You’ve been dating for a while. It has been going very well. You start planning a wedding. Suddenly money conversations begin happening more frequently. It is now time for both of you to disclose your financial history. You admit to having several thousand dollars left on your student loans, which leads them to confess they are carrying $25,000 in credit card debt. In that moment, you lost a bunch of money you never spent. It may not be a reason to cancel the wedding but it will certainly impact you afterward. Money is not a subject that is easy to talk about while dating, but it is vitally important to get on the same page with your partner financially as early as possible.
It would be helpful if dating sites had a category that said “Credit Score.” Since they do not, it’s up to you to have that conversation. You will have no idea what you are getting into until you and your partner discuss money. It’s a heavy topic, and one of the most frequent causes for divorce. Getting on board early can help avoid a meltdown later. Here are some questions to ask before you start getting calls from each others’ debt collectors.
What is your spending style?
You can be best friends, share the same interests, and be great in bed, but the way you spend is also a category in which you and your person need to be compatible. Many people get stuck with a spouse that spends money quicker than they make it. Asking this question will help you figure this out ahead of time. I can tell you that I prefer to shop around before making a purchase. It’s fun for me to check different websites for a specific pair of shoes that stopped being sold 5 years ago (Merrell Zaafran Moc). My wife likes to buy quality items so they last longer.
What major purchases have you made?
Let your partner know how much you spent on your car, and that very sparkly piece of bling you wear on weekends. Discuss how you paid for it, not only cash or credit, but how much you put down and how much you still may owe. Anything over $2K is worth talking about. Find out how your person feels about dropping that kind of dough, and how often they do so. Getting an idea of their big spending history will help predict what to expect down the line.
Do you carry debt?
How quickly you and your partner pay down credit cards and other debt is certainly an important topic. I don’t like owing anyone anything, so I pay off my credit card bill in full every month. If you are like me, you would not fare well with someone accustomed to letting debt carry for months and adding interest. It would behoove you to have this conversation before merging accounts and deciding if merging accounts even makes sense, or if it may be better to have separate accounts. It may make sense to have the more responsible person keep track of payment schedules.
What percent of your earnings do you save?
Most of us have direct deposit. Do you spend it as soon as you get it? What percent goes into your savings account? Asking these questions can be uncomfortable but it is incredibly helpful to know if your partner is living check to check, or stashing away 80% of their income every week. It might also shed some light on why they are wearing new shoes every time you go out.
Are you actively investing?
Discuss how you invest your money. Tell each other if you have a 401k or if you’ve bought thousands of dollars in U.S. Treasury Bonds. It’s great to have money. It’s better to make your money make you more money. Put your heads together and talk about how you invest, or how you might invest in the future. Getting started early is helpful. If one or both of you has been active in the stock market, talk about what moves you have made and how they panned out. If you have money left over after paying the rent and buying groceries you should consider ways to make that excess cash grow.
When do you plan to retire?
This is a tough one for young people. Many of us don’t have plans for next weekend, never mind 40 years from now! One day though, you will need to live off of your savings. Getting on board with a plan for retirement is more important than most young couples understand. At some point you will see your parents begin to retire and learn more than you ever wanted to know about end-of-days preparation. A little bit of preparation now can make things a lot easier later.
This is clearly one of my lengthiest columns to date, and I have barely scratched the surface on this topic. That’s tells you what a necessity it is to have these conversations. Money is important and the way you handle your finances can make or break a relationship.