Updated: 8/2/2012 6:55 PM ET|
10 money questions for your mate
Good relationships require open and honest communication between partners about money matters. These are some of the important subjects worth discussing.
There's no one right answer to most money questions.
That's important to keep in mind when you're discussing financial matters with your mate. People get emotional about this stuff. Understanding that we all have different attitudes, experiences and expectations concerning money can help us talk more calmly about it.
And talking is essential when you're trying to work out a financial plan together. Asking questions, and listening closely to the answers, will help you understand each other better. That can get you started down the road to working out solutions.
"Nothing in the world will affect your future together the way that money will. Money touches every area of your life in some way," said Mary Hunt, the author of "7 Money Rules for Life: How to Take Control of Your Financial Future." "If you and your beloved get your attitudes toward money straight, it will help straighten out almost every other area in your lives, both individually and collectively."
Financial planner Carl Richards, the author of "The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money," recommended setting aside regular times and a regular place to have these discussions.
"The worst time to talk about this stuff," Richards said, "is at 11 at night when you're exhausted."
He suggested picking a favorite restaurant, coffee shop or picnic spot for these monthly or quarterly confabs. To avoid burnout, pick one or two topics to discuss at a time, and adopt the mantra "no shame, no blame" to facilitate discussion.
Try to confine your big money discussions to those special times, Richards recommended, to avoid conflict and fights when you're less focused. If there's more to be said, you can say it next time.
"When we leave, the discussion's done," Richards said.
Here are some of the questions you should be asking each other:
1. How was money handled in your family growing up, and how did that affect you?
This question is way more practical than it may sound at first. Psychologists tell us our childhood experiences help shape our attitudes about money, but siblings who experience the same events may take away very different lessons. One person who grew up with frugal parents may have admired their resourcefulness and adopted their careful approach to money. Her brother, meanwhile, may have chafed under their spending restrictions and decided that a more "live for today" attitude made sense.
Or here's another scenario:
"Let's say you discover that your fiancée's dad took care of all the bills in a kind of behind-closed-doors fashion so her mother never had to worry about a thing," Hunt said. "If her daddy provided in this way, it is quite possible she expects the same will be true of her marriage and home. She may expect that you will somehow manage all the money and keep the bills paid and her credit card balance at $0 . . . and all behind closed doors, meaning she won't have to think about it."
Talking to each other about your childhoods won't necessarily solve your money problems, but it will help you better understand where your partner is coming from. That empathy may allow you to work better together to come up with solutions.
2. What would your ideal day be like?
Here's another seemingly softball question that can reveal a lot about your values and goals. Take turns with this one. Start from the time you wake up in the morning and describe everything about your ideal day -- where you live, who would be with you, what you'd do with your waking hours. Take some time to fill in the details, from the weather to what you'd have for lunch. You don't have to be practical or realistic with this exercise. You just have to dream a little and listen to your partner's dreams.
Touchy-feely types will tell you visualization is a powerful way to start creating your ideal life. On a more practical note, this exercise will help you identify and communicate what's important to you. That, in turn, may allow you to incorporate more of those activities and experiences into your daily life, now and in the future.
3. May I see your credit reports?
Ah, now we're getting into the real grit. Your files at the three major credit bureaus show what you owe and how you've handled your credit accounts in the recent past. Once you've decided to hitch your wagons, this is stuff you should be sharing with each other.
"Sharing your credit reports will get everything on the table, perhaps even things you did not know existed," Hunt said. "And yes, it is scary, and yes, it may be the most difficult thing you will ever do together as you build your relationship."
I'd like to see every couple do this before they move in together or tie the knot. But it's a smart idea to keep doing it every year. That can give you early warning if your partner is taking on new debts or if old collections have popped up to suddenly trash your credit.
Even if you've decided to keep your finances strictly separate -- and most couples don't, opting to merge their money to at least some extent -- your debts will affect how much money you have available for other goals, so they need to be revealed.
"Once you know what you are dealing with," Hunt said, "it will be much easier to get a plan together to repair, restore, improve or whatever needs to be done going forward."
4. How are we going to pay off our debts?
Once all is revealed, the next step is to figure out what to do with what you've found.
Your attitudes about how much debt is "acceptable" and how fast you need to pay it off may vary. Again, there's no one right answer. You'll need to find an approach that works for both of you, given your bills and other goals in life. To get you started on prioritizing debt and making a plan, read "A debt payoff plan that works.
Richards recommended that any couple that can't seem to work out a compromise on their own try talking to a third party.
"Sometimes it helps to have a third-party moderating," Richards said. "It can be a CPA, an attorney, a financial planner, anyone you both trust."
5. Are we saving enough for retirement?
Figuring out the "right" amount to save involves more than punching numbers into a retirement calculator. A couple that's determined to retire early and travel a lot is probably going to have to save piles more than serial entrepreneurs who can't imagine ever not working or those who expect a generous pension.
Savers who got a late start or suffered big setbacks may have to adjust their expectations for how much money they'll be able to accrue -- and thus how much they'll have to spend in retirement. Plus, what you plan may not happen. Disability may kick you out of the workforce early, for example, or your kids or parents may need unexpected financial help.
So this conversation needs to be a continuing one, adjusting for the twists and turns life sends you. Start talking about what your ideal day in retirement might look like. Figure out a ballpark estimate of what you'd be spending annually in that retirement, then use a retirement calculator to see if you can get from here to there. If not, consider making adjustments (saving more now, spending less in the future) until you have a realistic plan. Put it in motion, and check in regularly to make sure you're on track.
6. What do we owe the kids?
If you don't already have them, a discussion about whether you will is obviously in order. Even if you don't believe the government's estimate that a middle-class child costs nearly a quarter-million bucks to raise to age 18, you can rest assured that the little buggers will profoundly affect your financial life.
Once you have children, the big question becomes how much you're going to pay to educate them. Couples that agree on most other financial goals, Richards said, can have widely divergent views about their obligation to pay for college.
"One might say, 'I put myself through college, so they can too,' and the other wants to be able to pay 100% of the best school they can get into," Richards said.
Granted, most parents won't be able to afford to save for a full ride to Harvard if they ever hope to retire -- and retirement savings should be your priority. But how much you can save versus how much you're willing to save may be quite different.
Another issue is how you feel about your kids coming back to live with you if they're facing financial difficulties. Would you open your doors, under what conditions and for how long?
7. What do we owe our parents?
A quarter of baby boomers provide personal care, financial help or both to their parents, according to a recent MetLife study. Caregiving responsibilities can curtail the hours adult children are able to work and may lead to early retirements that further affect income and retirement savings. In fact, the MetLife study estimated that such caregiving will cost boomers nearly $3 trillion.
Clearly, this is something we need to be talking about. But too many of us don't until there's a crisis and we suddenly have to make snap decisions. Will Mom move in with us? Does she have money to pay for care, or will we pitch in for that? If it's a choice between caring for Dad and continuing to work, what should we choose? And how do we balance all this with any obligations we feel we owe our kids?
"This is a big deal for the age group that's in their 40s and 50s," Richards said. "They've got responsibilities for their parents and their kids at the same time."
8. What would we do if one of us got hurt?
The likelihood of your being disabled may vary based on what you do and your general health, but accident or illness can strike anyone. So even if you're at the peak of physical fitness, walk through what would happen if you couldn't work, and do the same with your partner. Is there money saved to tide you through a short disability? How about disability insurance to cover longer setbacks? Would one of you provide care for the other or would you need to hire help, and where would that money come from?
9. What would happen to me if you died?
Hey, if there's anything more fun to talk about than debt and disability, it's death, right? But talking now could prevent some nightmares later. And I'm not referring just to life insurance. If one of you handles most of the finances, you'll need to share information like where to find important documents and what your passwords are for various financial accounts. For more, read "Don't take passwords to the grave."
If you employ any financial professionals -- planners, tax pros, brokers, insurance agents -- you both should have their names and contact information handy. Better yet, both of you should go to these appointments so each person has a relationship with your helpers and feels comfortable asking questions. A survivor is going to need all the help he or she can get.
Whether you need life insurance should, of course, be part of this discussion. If each of you could get along without the other's income and the services he or she provides to the family, you may not need life insurance. If the survivor would be scrambling to pay the mortgage or pay for child care, though, life insurance is likely to be a smart purchase.
10. How will we care for ourselves when we're old?
These conversations will probably be pretty abstract when you're young and your parents are still healthy. As your parents get more frail, though, you may have to help find solutions for them. That can start you thinking about what you might do. Will you want to try to stay in your home or move to some kind of assisted-living community? How about moving in with one of the kids -- would you want to, and would they have you? Will you have enough saved to pay for nursing home or home health care bills down the road? If not, how do you feel about buying long-term-care insurance that might help you pay some of these bills?
Again, you may not come to an agreement -- or at least an agreement that works with your current financial situation -- the first time you discuss any of these matters. But understanding each other is the key to working out an eventual solution.
"The fact that we feel differently about these things is not an irreconcilable difference," Richards said. "Keep talking."
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Good questions. I sure wish I'd of asked my wife some of these questions, but the one about how much do we owe the kids for sure?
We got a son who just doesn't understand the meaning of work for a living...I'd of kicked him out by now, but she think he should be allowed to stay awhile longer.
There is no way to make a money conversation romantic. For all you unmarried folks out there, a word of advice: a marriage is a partnership, not a romantic get away. No matter how often he brings flowers or how cool she is about you hanging out with your buddies, the honeymoon will wear off and life will take over.
Frank discussions about money need take place before the I dos. Saving and spending habits can be good indications of marital compatibility. Before we got engaged, we sat down and swapped checkbooks and credit reports. When you get married you marry the whole person, including their debt.
Money issues are the leading cause of divorce.
I recommend a prenumptial agreement. Making the other person responsible for their actions during a marriage is good for the union. Just because you are good with money today doesnt mean you will be tomorrow.
Many people are responsible until they dont have to be. (I.e my husband/wife makes enough to carry us so I can spend on toys that I want)...change of mindset can kick in after "I Do". If you get a good attorney and spend the little bit now to protect yourself, you will feel much more secure in your marriage...and any financial secrets that come out (people hide stuff after marriage too) may not affect you because of your pre-nup. Keep finances separate (credit cards, car loans, personal loans, student loans). Have the home included in the prenup as well..such as "if we divorce, the home will be .........."
People tend to be their true selves when financial issues are addressed before marriage.
Sounds like a business deal but if you look at marriage in the eyes of the states it is! you cant ignore legal ramifications of marriage and divorce.
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