“Honey, I just can’t wait until we’re alone and we can talk about our household budget”—said no one, ever.
Let’s face it: discussing marital finances probably doesn’t strike you as the most romantic conversation. On the other hand, poor or nonexistent communication around these topics can definitely suck the life out of what could be or may have once been a loving relationship. This is true in spades for two-income couples and those with more complex financial situations. In fact, statistics show the importance of communicating clearly, particularly concerning matters like marital property vs. separate property, debt and the responsibility for paying it, joint tax liability, and other financial issues that arise in many marriages.
Teamwork Makes the Dream Work
A recent nationwide study of US consumers who described themselves as “in a relationship” found that 64% of respondents said that they were “financially incompatible” with their partners, having diverging philosophies on spending, saving, and investing. Not only that, but 45% of respondents admitted to “financial infidelity”: hiding purchases from their partner or failing to disclose other financial activity. Needless to say, this type of behavior is not exactly a recipe for building trust in other areas of the relationship.
And it shows. The 2021 “Money & Couples” survey by Fidelity indicated that 20% of the couples participating identified money and finance as the biggest challenge in their relationship.
Now, it’s not unusual for a couple to have differing “money personalities.” Often, one partner will be the one who keeps a mental running tally of the balances in different accounts, while the other depends on automated messages from the banking app to signal that it’s time to dial back the spending. Most couples have one partner who is the “spender” and the other who is the “saver.” Often, one partner will be the “designated driver” for household finances and other financial matters, while the other has a more laissez-faire attitude. It’s fine for these differences to exist; after all, opposites attract, right? The important thing is to make sure that both parties in the relationship understand who is playing which position. And even for the less money-inclined partner, it’s still important to have a good general understanding of where the money comes from each month, where it goes, and what it takes to keep the household budget on an even keel.
Discussing the Details
After you’ve established some basic understandings, there are a few other matters that deserve careful, open communication as early in the relationship as possible, since they affect ongoing decisions that can have major financial implications, especially for couples with significant assets and income. Let’s take a look at three that are especially important.
Joint marital property vs. separate property.
Even if you don’t live in a community property state, both partners need to understand the difference between joint marital property and separate property. Most assets acquired during a marriage are legally considered to be equally owned by both spouses, even if one spouse earns the majority of the household income. Similarly, debt accumulated during a marriage is generally considered to be the joint responsibility of both spouses. For these reasons, if no other, couples owe it to each other to practice open communication about household income and expenses.
Separate property, on the other hand, refers to assets that are owned by only one spouse. These are often assets that were acquired before the marriage or an inheritance received during the marriage. Those who are going into a marriage with significant assets may wish to utilize a pre-nuptial agreement that specifies the understanding of both partners as to any property held by one spouse that is not joint or community property.
For those with separate property, it’s important to maintain separation between those assets and marital assets. For example, if one spouse inherits an investment account that pays interest and dividends, the earnings from the account should be deposited in a separate account; they should not be deposited in an account holding jointly owned funds. Doing so could create the appearance of commingling of the assets, which could potentially lead to the inherited funds being declared community property.
Debt.
As mentioned previously, most debt accumulated during a marriage is considered the responsibility of both spouses, no matter which spouse acquired it. Understanding and getting a handle on your debt is one of the healthiest things you can do for your relationship. Ideally, before saying “I do,” you should have a good general idea of your spouse’s debt—and, as outlined above, their propensity for acquiring more of it. Unfortunately, this topic seems off-limits for many couples, especially before the wedding: according to the wedding planning site A Practical Wedding, 64% of couples never talk about the “d” word before the ceremony. This is not the way to get started on the right foot in your household finances. On a related topic, those entering second marriages—for either partner—should be transparent about any legal responsibilities stemming from a previous union. Child support, alimony payments, or other obligations should be fully disclosed. Also, if financial support is being provided to any other family member (an aging parent, for example), that should be disclosed and clear to the spouse or partner.
Regular bills, household income, and other day-to-day matters.
As previously discussed, it’s normal for one spouse to be the designated “money person,” but both of you should have at least a working knowledge of household expenses and income. If you’re the one in the dark, you owe it to your partner to start asking questions (i.e., don’t wait for them to come to you; you should go to them and ask for the information you need).
The bottom line is that if you really love someone, you owe it to them to have open, clear discussion about household financial matters. If you’re the one in the dark, you owe it to your partner to start asking questions and listening carefully to the answers. With money and financial matters—and just about everything else, come to think of it—honest communication is your best ticket to relationship success.
