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The most memorable life lessons for me, are usually from my own screw ups. And most of them have something to do with money and marriage.
When it comes to combining finances, the biggest mistakes I’ve made, aren’t from things I’ve done, but things I didn’t do.
Moving in together is a big transition. You’re deciding whose couch to keep, and whose bedroom set is in better condition.
What’ll we do with my Jamaican wood carvings and your stuffed animals?
Compromising on most things is fairly easy. It’s a one-time decision.
But combining finances isn’t a one-and-done deal. It’s a living, breathing, decades long decision making process that encompasses trust, honesty, and compromise all rolled into one.
But there’s a way to make it easier.
Are You Money Compatible? – Getting Intimate Takes Time
When my future fiancee and I were considering moving in together, we went to dinner one night to talk about it. It seemed like the right thing to do.
Living together was a huge step, and we didn’t want to approach it lightly. We wanted to discuss what we envisioned for us as a couple, for each other, and make sure we were on the same page.
What I didn’t see then, but do now, is that sitting down over stuffed flounder and a bottle of wine isn’t enough time to figure out whether you’re “money compatible”.
Wouldn’t it be nice if it were as simple as doing the door test?
Maybe the door test showed that she was considerate, but it’s just one step they’ll both take in getting to know one another. Understanding someone’s life experiences, and how they influence his/her feelings about money, takes time.
Time to understand things like:
- What are their values, and their non-negotiables in life?
- How do they feel about things like borrowing vs saving?
- What does he/she consider “must haves” in their life?
- Are they future focused, or more of a live now, pay later personality?
And most of all, does this jive with how you feel?
Understanding someone’s core values comes with living through shared experiences, and that takes time.
What seems like an innocuous argument over whether to buy a new couch, could be an indicator of bigger things. Things like control issues, and whether you’re able to talk, compromise, and come away happy, or feel like you’ve just been steamrolled.
Till Debt Do Us Part – Making it Work
Getting to know someone and realizing you share similar visions for the future is an exciting time. But combining finances to build the life you want can be rocky without working out a plan you can each live with.
Dave Ramsey likes to say, “financial success is only 20% money knowledge, and 80% behavior“.
So what can you do week in, and week out to make sure that 80% happens?
Use a System You Both Know and Understand
Whether it’s a paper notebook, a spreadsheet or an app, pick a way to track expenses you both understand and can use.
It may be easier initially, to combine finances and work out categories on paper. But once you’re zeroing in on a budget, and you’ve opened accounts for short-term and long-term savings, it might be easier to view everything in one window.
We’ve used the free app, Personal Capital for awhile because we can see everything from our net worth to this week’s budget.
Have Regular Money Dates
Suddenly combining finances can get hairy quickly unless you’re each familiar with your combined income, what bills you pay, and what, if anything, is left over. Just keep it simple.
- Pick a time when you’ll have 20-30 minutes without any distractions.
- Bring your budget, your planner, and maybe even some wine and snacks.
- Review whether your budget is on target, where you can cut back, or maybe celebrate a win.
Sitting down regularly is especially important if one person usually handles bill paying. That can be a stressful task if you’re living close to the edge, or you’re paying off a lot of debt. It’ll ensure you’re working together.
Here are 4 areas you can start with:
1. Talk about Goals
One of the great things about having a partner is the accountability you have. Not to call each other out for mistakes, but to keep your mutual goals alive.
Are you both planning to move or buy a house in 3 years? Take a trip to Europe, or maybe complete a degree? Your weekly meetings are a perfect time to talk about any setbacks, or celebrate your progress.
And keeping your long-term goals alive will make a lot of the short-term decisions – like purchases, a lot easier.
2. Discuss Your Budget
It’s fine for one person to assume the chore of writing bills, and maybe even updating the monthly budget. But you’ve gotta talk about it. Regularly.
I can say from experience, that when one person assumes most of the responsibility for paying the bills, and the other is either disinterested or kept in the dark, it’ll lead to tension and resentment.
Even with the most fine-tuned budget, irregular costs can come up from week to week, so it’s helpful to strategize together.
But the bottom line is, if you share similar goals, you should each have a say in how you’re achieving them from week to week.
3. Talk About Saving
It’s easy to focus on the big bills, and let savings slide down the list of priorities. But actually, saving should be the first “expense” on your budget. Adopting the habit of paying yourself first, without fail, will help in two ways:
- It’s one of the fastest way to achieve financial independence.
- Having some available cash will help you to avoid charging unexpected costs on a credit card.
Maybe you can’t dedicate 10%-20% to savings yet, but sitting down regularly is a good time to strategize. You may find an area you can cut back on, or you can kick around some ideas to bring in more money.
4. Talk About Emergencies
There’s a trail I like to run on that’s got plenty of hills and bends and the occasional deer or two. But I find that whenever I focus ahead too much, I stub my foot on a root.
It’s pretty common to lose focus and trip ourselves up financially too.
- If you’re too long-term focused, and don’t plan for emergencies, then things like car repairs have a bigger impact than they should.
- Or if money is tight and you’re living paycheck to paycheck, emergencies will almost certainly keep you that way.
So when we talk about paying yourself first, priority numero uno is to build an emergency fund.
Budgets are for predictable expenses. The ones you plan for. Since emergencies make your budget unpredictable, they should be paid for separately.
Here’s how we’ve set ours up to automatically drip money into our fund each week in affordable amounts.
Things May Never be Perfect – But Compromise is Key
Money has always been one of the most frequent sources of arguments in relationships, but people tend to deal with the issue in the same way that caused the friction in the first place.
By not talking about it until it’s a problem.
At that point, it’s hard to have a relaxed discussion.
Mixing money and marriage without talking openly may work for awhile. But without trust and a willingness to compromise, your relationship can risk “death by 1000 paper cuts”.
Just like sex, cleaning habits, or any other area of disagreement, the best method is the one that works for both of you. And the only way to figure that out is through regular, honest communication.
You can try the door test, but I think just talking it out, over time time will work better.
How do you combine finances? Have you hit upon a system that works well for you?