The Pros and Cons of Financial Planning for Couples

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Does Your Relationship Have a Financial Plan?Finances are tricky, no matter who you are, where you live or how much you make. Add in another person, though, and it can be downright overwhelming. While it might not cross your mind while you’re single, committing to another person means co-existing with their finances too. Financial planning plays a large role in any relationship, but like most things in life it takes some time to perfect. To make the process a little easier we’ve outlined three of the most common pros and cons associated with financial planning as a couple. Take a look and see what you think — hopefully they can help you and your partner find a happy middle-ground.

PRO: You’ll Be Happier Together

Life is complicated; add another person and it only gets more complicated. That’s why you need a plan. According to a study by American Express, nearly one in three couples (30%) say finances cause the most stress in their relationship.1 If you can work as a team and commit to a clear plan, life as a couple should be a lot easier all around. What’s more, a 2009 study found that couples who had financial disagreements several times a week had a 300% higher risk of divorce than couples who had financial disagreements less than once per month.2

PRO: You Experiment

There’s no “right way” to manage your money as a couple. According to a SmartMoney survey, couples manage their money in three different ways: they put all their money in a joint account (64%), they keep all their money separate (14%), or they opt for some combination of both (18%).3 Just as every person has a different way of managing their money and investments, every couple will likely have to try out a few versions before they find what works best. This experimentation not only exposes you to more ways of handling your money, but it can help you find the perfect balance for your situation.

PRO: It Encourages Openness

Secrets can kill relationships, especially when they concern money. A Prudential study found that in Britain alone, nearly 4.5 million people keep money hidden from their partners.4 What’s more, people have a tendency to lie to themselves about their own spending, just as they might lie to themselves about their own eating or health. Discussing the good and bad of your finances with your partner can open the door for more honest conversations, and help build a more supportive network for both of you.

CON: You Might Have to Make Difficult Decisions

When you look at finances from an objective point of view, the logical choice won’t always be the easiest one to make — especially when it concerns debt. According to the SmartMoney survey, debt is the number one financial issue couples fight about.3 When one person brings a lot of debt to a relationship it might be necessary to protect their partner from their creditors, such as through a pre-nuptial agreement. Such discussions can quickly get out of hand, though, so it is important to start on the same page and — if possible — approach your joint finances as if you were running a business. The objectivity can help.

CON: You Forget About Your Own Finances

When you commit to a budget with your partner it can be easy to lose sight of your individual situation. One example is credit ratings. If all the credit cards, mortgages, etc. are in your partner’s name, you aren’t building your own credit. If you want to borrow on your own later on, you may find that you don’t have much of a credit rating. It’s good to work as a team, but don’t forget about yourself in the process.

CON: You Divide Your Responsibilities

Even couples that discuss their finances and work together could put themselves in an awkward position. According to a 2013 Fidelity study, while 92% of couples agree they communicate well and 81% agree they are one financial entity, they are not always on the same page regarding financial fundamentals. How much do you want to save for retirement? Do you prefer risky or conservative investing? While the divide-and-conquer method works wonders in some areas, both parties need to be a part of all the major financial decisions — from weekly budgeting to long-term planning.

Like everything in life, financial planning as a couple has its pros and cons. On the one hand it can improve communication; on the other hand it can open the door for conversations you might not be ready to have. Whatever your situation, though, it pays to have at least a basic plan in place. So when the time is right, consider starting the conversation, and see if you can find the right financial plan for your relationship.

References

1 Money Trumps Children and In-Laws as Source of Relationship Stress According to American Express Spending & Saving Tracker. (2010, June 10). Retrieved December 5, 2014, from http://amex.co/1s5gB71

2 Rampell, C. (2009, December 7). Money Fights Predict Divorce Rates. Retrieved December 5, 2014, from http://nyti.ms/1uc27xb

3 Happy Couples Survey. (2004, June 23). SmartMoney.

4 Clare Goldwin for the Daily Mail. (2011, December 11). Should every wife have a secret bank account? How some women use it for little treats or as security in case of divorce. Retrieved December 5, 2014, from http://dailym.ai/12jGjZb

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