted debt), but if you are open about it up front, you can work through it together.
Have you shared this financial information with the one you love? If not, why not?