STARTING THE CONVERSATION
If you're serious about someone, you already have a sense of his or her approach to issues like spending, saving, credit and investing. But if you're thinking about tying the knot, it's time to open up your personal balance sheets to one another. Start with the simple stuff: what you own and what you owe. You need to know if you are about to forge a commitment with someone who has racked up $100,000 in credit card debt or has major financial responsibilities from a previous relationship.
The next part of the conversation is sharing your attitudes about money and investing. You might be a dedicated saver who always keeps a fund earmarked for the proverbial rainy day, while your spouse-to-be loves to shop and spend. Your significant other might be a risk-averse, conservative investor while you are eager to take a flier on a long shot.
I should point out here that none of these differences is cause, by itself, for rethinking the relationship - not at all. It's by acknowledging the differences in your financial philosophies that you can come to terms with one another and ultimately make the adjustments and compromises that will strengthen your relationship. One of the best ways I know is to create a structure that acknowledges your life together and lets you retain some financial independence and autonomy.
"YOURS, MINE & OURS"
I call it the "yours, mine, and ours" approach. It's quite simple: one couple, three accounts. Together, you use a joint checking account for shared expenses like housing, food, insurance and utilities. Separately, you maintain individual checking accounts for personal discretionary spending.
The big issue (for some couples, a really difficult issue) is how to fund these three accounts. Each of you could, for example, contribute the same amount of money to the joint account and retain the rest of your income for personal spending; this is most appropriate when both couples enjoy comparable incomes. If you make a lot more or a lot less than your partner, you may want to take a different approach. Each could contribute proportionally based on income. Alternatively, you could pool all your income in the joint account, and then allot each partner an equal monthly "allowance." However you handle it, the "yours, mine, and ours" approach will give each of you a financial stake in the relationship and an avenue for personal spending and saving.
This structure also works for investing. Obviously, you'll maintain separate retirement accounts. By law these cannot be jointly held, though you may want to name your partner as your beneficiary. If your investment goals and styles are radically different, you may want to maintain separate brokerage accounts as well; however, I do believe a joint investment account is an important foundation of a long-term relationship. What better way to commit to a future together than to create a vision of that future and invest to reach it?
In fact, one good way to strengthen the bonds of your relationship is to articulate your hopes and dreams for the future and then translate them into the financial goals to pursue together. A first or second home, children's educations or a comfortable retirement - these are kinds of aspirations that most couples share and that require some degree of partnership to achieve.
KEEP THE CONVERSATION GOING
And finally, keep talking. Even if one of you has no interest in the day-to-day financial responsibilities like paying bills (with innovations like online banking, this is easier and more efficient than ever), it's still important that both of you remain involved. Sit down together, once a month or at least once a quarter, and review the state of your finances. Are we sticking to our budget? Are we making progress toward our financial goals? Should we save more?
These are kinds of questions you both should be able to answer. And when you ask and answer them together, you will be building a life based on that shared vision.
Carrie Schwab Pomerantz is chief strategist, Consumer Education, Charles Schwab & Co. Inc. You can e-mail Carrie at askcarrie@schwab.com.
