Talking openly about money is the starting point for a financially healthy relationship.
Living together means sharing, but a strong relationship also requires individual financial knowledge and autonomy.
Being financially independent means you can work together more confidently to achieve your mutual as well as personal goals.
When was the last time you and your partner talked about money? To me it's not only a good idea, it's essential for maintaining a healthy relationship. And it's also essential that each partner have a certain amount of financial independence. That becomes increasingly clear when you look at recent stats about financial abuse and infidelity in relationships.
Think it can't happen to you? A June 2017 survey by CentSai, an online financial wellness community, found that 60 percent of Millennials surveyed said they were victims of financial abuse (one partner using money to manipulate or control the other) or financial infidelity (one partner lying to the other about their spending or financial history). These statistics are alarming—but not inevitable—especially if you take these steps from the get-go.
1. Know yourself financially—Everyone has a certain money identity. Are you a saver? A spender? Financially speaking, are you cautious or a risk-taker? Do you find finances intriguing or a complete snore? Understand and discuss these things about yourself—and your partner—before you begin a committed relationship.
2. Take a "yours, mine and ours approach"—Living together means sharing, of course. But each partner should also have discretionary money and be able to make individual spending decisions. To me, that’s just part of being an independent adult. If you're both working, decide together how much you'll each contribute to shared expenses and how much you'll keep separate. If one of you earns more than the other, discuss ways to equalize your finances, perhaps by having the higher earner contribute more to joint expenses.
3. Get personal—In addition to having a joint account for shared household expenses and savings goals, it is generally a good idea to have your own checking, savings and brokerage accounts. This is how you can put the "yours, mine and ours approach" into practice.
4. Your retirement is yours—Uncle Sam helps you keep retirement savings separate. An IRA or 401(k) can only be opened in your name alone. That said, you're the one who needs to make the contributions and you have to have earned income to do it. The one exception is a Spousal IRA, which can be funded by a nonworking spouse. The caveat is that the working spouse must earn enough to cover any contributions. And do pay attention to who you designate as a beneficiary. If you name your partner, just remember that you'll want to change that should your relationship change.
5. Understand what's in a name—You may have contributed to the purchase of a home or a car, but unless your name is on the title, you don't own it. Don't assume; make sure your name is on the title of anything you own in common.
6. Have the facts at your fingertips—In a healthy relationship, it's best not to have secrets. And that includes secrets about money. Make sure you both know about—and have access to—any accounts you have in common. Also, be open about accounts you hold separately. Hiding money from a partner is a form of financial infidelity. And even if one of you takes the financial lead, make sure you're each involved in the money decisions that affect you both.
7. Include your advisors in your relationship—If you both have the same financial advisor, great. But be sure you each meet with that advisor. If you have separate advisors, it's a good idea to introduce your partner. Again, avoid financial secrets.
8. Be cautious about co-mingling—An inheritance is legally your separate property—until you put it in a joint account. To me, it's not a sign of distrust to keep some assets under your individual control; it's just another guarantee that you maintain some independence. If you want to co-mingle an inheritance, that's up to you. Just realize that once it's done, it is very difficult—if not impossible—to undo.
9. Don't get caught at death's door—A certain amount of estate planning is recommended, even when you're young and especially if you have minor children. Create a simple will stating where you want your assets to go and name a guardian for any minor children. Another important document no matter your age is an advance healthcare directive, which specifies what you want done if you're no longer able to make decisions for yourself because of illness or incapacity. It also allows you to designate someone to make decisions on your behalf.
10. Keep talking—Open and honest communication is the key to any successful relationship, and money should definitely be an integral part of that. You may not think it's very romantic, but the more you discuss your goals and dreams and how you'll work together to achieve them, the more money becomes the means to a mutually rewarding life. Nothing unromantic about that!
Have a personal finance question? Email us at email@example.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.