smart spending

When and how to talk finances with your partner

Talking money with your honey
Talking money with your honey

Money might make the world go round, but it often sends relationships spinning out of control.

Financial spats consistently rank among the top reasons couples split. And while Valentine's Day accentuates the romantic, practical considerations such as money shouldn't get pushed aside.

"It's the elephant in the room for most couples," says Chris Remedios, a Certified Financial Planner professional who works for Financial Connections Group Inc. "Financial issues carry a lot of emotional baggage and lead to emotional responses, so it's often difficult to talk about."

Yet those talks need to occur. Not necessarily all at once, and certainly not on the first date, says Rod Griffin, director of public education at credit reporting agency Experian. But disclosures about money go a long way toward relationship success.

You don't necessarily have to bring your credit history to the candlelit dinner this Valentine's Day, but schedule regular talks about money and you'll increase the chances of enjoying more of those special nights together.

Dating exclusively
Dating exclusively

It's probably too soon to have any meaningful conversations about money at this stage, says Deatra Riley, financial education manager at nonprofit credit counseling firm CredAbility. "Your finances are very personal, and this could be a short-term relationship," she says. Things such as salary, debt load and credit history should probably stay off the table. "You might not want someone to have that knowledge yet."

That doesn't mean you should ignore money. "Think about it like you do with a lot of things when you're first dating," says Anthony Sprauve, spokesman at myFICO.com, a unit of credit scoring agency FICO. "Pay attention to signs and signals to understand how people operate and how people handle things."

Riley says her clients use these clues to assess their partner's financial situation. "You can make a salary assumption based on job title," she says. Other indicators include the car type, the swankiness of someone's apartment and restaurants one frequents.

There is a chance an ostentatious person could be living beyond his means. Riley says women, in particular, key in on big spending as a possible red flag, especially when it comes to restaurants. "Most women will see middle-of-the-road restaurants as more of a sign of financial stability than fancier ones," she says.

Staying over
Staying over

Once things get more serious -- you're spending more nights together, planning vacations -- the finance discussion needs to broaden. "Now is the time to be thinking about establishing financial expectations," Remedios says.

That includes talking about how much you can afford when you go out to dinner, discussing limits on gifts around the holidays and what you can spend on traveling. In these cases, Remedios suggests offering a range of possibilities that you are comfortable with and seeing how the other person reacts.

The problems that arise at this stage, Remedios says, trace back to the fact that people tend to date within similar socioeconomic classes, but attitudes toward money can vary greatly within those designations. You might have come from a family that pinched pennies, while your partner's parents might have spent freely. Those behaviors often get imprinted on you.

So it's important to discuss spending, she says. "My satisfaction from spending is very different from my husband's." Recognize the differences and discuss any problems they might be causing.

It's still probably too early to force a discussion on debt and credit history, Remedios says. "Relationships are complicated, and you're probably going to have an innate sense at this point if there's a problem other than a suboptimal credit score."

Moving in together
Moving in together

Get ready for a big talk. "If you are talking about any sort of long-term commitment, it's probably a good time to talk about credit histories," says Griffin.

Remedios says credit needs to be discussed when you start talking about any legal relationships, such as signing a lease.

"Have a credit report date," says Griffin. "It won't be the most exciting evening, but have a nice dinner and share the report." The data matter. Even if just one of you has a poor score, the landlord could require a larger security deposit. In a tight rental market, you might miss out on the apartment you want.

"You want to be protective of your interests, but supportive of the relationship," Remedios says. "Ask yourself, 'What do I need to know financially to take a legal commitment?'" More important, jointly signing a lease or loan means taking on responsibility for the other person.

"The debt truly is joint," Sprauve says. "If one person flakes, the other is going to be responsible for the whole debt."

It's best to check your credit report yourself and disclose any problems before the landlord does it for you, experts say. "It's always best to discuss finances calmly and nonconfrontationally," Sprauve says.

"A poor credit history should not be the cause for a relationship to end," Griffin says. "That alone can be overcome."

Engagement
Engagement

When the marriage question is popped, "You need to talk about the whole picture," Remedios says. That means credit histories, student debt, credit card burdens, child support payments, salary and any property you might have.

"Most people haven't talked about finances prior to the ring," says Riley. "If this hasn't happened, it's time." And it's not just the numbers. It's important to understand attitudes toward money and work at this point, says Remedios. "Oftentimes there are limited resources and very divergent values on where those resources should be allocated."

She recommends having a mediator for this discussion. "Someone who can keep the conversation factual and offer different perspectives means you're going to have a better dialogue," she says. While some couples will turn to their religious institutions for this guidance, Riley says she's hearing more instances of couples seeking formal counseling from financial advisers or bringing in friends to mediate.

Financial differences, big debt loads or poor credit need not torpedo the relationship. "If you're getting engaged, you have a year to 18 months," Riley says. "That gives you time to get credit sorted, pay down the debt." But she says it might be time to call things off if poor financial behavior persists. "If the person still insists on going out to fancy dinners or getting their nails done, that could be a bad sign."

Marriage
Marriage

By this time, financial skeletons and behaviors should be understood. But there remain plenty of money decisions that can lead to marital strife. You'll need to figure out who's going to pay for what, whether you'll have joint accounts, how you'll balance savings against spending and so on.

Remedios says there's no right answer to these questions. She recommends simplicity above all else, saying it might be a good idea to use online tools to track spending. At the very least, you should set up a budget, Riley says. This requires some effort, but should keep the money discussion going -- a key to remaining financially happy.

Riley suggests sharing at least one account for paying the bills, funding it with a certain percentage of your paycheck. "You need to have a very open method for how you will use that account," she says. Riley also recommends talking about purchases over a certain limit, say $200. "That prevents any financial shocks without taking away the other person's freedom."

Some couples assign one person to be in charge of handling the finances, leaving the other out of the loop. "Not a good idea," Riley says. That can lead to issues of control and perhaps even deceit. Don't hide income or debt, warns the National Foundation for Credit Counseling. This is known as "financial infidelity."

Kids and beyond
Kids and beyond

As your relationship progresses, the finance decisions you'll need to make become larger. At this point, it might be time to bring in a fee-only financial planner. "You need someone to help you articulate your goals and help you hash out what you have the ability to achieve," Remedios says.

Buying a house can strain relations if one partner wants that dream house. Saving for retirement could weigh more on one person than the other, who'd rather use money now. Also discuss the likelihood of caring for your own aging parents. "One may assume the parent will go to assisted living while the other expects the parent to move in," Riley says.

Couples could also face financial hardships, regardless of how well money is being handled. If you're already able to talk about money easily, these tough times should be less straining. And if one of you starts spending more at the bar regularly, causing a ding on your finances, it's time to reopen the dialogue.

"If a person has a compulsive spending habit, there may be more to the puzzle," Griffin says. He suggests going to a credit counselor. "There's no shame in that; people need help all the time."

The shame, instead, would be to keep quiet on your finances. Money talk doesn't need to be an everyday discussion. But make sure it gets the attention it deserves.

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