While it may not sound as romantic as the traditional fancy dinner or a dozen roses, nothing says “I love you” like making smart decisions that can build your financial future together. Have some fun with your sweetheart this weekend, but also make a commitment to each other to improve your financial foundation. These steps can help get you started:
1. Review your finances, even if you are not married.
Make time to sit down with your partner and see what your current financial picture looks like. To get you started, here are some questions you should each know the answers to:
- What is your spouse’s income?
- Where are you spending your money on a monthly basis? Where is your partner spending his or hers?
- What debts do you both have (Credit cards? Student loans? A mortgage?) and how are you working toward paying them off?
- Does your spouse have an employee-sponsored or other retirement plan? How much is he or she contributing each month/year?
- Do you have money in joint or individual savings accounts? If so, how much? Do you make regular contributions to it?
- Do you have any investments as individuals or as a couple? What are they? How are they performing?
It can be hard to talk about money and especially debt, but you will be more confident that you can make good decisions if both of you know all the same information.
Even if you are not married, you and your significant other should start to share your financial situation. Many couples do not talk about finances until after they are married and then find themselves straddled with their significant other’s debt. It is better to prepare yourself now than be surprised later.
2. Discuss how to split finances.
You may want everything to be even and equal, but often one partner makes more money than the other. You should discuss how that affects your spending and saving. Instead of trying to pay for half of everything, suggest splitting it by percentage of income. For example, if you make $45,000 a year and your spouse makes $52,000, try splitting your rent so that your spouse pays 15% more.
Creating a budget can help with understanding spending habits. Use our budget worksheet to organize your finances
Also, keep in mind the fact that women often spend their money on everyday expenses, while their partner’s income goes into investments or savings. Make sure that you are contributing to long-term savings and that there are assets that are also in your name.
3. Plan ahead.
Many women will end up living on their own at some point in their later years. You may be part of the 50% of couples that divorce. Or you may stay married, but live longer than your husband. Get involved in your family’s finances now so that you know how to handle them if you become solely responsible. Know where your investments are and how much they are worth. Make sure your name appears on all of your family accounts and investments to establish your legal right to them should your marriage end or if your spouse becomes ill or unable to assist in making decisions. And finally, make sure you take those extra years when you may be living on your own into account when you and your spouse are planning for retirement.
4. Revisit your financial plan.
Make plans to re-evaluate your finances each year, at minimum. Scheduling a time to sit down annually will allow you to make any necessary adjustments to your budget and check to see if your long-term savings and investments are on track. Also important – make a promise to each other to have a conversation anytime there are major changes to your finances. Did your spouse get a bonus, or are you now out-earning your partner? Discuss how to use those additional funds together. Did one of you make a big purchase that you have not told the other one about? Be honest with each other and talk about how to adjust your spending habits.
These four steps will help you avoid common mistakes women in couples make about their finances. You’re committed to each other, be committed your financial future as a couple too.
For more tips on making your love nest financially secure, check out one of WISER’s earlier blogs, WISER Ways to Say “I Love You”.