While money discussions may not be as important when two people are just dating, once they decide to take the next step, financial discussions before living together – as married partners or no – need to start taking center stage.
Yes, some issues are more important to partners than money. But the recent experience of one of my clients reminded me once again why potential partners should talk about money before moving in together. While Susan has strong insurance coverage that will protect her and provide care in the event of a long-term care event, Mike has an aversion to insurance and planning for the unexpected.
These differences in opinions and attitudes become more important when the responsible partner has to bear the burden of the other party’s irresponsibility or indifference. Who pays when the partner indifferent to long-term care ends up needing it? Such situations can be a huge strain on the love and affections that started the relationship in the first place.
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My client’s situation is often the experience of those who are in their second marriage or cohabiting with another partner after leaving their marriage. However, this situation is not unique to new partners, as married couples may also have conflicting attitudes towards financial planning.
What can financial advisors do to help potential partners or people who are already living together avoid or resolve these difficult situations?
For couples who are about to live together
The best time for couples to talk about finances to develop a compatible approach to financial planning is before they start living together. Although it may seem that discussions about money can disrupt the flow of love, it is always better to have these discussions in advance to avoid unbearable situations later.
Here are some questions to put on the table and discuss until both partners are satisfied with the answers:
- How do we pay a mortgage or rent?
- Do we share living expenses? If so, how?
- What insurance do we need? Should we have policies together or individually?
- How to plan for retirement? Individually or jointly?
- How are emergencies handled? By accumulating debt or using an emergency fund?
- Who are our dependents and how do we care for them together?
- Should we have joint checking and savings accounts and investment accounts?
These questions are not meant to be exhaustive. But they serve to highlight the kinds of discussions that need to take place. When there are significant irreconcilable differences that can cause heartbreak in the future, it might be best to take some time to rethink the relationship before moving in together.
For couples already living together
For those who already live together, the situation may be more difficult. Of course, the first step is for the responsible partner to have conversations with the other partner about why they need to be more intentional about their finances.
Instead of simply saying, “We have to do this or that,” the responsible partner can highlight the consequences of indifference and the benefits of active planning. If the other party refuses to act, the responsible partner can offer to initiate the process and/or enlist the help of an objective third party. A certified financial planner can help both partners make better decisions by providing guidelines and helping them negotiate compromises.
In the long-term care example mentioned earlier, if the other party remains adamant, the responsible partner must decide whether they are prepared to continue to bear the burden of their partner’s long-term care, including emergencies that were not prepared for. If they don’t want to, it might be best for both parties to rethink the relationship at this point.
All in all, the best antidote to such endings is to have a stable and strong start in the first place. Financial advisors should ask their clients to have sincere money conversations with their partners before moving in to ensure they are on the same page, or can be on the same page with a few compromises here and there. .
Finances may be the least pleasant thing to discuss when people have butterflies in their stomachs, but not discussing money issues can make what’s sweet in the mouth bitter in the stomach.
Living daily with someone else is different from having dinner every Saturday; the former requires a lot of planning, of which financial planning is the key.
This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SEC (opens in a new tab) or with FINRA (opens in a new tab).
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