The Secret to Financial Success as a Couple...

Should I combine finances with my partner? This is the question. I get tons and tons every single week. How do you know whether it's the right thing to combine finances? How do you even do it? Well, let me tell you that my wife and I have combined our finances. It has made a huge difference in living our rich life together. So in this video, I'm going to show you when to start talking about money with your partner, how financially successful couples talk about money, and if you should combine your finances. First up, the three best times to start talking about money. Now, there's a lot of opinions about when it's best to start talking with your partner. A lot of people in the personal finance world will tell you date one. Make sure you bring it up. Pull out your Roth ira. Show them how you allocate your investments, and I just say to myself, have you people ever been on a first date? What is wrong with you? This is not how you have a nice, seductive, fun date. No, do not pull out your Vanguard funds. I know you have a 0.07% expense ratio. It's so cool. I love it, too. 2. Don't talk about on your first date, there'll never be a second one. Instead, there are three natural, pivotal moments in a relationship where it makes a lot of sense to talk about your money. First up, going on your first trip. If the two of you decide to go on a trip together when you're dating, you might say something like, hey, I'm really excited to take our trip together. What do we want this trip to look like? What do we want it to feel like? How can we prepare for it? And as you get talking about it, you might ask, what are your financial expectations around this trip? Here's how I'm thinking about it. Next up, moving in together. In this example, you could say, I'm so happy you asked me to move in with you. I think it would be a really good time for us to talk about how we'd like to handle money together. At this point, a lot of people continue to keep their money separate, which is totally fine. But there will be joint expenses, and moving in together is a natural time to start talking about those joint expenses, including how you want your money to flow. Next, getting engaged. Now, here would be a great time to talk about how you want to live your life together and how you're going to use money to do that. For example, you might say something like, now that we're engaged, I would love for us to sit down and talk about what our rich life is and part of that is going to be discussing combining your finances and if you're going to do that, how you're going to do that. But I'll get to that a little bit later in this video. Just remember when you go through these moments and it's a natural time to talk about money, here are some other times you should bring up money. Getting married, deciding if you're going to have kids, any big life decisions, such as going back to school, moving, changing jobs, and of course, after you're married, talking about who's going to be in charge of certain parts of the money. Now, regardless of your living and your money situation, I would encourage you to talk more openly about money. A lot of times people believe that money is something they should not talk about. They should protect their partner or protect their children from it. I see money as something that is fuel for your rich life. It allows you to take trips or eat certain types of food, or be generous and charitable. That is why your goals and your financial situation might change. But your communication skills, that's the important thing. Get into the habit of talking about money now so that as your goals change and your income increases, it's gonna be a lot easier down the road. By the way, it is a huge red flag if your partner will not talk about money with you. Here's why. Financially successful couples talk about money regularly, not just when things go wrong. And often we are programmed to think that money is a taboo topic, that we avoid it and walk on eggshells until somebody overspends or something bad happens. I don't like that. For most of us, money has become something that's reactive. We only talk about it when there's a problem. Why'd you spend that much? How are we going to pay our bills this month? Problem, problem, problem. And as you start to develop that connection, you start to connect bad feelings with money. But I like to connect good feelings also. I don't mind if someone has debt, for example. I don't even mind if someone made a financial mistake. But they've got to be willing to talk about it with their partner. That is why I want you to start talking about it regularly. When things are good, when things are bad, when you just need to reconnect about money. Which brings me to how to talk about money without fighting. My wife and I found it really hard to find specific advice on how to talk to your partner about money. And we really looked everywhere when we started talking about it. Most of us grow up not learning how to manage our own money. Let alone how to talk to a partner about it. The advice was pretty generic. Have the conversation get on the same page. Okay, just tell me the words. I literally want to know the words. And what should I say and what should it sound like? That's what I needed. So I want to give you some specifics here as well. First of all, step one, bring up the money subject. If you're worried about bringing the topic up, start off a little slow. Hey, I've been thinking about personal finance a lot. I've been following this guy, Ramit Sethi, and I would love to get on the same page with you. Do you think we could talk about money in the next couple of days? Now, if you don't get an answer, try a more specific approach. You know, I'm really curious. How do you think about money? Like, some people like to spend a little bit more on food. Other people have a savings account. I think I overspend on eating out, frankly. But what are your thoughts on money? Notice that what I did with that was I started off broad. I offered examples, and then I offered a confession. A little vulnerability about an area I'm not great in. And I would encourage you to do the same thing. Start off by being a little bit vulnerable about your finances. You might say something like, how do you think we should use our money together? What would you want to change? Would you want to spend more on anything or less on anything? This is where you can discuss if you're going to save towards joint goals or even what fun things you're going to use your money for. Notice that at this point, we are not getting into the tactics of specific investment options. We're not making each other feel bad about things you should have done. The goal of these early conversations is just to agree that money is important to both of you and that you want to work together to create something beautiful together. That's it. Give yourself a pat on the back. End that conversation on a high note. Step number two, set up a second meeting to talk about your finances. In step one, you both agreed that money is an important part of your relationship. Okay. And you agree that you want to continue that conversation. Well, here we are at step two. Ask your partner if they'd be willing to sit down again to go over your finances together. And at this point, I'd like to see you embracing a little bit more preparation, really bringing together a list of your accounts, how much you have, how much you make debt, all that stuff. Now, remember, you are watching this. You're probably more into personal finance than your partner. Your partner may not have ever watched my Netflix show or read my book or any of that stuff. So you've got to be willing to be a little bit patient, be a little gentle. Just ask yourself, would you have cared about this five or ten years ago? Probably not. So be patient, give them a little grace. Now, after you have prepared, and of course, you've let your partner know, hey, here's a few things I'm going to bring. I'd love if you could bring some of those same things. If you don't know any of these numbers, that's totally fine. Just bring what you've got and we'll sort through it together. Right? Really nice, really gentle. Then you are ready for the next meeting. Step three, go into detail about your numbers. Now, I like this because in this meeting you can discuss specifics. Now, the important part of this conversation is to normalize talking about money, which is why we'll want to keep it as light as possible. Of course there are numbers. Maybe you just discovered that they have an extra $50,000 of debt. Alright, we'll deal with that. But you do not want to go into this and be like, here's all the things you did wrong. How could you not do that? And why, for the love of God, do you have an account and at Primerica, that is a piece of company. Well, yes, it is. Or Wells Fargo or Bank of America, you should not. You know what, I take it back. If you find out that your fiance has a bank account at bank of America, break up with them, okay? Wells Fargo, kick them out the door. Say, here's a garbage bag. Get out. I'm not going to be in an intimate relationship with someone who's part of a predatory bank. Get the out. But besides those two banks, I really think that you can connect about money, even if there's some surprises. Remember, the next part of this conversation is for both of you to get to a baseline, making sure that you understand what each other has. Are you saving? Are you investing? How do you think about money? Now, my wife and I did this with our finances. First of all, let me admit I did not follow my own advice. I didn't bring up money as early as I should have. I take total accountability responsibility for that. I should have done it. But eventually, because my wife reminded me, hey, you know a lot about my finances. I don't know as much about yours. I realized I had to follow my own advice. So I did. And then we started with the big picture, how much we earned how much we'd saved. And over the course of many, many months, in fact many years, we went deeper into not only our money, but also our attitudes towards money. Now, it probably will not take you years to explore your accounts, but to understand each other's attitudes towards money. Well, you hear it on my podcast. It takes a long time and that's okay. The first thing I want you to do is to zoom out. Talk about your goals, talk about things like, what kind of lifestyle do we want to live? Like, what if one of you finds out you want to do subsistence farming in a freaking barn again? Goodbye. Love you. Love you, babe, but I'm not living on a farm. Goodbye. All right, after you talk about your lifestyle, what is our lifestyle? Do we want children? What about vacations? Do we have elderly parents? Things like that? Then you can look at your monthly spending. And I want you to keep an open mind here because it's very sensitive. Okay? Most people have never really took a structural, strategic approach to their money. They literally spend what's in front of them. That's as far as most people go. So be gentle, ask them things like, let's, here's how I spend my money. I'm curious, what do you think I could be doing better? It's a really nice way to be vulnerable and to open yourself up first to model that vulnerability. And then hopefully your partner might say, hey, you know, what do you think about me? Next, spend some time talking about your attitudes towards money. How do you treat money? How do you think about money? One of you might say, like, I really want to save because I want to buy a house. Another person might say, you know, actually never really thought about buying a house. Like, I'm totally cool renting. One person might say, I need $10,000 in my checking account to feel good. Another person might say, wow, where'd you get that from? How did your parents talk about money? Use the podcast that I have as a guide to encourage you to open up about these money questions. Now, you can get to all the complicated stuff like joining accounts later, but in the spirit of keeping this conversation open, upbeat, I want you to set up a few short and long term savings goals, such as a year end trip. And set up an automatic monthly transfer for each of you. And make sure you set up your regular check ins as well. They can be bi, weekly, monthly, quarterly. Don't do quarterly. It should be every two weeks or at the least once a month. The key is you get together, you have one hour carved aside, you have an agenda. Yes, you freaks. It's normal to have an agenda in your relationships. So many people. Meet Sethi. What an automaton. He has a Google Doc in his relationship. This is so weird. Yes, it's weird. You know what? It's weirder? Going 55 years never talking about money because you thought it's weird to set up a Google Doc, set up the agenda, compliment each other. I love you. You're so great. You always plan the best trips. Give me a high five and give me a kiss. That's how you start off a great money meeting. The key here is to continually have these money conversations with your partner so that you are staying aligned on your goals. Okay, now you know how. Now, at some point in your relationship, you'll start to question, should you combine your finances? The short answer? You probably should. There's good research indicating that you find better outcomes when you combine your finances, including greater relationship satisfaction, especially among couples with low household income. Now, why does combining your finances lead to increased relationship satisfaction? Well, you're going to feel like you're part of a team. You're going to design a shared rich life vision. You're going to be able to work towards bigger goals rather than how much money can we afford to spend on bread? And you're going to have support in case something happens like one person loses their job. That's the beauty of a healthy relationship. When things are good, you're there, and when things are bad, you're also there. Now, I will say it's not necessary to combine your finances. You can also combine them at different levels. I know financially successful couples who combine literally all of their money. I know financially successful couples who have a joint savings account. They've figured out a way to divvy up their money. You can choose your level, but I do want to point something out. Those who don't combine their finances repeatedly tell me that they never really talked about money. They kind of just slid into being together. In other words, because they never really sat down to talk about money, they kept their money separate, and now their money has been separate for years. Typically, I find that couples who are in this situation probably got married later in life. They had their established financial routines, when they met their partner, they fell in love, they moved in, they got married, all that stuff. But they never simply said, hey, should we actually combine our finances? So they often create these super complicated systems. Well, my partner pays for the groceries and I pay for the utilities. But then I just got a raise and we haven't talked yet about adjusting our Ratios and it's just a lot. Here's my recommendation. Combine your finances. But whatever you decide, the most important part is that you continue talking about money with your partner regularly. Interesting topic is how should you combine finances when one person earns more than the other? Now, let me give you two ways that you can handle combining your income. If one partner earns more than the other, your first option is proportional. Let's say, for example, that your total household income is $150,000. Person A makes 50k, Person B makes 100k, and your monthly rent is $2,400. How would you divide that shared expense up? Well, since person A makes one third of the total household income, they would contribute one third towards the rent, which would be $800. Then person B would contribute 2/3 towards the rent, which would be $1,600. The rent is just an example of shared expenses, and you would contribute proportionally. So the person making more would contribute more to your shared expenses. There's another option which is simply combine it all, put the money together, pay your shared expenses, each of you gets a little percentage for your own, no question asked, money, and you move on. I gotta tell you, I like option two more and more. It's simple. It handles edge cases, like when one partner gets a raise or one partner gets laid off. It allows support, and most of all, it structurally focuses you together. You're no longer talking about me and you, it's we. So I really like the idea of combining your finances together, all while making sure that each of you has a certain amount of money, no questions asked, that you can do whatever you want with it. The key takeaway here is to discuss it. Come to an agreement that feels fair. Remember, 50, 50 is not the only definition of fair. And then check in every six to 12 months to make sure this agreement is still working for both of you. I want to address one more thing that I hear some people worry about when they combine finances, and that is what to do if your partner spends irresponsibly. This is unfortunately a very common complaint that I hear. But there is a way to go about handling this. And I can tell you it's not about attacking your partner, saying you spent too much at Target. When you keep trying to tell your partner not to do something, you're going to evoke something called reactance. It's like when you tell a kid, don't eat that pizza, and they go, I'm going to eat the pizza. Nobody likes to be told what to do. Kids or adults alike no, the solution here is to elevate the conversation beyond you and your partner. What do I mean by that? You can have a conversation about what your savings goals are, how much you need to reach them. You want to come to a plan that you both agree on, and then the next time you have an argument about one of you overspending, you don't need to point the finger at them. Instead, you talk about the plan. You might say something like, hey, I. I just want to check in with you about something. You know, a couple months ago, we both agreed that we want to have an emergency fund with $5,000 in it, and that means that we have to be putting aside $250 a month to hit it. Now, I noticed this month you didn't send your contribution in. That means we're short. Means we're not going to be able to hit our goals. Now, I just wanted to check in, not pointing any fingers, but I just want to understand what's going on, because we did create this goal together, right? Yes, we did. So can you tell me what's going on? Is there something I can do to help? What you're doing here is you're focusing on the plan and you're reminding them you both agreed to it. It's a little harder than just saying, you suck. Why'd you do that? It's gonna feel like you're slowing down, but it's gonna be so much more effective when your partner buys in, because then you're not gonna be trying to pull your partner drag them with you. You're both gonna be rowing in the same direction. So focus on the plan, not on the person. All right? I hope this video helps you have more fun, positive conversations about money with your partner, because I want both of you to live a rich life together. Now check out this video to learn more.