Financial Considerations When You Combine High-Income Households

Money is a leading cause of friction in relationships, but it doesn’t have to be.

Living together with a plan for financial balance could help ensure you both know what to do down the road when money conflicts arise. Combining households, whether you’re married or not, means you’ll need to address financial questions like shared bills, housing costs and planning for the future. Communicate often to forge a financial partnership that helps support shared goals while preserving the emotional health of the relationship.

Here’s a flexible, fun (as fun as personal finance can be) way to integrate the habit of regular money talk into your day-to-day: take each other out on money dates.

Set regular money dates

Money dates are a great way to weave casual discussions about finances into your relationship’s routine. You can make money dates into a regular habit by scheduling a time on your calendars to talk together about your finances.

Starting this habit now will make it easier to maintain in marriage, and your union will be all the stronger for it.

Making time for money talk shows respect for your partnership and your shared goals. Over time, regular money dates will create a common framework to articulate what’s going on in the moment and how it relates to your shared future.

Make money dates worthwhile:

  • They don’t have to be long and involved.
  • They do have to occur regularly to be effective.
  • Design your money dates according to what works for both of you. (For example, if you think better with snacks, have snacks.)
  • Allocate time for each topic and stick to it.
  • Establish rules of engagement, which can include allowing each other space and time to express feelings and thoughts.
  • Use plenty of “I” statements and avoid accusatory statements or assigning blame. Think of this as a “Yes! And” exercise.
  • Vary your approach depending on what you need to discuss.
  • If you find yourselves dreading a money date, change the environment in which you meet. Go for a walk, or gamify the process. There are lots of ways to make this “date” special.
  • Agree on follow-up steps and deadlines.

Must-talk-about topics

You’re going to have a lot to talk about, especially if you intend your cohabitation to lead to a formal partnership or marriage, a family, and home ownership someday. Here are four areas of money management to concentrate on in your first money dates, in particular if you’re combining two higher-income households.

Debt

  • No matter your income, the amount of debt you each have comes into play. Whether you’re planning to rent together or buy a house, keep an eye on your credit reports before making decisions as a couple.
  • It’s important to talk to each other candidly about your approach to debt today and the future. Does one partner own multiple real estate properties or a business? Is one partner financially responsible for family members? With higher income often comes more complexities, and every facet of this should be discussed.
  • This goes without saying, but I’ll say it anyway. It is critical that you refrain from combining your debt.

Budget and Spending

  • Setting a budget is more about clarity than anything. Establish how household expenses will be covered and intermittently review how it’s going together. Automation is key.
  • Run your household like a business. Develop an annual cash flow, then manage to that plan and check in monthly or quarterly for needed changes. Put proactive thought into maintaining a prudent emergency fund and discuss the “right” amount of cash reserves. Plan for upcoming capital expenditures like home renovations or milestone trips.
  • If you’re still in the dating phase and haven’t yet combined finances, it’s important not only to understand your own expenses and how checking accounts, investment accounts, 401(k)s, etc. are allocated—but be aware how your spending habits can impact and integrate with your partner’s finances. This is a form of empathy that can come in handy in many aspects of a close relationship. For example, if you take a luxury vacation together and agree to split costs, does the expense make more of a financial impact on one partner over the other?

Values and Goals

  • Often times couples have a number of shared values but may articulate them in different ways. Getting on the same page about what’s most important to you as individuals and a couple can help be a guide as money decisions come up. Going forward, you can run decisions through your shared value system to determine if a choice/purchase/tradeoff is a good fit.
  • With accumulated income, sharing big picture goals for your financial future becomes increasingly important. Things like how to allocate bonus payments, planning for liquidity events, and understanding “your number” to be work optional all all topics to discuss along with your investment strategies. The earlier you get dollars working for you in the market (versus spending aimlessly or sitting in cash), the more years you have the dollars compounding returns and growing your nest egg.
  • If your future together might involve children, this adds another layer of values and goals to consider and discuss. What is your education philosophy? Public or private schools? Funding – how will yu approach 529 plans? And further down the road, how do you intend to talk to your children about money? Do you see your children participating in their education funding as they go to college?

Cohabitation agreement

  • No matter your income level, if you’re moving in together it’s important to have a contingency plan for your new shared life by composing and signing a cohabitation agreement form. It’s great to have in place, as it signals mutual respect.
  • What are the rules of the road? Specify rights and duties for the short term and the long term.

Regardless of your ultimate plans for your relationship, you’ll have to deal with money. Doing so can promote open communication, trust around money habits, and can lead to a positive experience around money conversations for both partners.

More insight as to your partner’s money values can only be beneficial to your relationship in the long run.

Everyone knows it’s important for married couples to think about and discuss financial issues like saving and spending, credit use, and retirement planning. But I think it’s equally important to focus on personal finance at any stage of your relationship.

 

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