Love and money is not a foreign pairing. Some people think of their love for money, or perhaps choosing love over money, but how many of us think about combining our money with the one we love? Money, not just meaning our income, but also our financial status- loans, credit scores etc. Money is a sexy topic until we wonder if we or our partners will have enough. If you’re in a long-term relationship contemplating marriage, or buying a house with someone else, or are single and never thought about how having a significant other would change your own financial well being, then this article is for you.
Many of us Millennials begin our adult lives in the red, meaning our debt outweighs our income. Some choose to not look behind the curtain, afraid of the reality that we’re not as financially stable as we think. Others of us choose (or are forced) to explore the unknown of what those government student loan letters meant, and how that will affect us getting a car, a house, or even a credit card with a decent interest rate. If you’re reading this then you’ve either already taken that journey or are on the verge of doing so, either way, good job.
Now let’s say you’ve taken that journey and have implemented a plan to chip away at your debt. Your credit score is rising. You see your loan principal decreasing, and you’re just starting to feel secure in your lifestyle and choices. Have you considered if your potential life partner is doing the same and how that will affect you? Or perhaps your partner appears to have it figured out, and you’re the one afraid to look behind that curtain? Personal finance is a very sensitive and private topic for most people. However, it’s best to take a look at each other’s finances together, before saying “I do” or getting an unpleasant surprise when applying for a mortgage. For example, when applying jointly for a mortgage, according to realtors on zillow.com, banks and mortgage companies to use the lowest middle score out of the two applicants. In other words, if the applicant with the lowest credit has scores of 580, 620, and 660. Lenders will use the 620 as the credit score for the application.
A decent starting point would be to openly ask your partner about their goals. If you’re considering this conversation, then you probably care about the person enough to know where they would like to be in the future and if they already have a plan to get there. If your partner wants to buy a house in the next five years, a car, or has the aspiration of being debt free in 10 years, or anything that involves those green notes, we call dollar bills, then this is where you begin. Have you thought about your own goals? This would be a good time to share them. Have either of you started a physical road map on how to achieve your goals? Bring it to the table. The one who has their own budget can teach and explain to the other what they’re working on. If neither of you have a budget or financial road map, then this could be an opportunity to learn together. For more information on building a budget, please read my piece Saving and Budgeting- A Necessary Evil or A Satisfying Hobby. This piece will show how to determine your current financial status, how to build a budget, and what to do if your expenses outweigh your income.
This conversation should be a safe space for both sides involved, no judgment or condescending behavior. It’s easy to feel intimidated if one person appears to have it together, but this isn’t the time to cower. This is the time to get excited and see what you can learn or teach your partner. In some cases the student surpasses the teacher, and then you both can stay on that path.
I want to emphasize that this is not a conversation that can be forced. This is not an easy conversation to have, and should only be done so if you’re considering a long-term future with this person. If your partner is comfortable sharing their goals, but not how they plan on getting there, then this is your chance to articulate why you brought up this conversation. Personally, it was because I felt we were a team, and I wanted this relationship to last long term. One of the top 5 reasons marriages fail within the first few years is due to finances. To think that I could have a loyal, caring, intelligent partner in my life, and potentially lose that due to money, was not a chance I was not willing to take. Although all relationships are filled with uncertainty, one of the things we can control, is our finances. Could you imagine losing your partner not because of infidelity, deception, or abuse, but because there were too many financial surprises and you didn’t know how to tackle them together? If that scenario is not what you want, then have the conversation one weekend. It may start off uncomfortable, but in the end you’ll both have a better idea of your relationship and where the both of you stand in working on it together.
Now, with every couple willing to work out their finances, there’s a couple struggling to decide whether or not to do the same. What if your partner shares their financial background and it’s not what you expected? What if your partner has significantly deferred their student loans, accruing thousands of dollars in interest, and has a low credit score? Or is that person you? This is where the fight or flight decision comes into effect. You or your partner might now have to make a decision whether staying involved is worth the struggle of helping to rebuild, or is the financial damage too much to take on? For some, the relationship may take a turn down a road that was not filled with comforting words, but a harsh reality that the current situation cannot continue. Whether that be through building up together, or jumping ship before things get too deep. Neither outcome is wrong. Every person has the right to evaluate their financial future with someone, before making further commitments. In that same respect, hiding the possibility of financial fumbles will only bring it to light the longer you’re together, which will make the outcome that much more difficult. If you feel you may be the weaker link out of the two of you, then do your homework before bringing up this topic. Check your credit score. Many banks now offer this service for free, or you can sign up for Credit Karma. Here you can see how much debt you have outstanding as well. Come up with a plan to make yourself more financially stable. Not just for your partner, but for yourself. For more details on how to build this plan, please visit my previous installment Saving and Budgeting- A Necessary Evil or A Satisfying Hobby.