Personal finance is a taboo topic in our culture, but it’s a very important topic – money is the No. 1 reason for divorce in almost every country. That means talking about money is paramount in a relationship, even though it’s not the easiest thing in the world.
Talk about your financial expectations in a candid way.
Addressing the tough conversation is absolutely critical to setting up a solid foundation for a successful relationship. Frankly, waiting until you already have a money problem means it’s probably too late; therefore, you should talk openly about your financial expectations, thereby setting the stage for a sustainable relationship.
You can begin with baby steps, e.g. letting your partner know your credit score, and then you can mention retirement plan later. This will strengthen the emotional connection in your relationship and improve your financial, physical and mental health.
How to talk about money tactfully (dating safety advice):
First and foremost, you can frame questions as ‘What if…’ This is a way to understand your partner’s psychology by asking some broader questions. Here are some good examples:
1) “If you won the lottery, what would you do with a large amount of money?”
2) “If you don’t have to go to work, which career would you choose?”
In the second place, you can cite a blog article about finances and couples. A case in point: “Today I read this blog post about having a money talk with your partner. Shall we try this new idea?”
Share a money goal with your partner.
This is a way to bring up money under the radar – you simply bring up a money goal that you would like to share with your partner. For instance, you can say this to your partner, “Let’s say we are going to buy a house in five years; we should have a money goal, right? Let’s hold each other accountable and save money from now on.”
If you and your partner have children:
Since a lot of children don’t understand the concept of delayed satisfaction, they behave in a selfish way – they ask parents to buy this and that for them constantly. How can you handle that?
Reward good behavior with activities rather than objects.
In educational psychology, positive reinforcement means whenever your child shows good behavior, you give your child a reward. This is a way to reinforce the child’s good behavior. For example, your son has been on his best behavior recently, you reward him extra stories at bedtime this weekend or another trip to the park on Sunday. Remember: you don’t have to reward him with objects. In this way, he won’t equate rewards with material things automatically.
Give a heads-up in advance.
If you don’t plan to buy your child anything when you go to the shopping mall, clarify that in advance please. When you are still on your way to the shopping mall, you can say this to your child, “We will only buy shoes today, not toys.” Remember to repeat this when you enter the shopping mall. It’s very important to set limits and stick to them!
What if you have a blended family?
A second marriage might have a more complicated situation. But there are many things you can do to manage children in this regard.
First and most importantly, parents must be on the same page. Set realistic rules and present the plan to kids. Having one set of rules and being consistent could help you manage children in a blended family effectively. You have to be crystal clear, purposeful and intentional.
In the second place, you would be well-advised to have a family meeting regularly. Invite children to attend the family meeting so that they feel they are also responsible for the household. Make decisions at the meeting and stick with that.
How to combine finances as a couple:
In general, there are three ways to combine finances as a couple. But there isn’t a perfect way. Please let me explain.
Three common ways to combine finances (dating safety):
1) The Proportional Approach
Couples who use this approach each contributes to the household expenses at a rate which is proportional to their salary. Let’s say Alex makes $4,000 per month (66% of the total household income) & Ann makes $2,000 per month (33% of the total household income). That means Alex pays 66% of their monthly bills, whereas Ann pays 33% of their monthly bills.
2) The Raw Contribution Approach
Couples who prefer this approach each contribute the same raw number, no matter how much money they make per month. For example, Andrew makes $3,000 per month; Lily makes $4,500 per month. Their monthly bills come to $3,000. They each contribute $1,500 and keep the rest of their money in separate bank accounts.
3) The Complete Combine Approach
Couples who choose this approach pay monthly bills from the same bank account, use joint bank cards only and have shared long-term investments. For instance, Darren makes $5,000 per month; Lisa makes $2,500 per month. Both paychecks go to one joint bank account which is used to pay all monthly bills.
How to discuss this sensitive topic when you decide to combine your finances:
During the discussion, you will need to cover these things:
1) A list of bank accounts to combine;
2) A budget;
3) How much is too much to spend without asking for the other person’s opinion;
4) Should you combine all bank accounts or merely some bank accounts?
Please note that different countries have different legal systems. For instance, in some countries, unmarried couples don’t have to separate their finances if they break up. That is to say, if you two are not married & you have combined your finances completely, your partner might leave you and drains the joint bank account. Therefore, you’d better check relevant law in your country before making a decision.
How to manage multiple bank accounts & implement envelope budgeting:
Many people have multiple bank accounts due to various reasons. For example, an entrepreneur may have a separate bank account for their business – it’s a great method to separate their business finances from their personal finances. In this way, this individual can pay themselves a salary every month without using their business bank account to buy small things they might need. As a couple, you can also have multiple bank accounts – this is the modern way to implement envelope budgeting.
Multiple bank accounts = virtual envelopes
Here are Daniel and Kylie’s bank accounts:
1) Everyday account – this account is linked to their ATM cards which receive salaries.
2) Savings account – this account keeps their savings (they transfer a certain amount of money from their everyday account to this savings account regularly).
3) Play account – this account is all about entertainment and buying what they want rather than what they need (they transfer a specific amount of money to this account whenever they get paid).
4) Bills account – this account pays all monthly bills, i.e. things they need.
Clearly, Daniel and Kylie have four virtual envelopes which organize their money systematically. Clarity and certainty lead to successful financial management! What’s more, they know exactly how much they can spend in each category and how much they are saving!
“The ultimate dating safety advice is to continue managing your personal finances properly and effectively when you start a romantic relationship.”