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Discussing household finances may not seem like the most romantic Valentine’s Day conversation, but poor communication around money can certainly suck all the vitality out of what may have once been a loving relationship. Especially for two-income couples and those with more complex financial situations, it’s important to communicate clearly, particularly concerning matters like marital property vs. separate property, debt and the responsibility for paying it, joint tax liability, and other financial issues that arise in many marriages.
Statistically, Millennials have the lead in this important skill: 39% of them reported daily (!) money discussions with their partners. On the flipside, though Baby Boomers’ parents may have been the “Silent Generation,” Boomers, at only 13%, are keeping pretty quiet with their spouses on the topic of money. On the other hand, a majority of both Millennials (58%) and GenZers (57%) report occasional arguments over money with their partners, while only 30% of Boomers do so.
So, does that mean it’s a good relationship idea to avoid discussing financial topics? Not really. Financial infidelity (hiding purchases or concealing debt from a partner) and uncontrolled credit card debt were cited as reasons for the dissolution of the marriage by about a third of divorced persons surveyed recently by Debt.com. Clearly, romance and finance are related, and not just because they rhyme.
So, what’s the key to finding the right balance for money conversations between partners? First of all, both individuals are unlikely to be equally interested in or conversant with financial matters, and that’s okay. It is common for one or the other partner in a marriage to be the “money person.” That’s fine, but it is still crucial for the other spouse to have at least a working knowledge of household income, bills that have to be paid, and other day-to-day financial matters.
Furthermore, it’s pretty common for two partners to have different “money personalities.” For example, one will often be the “saver,” and the other will be the “spender.” While the former individual gets a legitimate endorphin rush when making a bank deposit, the latter gets the same spark when scoring a coveted item on sale. This doesn’t mean that either orientation is bad; it just means that the two need to understand this about each other and set reasonable, mutually agreed boundaries and expectations for their respective behaviors.
Looking Forward, Not Backward
One of the most constructive financial conversations couples can have is around shared goals for the future. Most of us have plans, and most of those plans come with some kind of price tag. So, it makes sense that discussing shared plans and building strategies to pay for them would be a good way to focus both parties’ financial energies on achieving the desired outcomes.
The other advantage of “forward-focused” money conversations is that they tend to lead to fewer arguments. In fact, most money arguments are about something in the past: a purchase that one partner considers unwise, a failure to make a purchase that one partner considers a missed opportunity, and similar situations. And even here, focusing on “what can we do about it?” instead of “this is why it was wrong” can sometimes cool the temperature in the room and keep things moving in a more positive direction.
Separate Property: The Elephant in the Room?
If there is separate property owned by one spouse or the other, this should be thoroughly discussed and understood. Even if you don’t live in a community property state, it’s important to be clear on the difference between joint marital property and separate property. Most assets acquired during a marriage are legally considered to be equally owned by both spouses, even if one spouse earns a disproportionate amount of the household income. On the flipside, debt accumulated during a marriage is generally considered to be the joint responsibility of both spouses. For these reasons, if no other, couples owe it to each other to practice open communication about household income and expenses.
Separate property, on the other hand, encompasses assets that are owned by only one spouse. Typically these would be assets acquired before the marriage or an inheritance received during the marriage. Often, those going into a marriage with significant assets are well advised to use a pre-nuptial agreement that specifies the understanding of both partners that certain property held by one spouse is not joint or community property.
For those with separate property, it’s important to maintain separation between those assets and marital assets. For example, if one spouse inherits an investment account that pays interest and dividends, the earnings from the account should be deposited in a separate account; they should not be deposited in an account holding jointly owned funds. Doing so could create the appearance of commingling of the assets, which could potentially lead to the inherited funds being declared community property.
Getting It Out in the Open
If you really love someone, you owe it to them to have open, clear discussion about household financial matters, and if you’re the one in the dark, you owe it to your partner to start asking questions and listening carefully to the answers. Honest communication is your best ticket to lots of happy Valentine’s Days in the future. At Aspen Wealth Management, we place immense value on open, clear communications, both between us and our clients, and among our clients who are working to build a secure financial future for their households. Gain insights on financial topics important to you with our free Alexa skill, “Purposeful Planning.” Just click here.