Real Life Planning Podcast Episode 6: Have You Had The Money Talk?

If you're contemplating sharing a household together now or at some point in the future, there is no better time than the present to discuss finances. In Episode 6, financial planner Cynthia Meyer outlines a powerful format for building a strong financial foundation as a couple.

“The foundation of any successful economic partnership, including living together or marriage, is strong communication and full financial disclosure. -Cynthia Meyer

 This week on Real Life Planning Podcast, Cynthia covers:

TAKEAWAY QUOTES: 

“You don't have to have the same financial personality in your relationship, but you do want to understand each other's financial personalities.”– Cynthia Meyer 

“…that the marriage dividend or that the dividend from being two, instead of one, is that the relationship is an emotional and spiritual partnership, it may be a parenting partnership, but it's also an economic relationship and that economic relationship has tremendous power to catapult both of you forward into the future that you want. -Cynthia Meyer

About the Real Life Planning Podcast

Host Cynthia Meyer and guests share real life stories of how they are realizing their financial potential.

 The Real Life Planning Podcast aims to provide:

• 1-3 practical, realistic takeaways of actions the listener can try
• Encouragement to learn from different paths to creating results
• Possibility and optimism 

If you like this video podcast, consider joining Real Life Planning’s Question of the Week where CERTIFIED FINANCIAL PLANNER™ and rental property business owner Cynthia Meyer answers the most common questions about real estate financial planning direct to your inbox each week.

Transcript - Real Life Planning Podcast - Episode 6

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[00:00:11] Hello friends. I'm Cynthia Meyer with Real Life Planning and this is the Real Life Planning Podcast. If you're in a serious relationship or you're thinking about moving in together or you're engaged, or maybe even newly married, I want to continue the conversation that I started earlier on in this podcast series where I talked about marriage and money.

[00:00:28] And so today, I want to talk to those folks who are getting more serious. Who are taking their coupledom to the next level. Maybe getting married or maybe moving in together. So if you're contemplating sharing a household together now or at some point in the future, you know, really there is no better time than the present to discuss finances.

[00:00:48] Recently, in my practice, I was working with a fabulous young couple who have set a wedding date and they were going through the financial planning process together for the first time. And this reminded me a lot[00:01:00] of something that Liz Davidson said in her book, What Your Financial Advisor Isn't Telling You?

[00:01:05] She was somebody that I worked for a couple of years ago when I worked in financial wellness programs and she wrote this great book. In the book, she said, "Your life partner can be your best financial friend or your worst financial enemy." And boy, I really agree with that. I think that marriage is an emotional and spiritual partnership, as I mentioned, but it's also a legal financial relationship.

[00:01:25] Money is the leading cause of stress in relationships and it doesn't have to be. The foundation of any successful economic partnership, including living together, or marriage is strong communication and full financial disclosure. So when I say money talk- strong communication and full financial disclosure. Let's set some ground rules here because the money talk can bring strong emotions to the surface.

[00:01:50] So you want to choose a place to have your discussion that is more neutral. It should be relaxing and free of distractions to both of you. Pleasant. Neutral [00:02:00] location. You've got to have enough privacy, right? The living room on a Saturday where the dogs are running around or kids, if you have them, that is not the place to do it. You want to pick a good place to do this, that is going to be relaxing and keep these ground rules in mind.

[00:02:13] So the first thing, make sure that the talk is scheduled for a time of day that is good for everybody. My husband likes to talk about money stuff at night, and I prefer the morning. We also have different work schedules. He semi- retired. So over time, we've learned to bring up financial decisions during breaks during the workday or on weekend days where we've prescheduled it.

[00:02:36] When we can, we try and set a time, where we're going to go through financial housekeeping. We're going to have the most productive conversations, if we can stick to that ground rule. So we don't want to have that conversation when Steve is tired or where I'm tired, for example, or what, either one of us is distracted by work.

[00:02:52] So the other thing is I say, no alcohol. A glass of wine could give you courage to disclose something to your partner. If you've got a student loan [00:03:00] balance or, you've got a debt or a business problem or you've been laid off or whatever. But it's going to be easier for you as a compassionate listener to listen to your partner without judgment.

[00:03:12] And that is definitely the goal. Feel free to stash the champagne in the fridge later on for after you've had the talk and you're feeling good about the, your financial communication.

[00:03:22] Set up a beginning and an end time for your discussion. So if you haven't finished everything, you can put some topics down the road to the next conversation.

[00:03:30] If you're getting to a point in the money talk where conflicts are starting to arise, it's probably a good idea to put things in the parking lot and revisit them later, right? I'm not saying revisit them, never. I'm just saying, everybody cools down and goes back to their corner and revisits it again.

[00:03:46] So once you set those ground rules, you've agreed on how you're going to communicate with each other, over time, during your money talks, particularly in a new commitment in your relationship, we want to do these things:

[00:03:59] And the first of which is [00:04:00] you want to tell each other your money stories. How did your parents handle money? What did you think about it? How did you handle money as a kid? How did that impact you? A financial planner, Michael Kay, who is also in New Jersey, wrote a very good book called, The Feel Rich Project, which has loads and loads of helpful questions. Helpful coaching questions that couples ask themselves, and ask each other when they're telling their money stories.

[00:04:27] How would you describe your financial personality? There are a lot of relationships where one person is a saver and one person is a spender. One person is a risk seeker and one person is a risk avoider. You don't have to have the same financial personality in your relationship, but you do want to understand each other's financial personalities. Not judge them. And work to come up with a fusion strategy for the two of you that where you can meet in the middle of somewhere.

[00:04:53] There's also talking about the stuff that you've done well. Have you always saved the maximum in your [00:05:00] 401k? Or did you pay off a car loan or student loans or dig yourself out of credit card debt? What are the factors that contributed to that, that you want to bring forward into your relationship.

[00:05:10] I would also encourage people to share their financial failures. Not everybody is out of financial failure before they get into a serious relationship. But if you have had one, share that. Chances are the person that's had a financial failure is going to have learned a lot from it and that will have affected what they bring to the joint financial relationship together, in terms of what they've learned.

[00:05:30] If you've been married or you've lived with somebody before, what worked and what didn't work about how you and your ex handled money together? Any takeaways that you have from that, that you want to share, anything you want to do differently in your new relationship.

[00:05:44] So the second step is to take an inventory and fully disclose to each other: How much do you spend? What do you owe? And who do you owe it to? So you've taken care of the emotional side of money. It's time to get practical.

[00:05:57] And by how much do you earn, what are [00:06:00] all your sources of income? Do you expect it to increase or decrease or stay the same? Do you have career change goals that you want to discuss with your partner that they might not know about? Do you have any other sources of income? A business? An investment? Anything like that?

[00:06:14] In terms of your expenses, what are your regular costs of living expenses? Do you have other expenses, for example, if somebody has got kids from a previous marriage, what's the alimony or child support? What is your commitment for college or insurance?

[00:06:25] And then what are your assets, right? How much have you saved for retirement? For an emergency fund? What kind of investments do you have? Fully disclosing those to each other over time, is a helpful part of building financial trust in the relationship.

[00:06:39] The other thing is, what you owe. So obviously what's your mortgage balance? How many credit cards do you have? Do you carry balances on them? You want to make sure that everybody knows what they're getting into in the relationship, whether you're cohabitating or you're living together or you're getting married. And so you really do have to have full financial disclosure. And then do you have outstanding student [00:07:00] loans? And how are you going to handle things like that?

[00:07:02] Cohabitating with somebody, whether you're living together or married, you feel financially responsible for your partner. You want to make sure that your partner has basic things like health insurance. If something happened to them, are they going to be able to fund the cost of getting better? Or if there were an illness or a car accident, for example, does somebody have a minimum amount of insurance?

[00:07:20] If you're engaged, I would encourage people to show each other their credit reports. That's a hard part, right? It could be a hard part, especially if you've had some issues. You can access your credit report for free from the three major credit bureaus, once a year. You can go to annualcreditreport.com to do that. If you're signed up for a credit monitoring service, like credit karma or credit sesame, for example, you can share that. So if one partner has significantly better credit than the other, how is that going to affect joint financial decisions that you make together? For example, like buying house, applying for a mortgage. Is there a certain amount of money that needs to go to debt repayment? Plenty of couples navigate this situation [00:08:00] successfully, but the reason they navigate it successfully is because they have disclosed to each other upfront what the real financial situation is and then they've made a plan on how they're going to tackle it together.

[00:08:11] So that's the rough part, guys. And now you can head to the fun part, right? So the fun part of the money talk is developing the shared vision of what you want your future to look like together. It's really interesting, I found as a financial planner, that the process of financial planning and putting some numbers to financial life goals, can really help people get on the same page about what those financial life goals are. So if everything worked out exactly the way that you wanted it to, financially for both of you as a couple, what does that look like?

[00:08:47] That is such a powerful question. I ask it every single day. And I love seeing the expressions of people as they're answering that question. What is your true goal, right? Individually? For your relationship? Ask that [00:09:00] upfront. Where do you see us living now? Where do you see us living in five years? Where do you see us in retirement? You may both be living in the same area and you may not know that your partner wants to move back to where his or her parents are when you have kids. Or you may not know that your partner wants to live overseas. Or never wants to buy a car, only wants to in the city. So it's important to get super, super clear about that upfront. We all carry these goals inside of us. Let's get them out on the table and discuss them clearly without judgment. We may not agree, but we want to get them out on the table.

[00:09:36] If you plan to have children, does one of you want to take a career break? Do both of you want to step back from your careers during the early child rearing days? Do you not want to take a career break and you expect to have increased costs of childcare? How long has this all going to last? How many kids do you want to have? What kind of education do you want to provide for them, if you're planning to have kids? Are you committed [00:10:00] to a full year of a fancy private school education living on campus? Or are you going to do four years of public? Or are you going to set to save a certain dollar amount?

[00:10:10] Something that I had to deal with in my relationship is what if one of you has children from a previous relationship? When I got married, I became a step-mom. Now for us, we always treated those expenses as if they were joint expenses. Not everybody does that. Getting clear about how are you going to treat expenses from kids from a previous relationship, is that all your partner's expenses? Are you going to share them together as a couple?

[00:10:34] When would you, as a goal, like to be financially independent enough to be able to be work optional or to retire? It doesn't mean that people are necessarily going to leave the workforce or their business at a certain age, but, do you have a time in mind by which you would like to be financially independent? And for some individuals and some couples, that can be a lot earlier.

[00:10:55] Somebody wants to leave the workforce at 50 and travel the world [00:11:00] and live very frugally and the other person, wants to have a big house and a fancy car and wants to work till they're 67. You can see how there's gotta be some communication that happens about a joint goals.

[00:11:11] So what would happen if one of you got sick or laid off? First looking at the insurance that you have in the benefits that can cover you there. But also how would you handle a situation like that?

[00:11:20] If one partner plans to step away from the workforce for awhile to be the primary person responsible for home and hearth and kids and the other person is the higher earner that's going to be bringing money into the household. There are some decisions to talk about. There's some things you're going to want to discuss in terms of emergency reserves and insurance, et cetera. How would that change if something happened to your partner?

[00:11:42] If one of you has significant debt, credit card balances, student loans, for example, do you have a target time to get them paid off completely? And is the partner who has debt, really willing to do what it takes? Are they currently working on getting it paid down and are they taking ownership of the fact that this is a goal for both of you as a couple?[00:12:00]

[00:12:00] If you've gone through this money talk, and again, this is probably a conversation, it's multiple conversations, right? It's probably not going to be just a couple hours on a Saturday afternoon. It's not a one-time event. Once you get through that first money talk, that's going to set yourself up for really solid financial foundation of communication. Hopefully, they'll be the first of many conversations that you have over time about your finances. I like to say that the marriage dividend or that the dividend from being two, instead of one, is that the relationship is an emotional and spiritual partnership, it may be a parenting partnership, but it's also an economic relationship and that economic relationship has tremendous power to catapult both of you forward into the future that you want. If you set up a good foundation, you set the ground rules, you communicate respectfully to each other and you get on the same page with a shared vision, a win-win for both of you, a shared vision of what you want your future to look like [00:13:00] and then you get down to work and you make it happen.

[00:13:02] So if you have any topics or questions, have ideas that came out of this particular discussion about relationships and money and having the money talk, or if you have another topic that you'd like me to tackle in the Real Life Planning Podcast, please send me a note at podcast@reallifeplanning.com. Leave the comments below and please hit subscribe so that you get notification of future recordings. So have a great day everyone and happy money talk.

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