Mindful Money’s Kathryn Mandelcorn sees it all the time. A couple will come to see the Vancouver-based certified money coach and financial planner and the tension is thick. They’ve tried to talk about money and discuss their finances themselves, but it’s just causing friction.
But when they leave after talking with her, their shoulders have relaxed, they’re smiling, and they have a much better understanding and appreciation of their partner’s – and their own – thoughts about money.
“They come in super stressed,” she explains. “They end up with so much clarity. It’s a liberty and a feeling around money that changes, so it’s not super tangible. (The biggest) benefit is the improved communication and clarity and being able to make choices and decisions together.”
“They come in with a feeling of scarcity and … then (we) shift that to what’s possible,” she says. “And that’s a different perspective to work with.”
Shifting the tone
It’s extremely important for a couple to be able to talk about money and finances, Mandelcorn says, “especially if they’re going to share a home and life together and kids. We need money for absolutely everything.”
But those conversations aren’t always easy, acknowledges Alexandra Boland, a certified financial planner with Caring for Clients.
“Coming into a relationship, it’s important for a couple to begin building a foundation and understanding where their partner comes from” when it comes to their view of money,” she says. “The concept of talking about money can feel vulnerable (and) can trigger feelings of insecurity.”
Start early
These money conversations can start on the first few dates as you get to know someone, says Anna Premyslova, a client portfolio manager at CWB Wealth Partners in Calgary.
It can be as easy as asking if you’re going to split the bill for dinner, or asking what they would splurge on if they had some extra cash in their pocket. And if you start to share first, talking about whether you like to save or spend, or if you hate to have a balance on your credit card, that opens it up for them to join the conversation.
You can also ask broader questions that get at how a person values money, adds Boland, such as asking about their first part-time job, and at what age they opened a bank account, and if money was no object what is their dream job?
“If you establish that dialogue early then there’s never this big scary time where we’re sitting around the dinner table (and say) ‘let’s put all our cards on the table’ and that financial intimacy conversation starts looming,” Premyslova says.
“It’s not something that you should be doing the night before the wedding.”
Compatible and incompatible differences
But don’t be concerned if your partner’s views about money and finances don’t match your own, she advises. “I fairly strongly believe that you don’t need to have one unanimous and perfectly harmonious identical view of money to have a happy, successful, lasting relationship,” she says.
“Ruling out a potential partner because their views on money are different from yours probably isn’t practical,” she adds. “It’s less about finding your financial twin and more about gauging …that partner’s openness and willingness to let you in to how they do things.”
There are some key issues to discover as the relationship gets more serious though. You’ll want to know how much debt your partner has, if someday they want to buy a house or have kids – all big financial decisions.
“More and more people these days are coming into a relationship with debt, and that’s not necessarily a bad thing,” says Premyslova, as people may be older and carry student debt, a car loan, or have faced some financial challenges in the past.
The good part is that in Canada, if you bring the debt into a relationship it is yours, and not your partner’s. But that doesn’t mean your partner’s bad credit score, or high debt, won’t impact the couple’s overall credit rating when they try to get a joint car loan or mortgage, she adds
Boland says that often a couple will aim to pay off all their debt together, regardless of who it ‘belongs to’ in order to start their relationship on firm financial footing and then build their net worth together.
The bigger issue is if that debt, particularly credit card debt, is due to spending beyond their means, she adds, because then “a spouse paying that (debt) off is not going to solve the problem. It may just reappear on a credit card sometime thereafter.”
Getting (more) financially intimate
That’s when you need to have an open and honest conversation about the debt and those spending habits, as well as the actions you can take together to mitigate the debt situation, she says.
Premyslova adds that “there’s no magic formula that’s going to help your loved one improve their money habits overnight,” and often there is shame and guilt about debt, so you need to be open and discuss without judgement.
Mandelcorn says this is where budgeting can help, but it needs to be a more creative approach than simply dividing up your income into certain spending and saving ‘buckets’ on a spreadsheet. If debt is an issue and is causing tension in the relationship, it’s best to seek out a money coach or other counsellor to help work through this problem.
A plan that works
Setting a budget often won’t work when it’s one partner telling the other how much money they are allowed to spend, she says. It’s coming up with the ‘why’ behind the saving and spending goals that’s needed.
“What is super effective is to start with ‘let’s talk about how we want to design the next year of our lives, or the next five years, or the next six months? What does that look like? What is important to you, what is important to me and what is aligned?”
Then they can look at the income coming in, decide how they want to spend it, and what goals are realistic, she says.
“It’s the most effective way to create change when it comes to money, bar none,” and because it’s a plan both partners agree to, it gets buy-in and it’s more exciting, she adds.
Investing in your future – together
It should be a similar situation when it comes to investing, Mandelcorn says, and you need to start by asking “why are we investing?” – whether it’s for retirement, to buy a home, pay for kids’ education, or for a trip or other big purchase. Once you know the ‘why,’ that can help determine what risk level you’re comfortable with and the time horizon, which will narrow down your choices, she explains.
Premyslova says one of the biggest mistakes new investors make is letting an advisor or a partner “strong arm you into an investment philosophy that is riskier than your tolerance allows.”
“Whatever investment philosophy you settle on, it should make you feel equally comfortable on the plus-30% days – the best days in the market – as it does on the worst days.”
