Follow this timeline for sharing your financial history in a new relationship
“The Rules” is a Moneyish series where we define the rules around sticky money topics like giving an allowance, who pays on a date, combining finances with your partner, and more.
It’s never too early talk money with your honey.
Financial intimacy is key to a healthy and happy relationship, whether you’re simply heading out of town together for the weekend, or you’re settling down to buy a house and start a family.
Yet most of us are more comfortable bringing someone home than we are telling them how much rent we pay to live there in the first place. We’d rather bare our bodies than our bank accounts.
In fact, while 72% of surveyed couples claimed they communicated “exceptionally or very well,” a 2015 Fidelity Investments report found that more than 4 in 10 of them (43%) didn’t even know how much their partner earned in a year, and 10% were off in guessing their other half’s salary by $25,000 or more.
“You and your partner’s income, savings and debt affect the choices you can make in your life: Whether you can buy a home, where you can go on vacation — whether you can afford your meals comfortably for the next month,” Kimberly Palmer, a personal finance expert at NerdWallet, told Moneyish. “You both deserve to know whether or not you are going to be able to feel a sense of financial security.”
“The Money Couple” Scott and Bethany Palmer (no relation to Kimberly Palmer), coauthors of “First Comes Love, Then Comes Money,” agreed. “Money impacts relationships every single day,” Bethany told Moneyish. “Not necessarily big money decisions, but small, everyday money decisions like: Going to Starbucks or making your coffee at home? Money decision. Going out to eat or brown-bagging it? Money decision. What grade of gasoline do you put in your car? Money decision.”
That doesn’t mean you have to exchange credit scores on the first date. But financial experts tell Moneyish that it’s smart to use relationship milestones such as taking your first trip, moving in together or getting engaged as opportunities to share what you make, what you spend and what you owe, so that you’re both on the same page.
After your first few dates: Discuss spending habits. Now is a great time to observe how you both handle cash. Is your partner always picking expensive restaurants? Or maybe you’re always taking Ubers, but your date takes the bus. “This is where you might realize one person might be a little more financially well-off than the other,“ Kelly Lannan, director of the Women & Young Investors division at Fidelity Investments, told Moneyish. So use planning your next date night to discuss what you spend for fun, like, “I’m trying to save money by cooking at home more. How often do you go out? Where do you budget?” just to see how your habits stack up.
Note: It’s not necessarily a deal-breaker if you pinch pennies, but your partner loves to indulge. “It can be a good thing, because you balance each other out,” said Kimberly. “My husband and I really differ when it comes to money: He’s a risk-taker, and I’d rather keep all of my money under my pillow.” You can help him be more responsible, and he can encourage you to splurge on a priceless experience. “ It doesn’t mean you can’t date; you just need to talk more,” she said.
Before going on vacation: Break down your budgets. Taking a trip often calls for booking a flight or renting a car, reserving a hotel room and having money for meals and activities. “You don’t need to share exactly what your salary is yet, but it’s good to discuss what your expenses are on a monthly basis, and how much you have left over, to figure out how to budget for a vacation together,” said Kimberly. This could also be a segue into how many credit cards you have, your credit limit and what balance you’re carrying on those cards, as you will use them to make reservations.
Note: Give yourself a financial check-up first. Lannan suggested taking a good look at your own finances to make sure you know your current credit score, or how much you still owe on your student loans, before getting your partner to give up theirs. “It’s hard to go into these conversations without having a good grasp of where you are,” she said.
When moving in together and/or getting engaged: It’s time for the dreaded debt and credit check. Renting or buying a home will require a credit and background check, anyway, so you two should suck it up and bare your credit scores, your debt history and any black marks on your record (bankruptcies, evictions or criminal convictions). “If you are about to go to the serious and committed stage, and your honey doesn’t want to divulge any of that, then run, run as fast as you can,” warned Bethany. “If your honey is secretive now, he or she will be even more secretive when you move to the next level.”
If you haven’t disclosed annual salaries yet, those will also be required for housing applications. And the experts bundle moving in together and getting engaged on the same level with regards to disclosing finances. “Your finances are becoming completely intertwined,” explained Kimberly.
Note: What to do if one of you has bad credit. One partner’s low credit score doesn’t directly damage the other person’s score. But when you apply for joint loan applications or mortgages as a couple, you could be denied, or get slapped with higher interest rates.
Mint.com suggests you first find out why the credit score is low: Is it because the person hasn’t built up much credit yet? Or is this a sign of skeletons in the closet like paying bills or taxes late, defaulting on loans, or overspending? The latter calls for having a heart-to-heart about your financial situation, and how you want to proceed.
Then invest in improving the credit score, which can take a few months to several years – but it can be done. First, check your credit reports for mistakes that could hurt your scores. Then pay down existing debt faster by making more than the minimum payments. This will also lower your debt-to-credit ratio (you should aim to keep your debt below 30% of your credit limit) which boosts your score. Obviously, keep making payments on time.
And if you’re both committed to fixing this, NerdWallet notes that the partner with better credit can add their significant other as an authorized user on one of their oldest cards to establish good credit history more quickly. The person with worse credit can also apply for a secured credit card backed by a cash deposit, which builds credit without going into debt.
When paying bills together: Consider opening a joint bank account. “When you’re combining your lives, logistically it’s just easier to pay out of a joint account,” said Kimberly, who noted that there’s no blanket rule that you have to open a joint account. If you’re more comfortable keeping your own account, discuss that with your partner. But dividing up the expenses and paying out of separate accounts can get complicated each month, which is why it may be easier for each of you to contribute money to a shared account that you make rent, mortgage or utility payments from.
Note: You’ve got to decide how you are splitting expenses. “If you’re making very different amounts of money, maybe you talk about contributing different amounts based on your earnings,” said Kimberly. So perhaps one person pays 60% of the rent or mortgage, and the other pays 40%. Or maybe it has to be split 70/30. But you need to have a frank discussion. “It’s not necessarily fair for the person who makes a lot more to pay everything, so you need to talk it through to find what makes sense for the two of you, so that it’s fair for each person,” she said.
Before getting married or starting a college fund for future kids: Disclose your savings. The average wedding costs more than $35,000, according to The Knot, and studies show that it’s never too soon so start putting money aside for your child’s education. So if you’ve got a stash or trust fund that you’ve been saving for a rainy day – like the 12 million Americans who confessed they’ve kept a source of money secret from their romantic partners – that could be the starting capital for these major investments. While it’s your money to do as you wish, Kimberly suggests disclosing it, “as soon as it could affect the other person, like when you’re about to embark on something where finances impact the other person, because it can affect what choices you want to make.”
Plus, your new apartment or house will need furniture, or perhaps you plan to buy or lease a car together. “These large purchases are going to need financing [and having good credit] or you’ll need to draw from savings,” said Kimberly.
Once you’ve completely merged assets through marriage/buying a home/having children: Schedule regular money dates to stay on track. You’re not done talking money yet. Do you have enough on hand for sudden household or car repairs, or in case someone loses their job? Sixty percent of Americans don’t have enough savings to cover a sudden $500 expense, and 24% don’t have even a single dollar saved for an emergency. What if the kids need braces? Are you suddenly caring for a sick parent? And are you on track for retirement?
“Even though my husband and I went through the money basics a long time ago, we have regular ‘money dates’ to talk about the stuff that’s recurring constantly,” said Kimberly. “Can we scale back our spending by cutting cable? Can we afford new windows, or do we need to wait for that? We set aside a stress-free time, over coffee or a drink, to talk about this stuff. Have fun and view it as a joint project like, let’s figure this out together.”
Remember: The whole point of money talk is to work toward your dream home, vacation or retirement plan together down the road. “Often when we have these conversations, we forget about the fun stuff,” said Lannan. “Share as much [financial information] as possible, save as much money as possible, so you can be prepared for the bad – but also remember to take advantage of all the good in life.”
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