A frank talk about dollars and cents is no one’s idea of romance. But if you’ve met the person you want to share your life with, you should also verify whether your financial habits are compatible.
A 2013 study conducted by Boston-based Fidelity Investments found that 51 percent of couples admit they argue either frequently or occasionally about money. Among those couples, 38 percent said they never resolve their financial disagreements in a “mutually agreeable way,” Fidelity said.
Further, another study published in Family Relations Journal found arguments about money are a top predictor of divorce.
“Though finance doesn’t exactly spark the romantic flame, it can extinguish it if you are not on top of it,” said Jason Lilly, director of portfolio management at Rockland Trust.
Here are some financial questions that couples should ponder. Next
Are you truly equal partners when it comes to handling the finances?
Fidelity recommends that both people in a relationship be prepared to assume the position of “family CFO” if necessary because you don’t know what the future holds.
“A bit of contingency planning now can help you avoid a larger problem down the road,” the company said.
Do you both have a handle on the insurance and brokerage accounts?
Fidelity recommends that you both know who the beneficiaries are on life insurance policies and brokerage accounts because there are legal consequences if beneficiaries are not assigned.
Discuss what retirement, savings, and insurance policies you have in place, and where important documents are stored.
These steps can help avoid family squabbles and unnecessary tax penalties in the future, Fidelity said. Next
Are you both maximizing your savings potential?
Make sure each of you, if eligible, contributes to tax-advantaged savings accounts like a workplace savings plan or an IRA. Also, allocate your joint assets properly.
“Establishing and maintaining an age-appropriate asset allocation that adjusts over time is critical to savings success,” Fidelity said. Next
Do you have a shared vision for what your retirement might look like?
Fidelity's “Couples Retirement Study” found that approximately 4 in 10 working couples, or 38 percent, disagree on the lifestyle they expect to lead in retirement.
Talk about what you want to do in retirement.
“If you are not on the same page about your goals, it’s hard to put the right plan in place,” the company said. Next
Discuss finances before committing
Develop an awareness of your financial personality and your partner’s. Is your love a spender? A saver? Will he or she make sacrifices like withdrawing money from a retirement account to support an adult child? Which category do you fall into?
Savers and spenders can co-exist as long as they manage to find a balance, Lilly said.
“It’s really important to have that conversation before you commit for sure,” he said. Next
Are you willing to find a financial middle ground?
Whether your partner is a spender, a saver, or someone who is willing to sacrifice money for the benefit of others, you “have to be willing to look at the other person’s perspective,” said Lilly of Rockland Trust.
He recommends creating a balance by saving and spending what you can afford.
Having a little bit of debt is OK and so is sacrificing—whether it be to help a friend or relative or support a charitable cause, Lilly said. The goal is to develop spending and saving habits for the lifestyle that reflects you as a couple, he said.
“There’s only one life. We want to enjoy it while we go through it,” he said. Back to the beginning
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