While money discussions might not be as important when two people are only dating, once they decide to take the next step, financial discussions before living together – as married or unmarried partners – must begin to take center stage.
Yes, some issues are more important to partners than money. But the recent experience of one of my clients has once again reminded me why potential partners should talk about money before moving in with each other. While Susan has robust 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.
Such differences of opinions and attitudes become more significant when the responsible partner must bear the burden of the irresponsibility or indifference of the other party. Who pays when the partner indifferent to long-term care ends up needing it? Such situations can be a huge strain on whatever love and affections started the relationship in the first place.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The situation of my client is often the experience of those who are in their second marriages or cohabiting with another partner after leaving their marriage. However, this situation is not unique to new partners, as married couples can also have conflicting attitudes toward financial planning.
What can financial advisers 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. Though it might seem that talks about money may disrupt the flow of love, it is always better to have these discussions beforehand to avoid unbearable situations later.
Here are some questions to lay on the table and discuss until both partners are satisfied with the answers:
- How do we pay for mortgage or rent?
- Are we sharing living expenses? If so, how?
- What insurance do we need? Should we have policies together or individually?
- How do we plan for retirement? Individually or jointly?
- How do we deal with emergencies? By accruing debt or by using an emergency fund?
- Who are our dependents, and how do we jointly take care of them?
- Should we have joint checking and savings accounts and investment accounts?
These are not meant to be exhaustive questions. But they serve to highlight the kinds of discussions that need to occur. Where there are significant unreconcilable differences that can cause heartbreaks in the future, it might be better to take some time to rethink the relationship before moving in together.
For Couples Already Living Together
For those already living together, the situation can be more challenging. Of course, the first step is for the responsible partner to have conversations with the other partner on why they need to be more intentional about their finances.
Instead of just saying, "We need to do this or that,” the responsible partner can illuminate the consequences of indifference and the benefits of active planning. If the other party refuses to take action, 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 if they are willing to continue to bear the brunt of the long-term care of their partner, including emergencies that haven’t been prepared for. If they are unwilling, then it might be better 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 beginning in the first place. Financial advisers should mandate their clients to have heart-to-heart money conversations with their partners before moving in to ensure they are on the same page, or can be on the same page with some compromises here and there.
Finances might be the least pleasing thing to talk about when people are having butterflies in their stomach, but failure to discuss money issues might make what is sweet in the mouth bitter in the stomach.
Living daily with someone else is different from having dinners every Saturday; the former requires a lot of planning, of which financial planning is key.
-
AI Goes To SchoolThe Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
Where to Invest in an Uncertain MarketIn an uncertain market, you can still pocket juicy payouts ranging from 4% to 14%, depending on risk.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
-
Such Attractive Yields in High-Grade Munis Are Rare and May Not Last LongAccording to this munis expert, the last time munis were this cheap was a brief period in 2023. If you kicked yourself for missing out then, you have a second chance now.
-
Financial Analyst Sees a Bright Present for Municipal Bond InvestorsHigh-tax-bracket investors have an excellent opportunity to secure low-volatility, high-quality returns at yield levels rarely seen in over a decade.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance AgentYour insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
Two Estate Planning Issues You Should Never OverlookThis estate planning attorney explains why proper asset titling and beneficiary designations make a big difference when it's time to transfer your wealth.
-
The Four D's That Could Force You to Sell Your BusinessBusiness owners (or their heirs) can be rushed into a sale of their company if they haven't planned for a major change in circumstances — or the four D's.
-
The Three Retirement Tax Issues I Nag My Clients AboutA financial professional highlights areas of tax planning that retirees should have on their radar as they finalize their retirement plan.
-
Do You Need Disability Insurance? Three Things to KnowDisability insurance can help replace some of your income during unexpected life events. Here are the basics, courtesy of a financial professional.
