Your money, my money, our money
Money matters in a relationship - the three main topics
Caroline and I attended a Brigitte Academy event on finance in April this year. Two of the panelists, the “Beziehungs Investoren” (link at the bottom of the article) talked about how they manage their finances in their relationship and marriage. I was very impressed by the level of detail they applied to setting up their account structure and dividing their workload when they planned to have their first first child. If I remember correctly, both had a salary account, a joint account for common expenses (eg, rent, food), individual investment accounts and individual savings accounts, as well as joint investment accounts and joint savings accounts. A bit elaborate, I would say. But managing fairness in spending and savings was very important to them.
No matter what account separation you have with your partner, transparency is key. I particularly favor this and try to adhere to this in my relationship. Likewise, being fair and discussing how to handle money together is important.
Of course, you do not talk about money during the first date. But discussing how to handle money is important as soon as the relationship becomes serious. Why? Because in the first phase of the relationship many aspects are defined. This also includes which topics are taboo and which are not. Not talking about money potentially makes this a taboo subject. In my relationship, we were transparent about this relatively early on - in terms of how much we each earn, own and invest. Sure, some people are educated not to talk about money. But times are changing and people can change, too. You can actively work towards this by asking your partner how he / she makes investments, for example. You may also need to develop interest in a topic that you did not find so exciting. As soon as you have a future together, money will come up.
If you discuss monetary issues together, it will be an issue that both can handle well.
Fairness is difficult ... what is fair? Absolute fairness, that is, to share all expenses 50/50? Or rather relative fairness, so have both contribute based on their income? Here are the advantages and disadvantages:
Advantage of the 50/50 rule: Sharing your spending 50% / 50% will make it absolutely fair because both contribute exactly the same amount. The person who earns less can say this is not fair. As both should contribute the same percentage based on their income. This would lead to relative fairness. In that case, both allocate e.g. 20% of their respective income to joint expenses (rent, food). In absolute terms, one person pays more than the other. Relative to what he or she earns, it is the same.
Personally, I've changed my mind about what I think is fair.
Initially, we chose an absolute principle of fairness in my relationship because it was important for me to know that I was able to pay for my own lifestyle. This was relevant for me in terms of a possible separation or other unexpected turns.
Nowadays, we divide things more by relative fairness, depending on what each of us earns.
Why? Because the person who earns less, has less opportunity to save money (such as for retirement), investing, and takes longer to build their own emergency fund. With relative fairness, it's like paying taxes, both pay about 40% tax, but everyone pays 40% of his or her salary.
No matter which version you choose for your relationship, as soon as you're cohabiting, getting married or children become an issue, you should discuss the issue of fairness.
For many couples, this makes it easier to make joint decisions based on a jointly agreed upon principle. Otherwise, this could lead to strife as a person spends more money on things that the other person does not care about and so on. By the way: Money is one of the most common reasons for divorce, no matter whether there is a lot of money or not.
I recently read the book "Emotional Currency". Author Kate Levinson explains how our beliefs and socialization impact our money management. The book shows how our value system applies to topics such as money.
Very often, we are unable to manage our finances, not because we are not capable, but because we block ourselves or unresolved issues of control, shame and identification get in the way.
Kate Levinson explains that problems with money are often not caused by money. They are often a symptom of a deeper problem and come to the surface in situations related to money. Below, find a link with an interview with Kate.
3. Speaking and listening
Talking about money issues not only helps you understand what your partner is doing with his or her finances, but also why. The same applies to you. Verbalizing also helps you to reflect your money beliefs and values. In every respect, speaking and listening are important tools for understanding your partner more holistically. Money is by no means a purely rational topic, but an emotional issue.
No one wants to be greedy or wasteful, at the same time we are brought up to make money decisions in a structured and sensible way.
However, nobody at school has taught us how to handle money in a structured and rational way.
Instead, we are left to what our parents have taught as our first role models - provided we have grown up in an environment where this issue has been more openly discussed. Your parents may have faced similar difficult situations.
For this reason, we at Finelles believe that "talking about money" is an approach that needs to be advocated much more. The more people talk about it, the less difficult and blurry it will become. Be courageous and start with yourself. Even if you want to exchange ideas with like-minded people, you can join our Facebook group and share your ideas and thoughts and ask questions.
To sum it up: Speak about money! Be transparent!
Links and Goodies:
The "Beziehungs Investoren": https://beziehungs-investoren.de
Kate Levinson explains the three keys of your emotional currency: https://katelevinson.net/video/3-keys-to-understanding-your-emotional-currency
Written by Clara Creitz
Finelles Founder. Coach and Consultant (UBS, Towers Watson).