Couples and Cash
Couples and cash – how to avoid money woes.
According to statistics, prenups are on the rise. More people than ever before are signing agreements before saying ‘I do’. But are these the answer to marriage money woes?
While many surveys suggest that money is one of the factors couples in marriages and long-term relationships fight about the most, it doesn’t have to be that way. Most money experts and psychologists say that the easiest way to avoid money problems is to talk about them.
We need to be confident communicating about cash.
Easier said than done, right? The truth is that a lot of people would rather talk about death, politics, and religion rather than what they earn, spend, or owe.
Should you keep money separate or pool resources?
While you might not choose to get married, even if you’re making a long-term commitment in a relationship, you have two choices with regard to money: Either keep the finances separate and make individual contributions to shared costs, or pool your financial resources and work together.
Of course, changes along the way, like buying a home, having a baby or losing a job can affect the way couples deal with their finances, so the strategy you start out with, may change out of circumstance.
If you decide to share your finances, then there are vital things you need to discuss to ensure that you can get ahead together, particularly if you’re considering entering into big financial commitments like purchasing property together.
Firstly, you need to talk about your income and your spending. A great way to do this is by creating a household budget. Detailing exactly what you earn and what you spend is a good chance to explore your individual attitudes towards money.
Create Common Goals
Making joint decisions about what you’re saving for, or the kind of lifestyle you want to achieve, is critical as a basis for forming team work, because if you’re not in synch, your goals will just remain dreams. Talk about how you’re going to make spending decisions or investing decisions, because if you both have different views, these can be a sticking point.
Make sure that you don’t just a draw up a list of holidays, or lifestyle luxuries. While they’re great to aim for, your discussions should also include putting together money for an emergency fund, sometimes called a ‘rainy day account’. Essentially this is a financial buffer that will protect you if a big unexpected expense occurs. Typically, it’s recommended that you have between three-six months’ worth of expenses tucked away.
Think about the future – no matter how far off it seems
Consider retirement too, and how you’re both contributing to your superannuation. And also talk about insurance, to ensure you have adequate protection if you need it.
Talk about debt
Do you have personal loans, credit card debt or other finance like ‘rent-to-buy’,
These can be very expensive types of debt, and any good savings plan must focus on clearing debt as well as putting a little extra cash aside.
Do you need a legal agreement?
Many people are waiting longer to get married and may have assets they’ve accumulated before the current relationship started. This can be a reason to draw up a pre-nup or a similar agreement. While it’s typically not the most romantic idea, drawing up such an agreement before you commit to each other, or before you consider entering into joint loans or investments, can protect you both in the long-run. It will also help you work through a range of ‘exit strategies’ if for any reason, you separate, divorce, or need to sell the property or cash in investments.
Get professional help
A personal financial advisor can get you off on the right foot – from helping you understand your current financial position to creating a workable plan to reach your financial goals. Having expert money advice can help you make sound borrowing decisions and investing decisions. You work hard for your money, make it work hard for you too!
Most people rank finances as one of the most difficult things to talk about. As a result, many couples ignore the issue and blindly or naively ‘hope for the best’. But life is unpredictable –our relationships change, we are presented with new opportunities, our aspirations and basic needs and wants can change too, and these things all impact our finances.
A frank talk about money may be one of the most important conversations you’ll ever have.
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