5 Steps to Happily Ever After
Money often costs too much. – Ralph Waldo Emerson
I don’t know for sure what Emerson meant with this quote, but in relationship terms, money often costs the relationship. The pursuit of money, the stress of money, the secrecy of money, the use of money or using the control of money as a weapon.
Number 1… That’s where financial pressures sits on the list of the top 10 causes of marital strife. It’s a key reason why many couples seek relationship counselling and a major contributing factor to divorce.
A 2018 poll of over 2000 British adults by Slater and Gordon(1) found money was the top reason given for married couples splitting up. One in five said it was the biggest cause of marital strife. A third said financial pressure was the biggest challenge to their marriage and 20% said most of their arguments were about money.
Whilst this study was conducted in the UK there is no reason to expect it’s any different here in Australia. Anecdotally, it matches what I see in my work as a Financial Planner. Regardless of the stats, it’s hardly a surprise that money often causes stress in relationships.
But, I haven’t written this article to examine all the ways financial stress can manifest in relationships but rather to provide some steps to overcoming or avoiding this stress.
1. COMMUNICATION: what an obvious way to overcome a stressful situation …. To talk about it calmly and rationally! However, the Slater & Gordon study also noted that 1 in 3 people admitted to never speaking about their relationship issues with anyone, INCLUDING THEIR PARTNER and 17% only confided in their partner when they need to.
If money is already a source of conflict and you know the conversation is going to be difficult, pick your moment to raise it or even set a time to talk about it. Make sure you have plenty of uninterrupted time to talk and plan. Set some ground rules: no blaming or shaming, no judgement and no yelling. Start the conversation by each of you having the opportunity to raise how your current financial situation is making you feel and how you would like it to be (remembering the rules!). Just listen to the other person and try to understand what they are telling you, without planning your response (defence). You may well be surprised about what you learn about your partner in this conversation.
If you find you can’t get through this conversation together without it turning into a slanging match then get some help. All is not lost, you just might need an impartial third person to guide you through it. A Money Coach is a good starting point.
Once you have a good understanding of what’s bothering you both then the planning phase becomes much easier.
2. BUDGET: There’s no sexy way to say it, but budgeting is so important in terms of a) knowing exactly where you are spending your money and then b) planning how you would like to be spending it. Budgeting is a whole topic on it’s own and I tackled it in this article. For now, a good start is to download your bank and credit card statements, pull out old invoices and start writing down your expenses. Be honest. There is no point doing the exercise if you gloss over some of the expenses.
The ASIC MoneySmart budget is a good place to start. https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner
3. DEBT: This is also a whole topic on its own but for now you need to be honest about all the debts you have (assuming one of you hasn’t been completely honest before). Mortgages, investment loans, car loans, personal loans, credit cards, store cards, HELP debt, and even money you borrowed from your Mum. Prioritise it so that you pay down the debts with the highest interest rates first. Make sure the repayments are in the budget.
If after these two steps you can’t make ends meet, return to the budget and work through it to take out the discretionary costs. These are things your nanna would have thought frivolous: Foxtel (yes… people do still have it!), manicures, cleaner, sports gear.
If it still doesn’t work (often due to high levels of debt) then it’s time to go the bank or other lender and come to some arrangement to repay the funds. It’s best to do this before they come knocking on your door.
4. FORWARD PLANNING: On the other hand, if the budget is looking good and you are feeling confident about your financial future, now is the time to start the forward planning. What are some of your goals? Travel, kids, education, buying a house, retirement? Start to really plan them out: figure out what they cost, when you want to do it and then put that saving into your budget. Don’t forget to plan to protect the “back door”. Factor in personal insurance and estate planning.
If this step feels overwhelming, engage the help of a Certified Financial Planner ® to help with the details.
5. BANKING: Should you have joint accounts or separate? To some extent it’s personal preference. My preference is a yours, mine and ours approach where the bulk of the money is in the joint accounts to pay for mortgages and other debts, household expenses and savings for longer term goals. The yours and mine accounts are for your own spending… so you can have the manicure without having to explain it or ask about it. Just make sure that you look for low or no cost accounts if you are going to have a few.
An idea might be to go back through the expenses and decide if they are joint or individual and ensure that each person has sufficient funds to meet their obligations. If one partner earns significantly more than the other then you may agree to put a proportional amount into the joint accounts.
There is no right or wrong way to approach this: it’s a case of whatever will work for your relationship, but the reality is that you won’t get far without talking about money!