Moving in with someone is a grand experiment in trying to love a person in spite of knowing intimately which foods cause them the most gastrointestinal distress. A more significant but often-overlooked challenge is learning how to love someone whose financial habits are wildly different from yours — and how much to risk your money alongside your heart. Combine things too much and risk losing your own financial security with a partner you can’t trust financially. Throw in too little, and you may find a partner who feels you haven’t really committed. Either one can tank a relationship.
Tiffany Johnson writes at The Billfold that she knows both stories personally. Though she was a mindful hard worker and saver of money, she married a man with whom she never discussed money or finances. Everything was fine when the paychecks were rolling in and their overhead as a couple remained low, but the bloom was off the rose when, during her husband’s military deployment, she started receiving notices from debt collectors that he wasn’t paying his outstanding debt — debt she didn’t know existed. Thinking it was a blip, she covered him, but soon realized he had a longstanding pattern of overspending and ignoring the consequences — and monthly payments she’d have to scramble to make current.
It wasn’t that she was unwilling to shoulder the problem, or cover him, or work diligently to avoid such issues in the future. It was that no matter what she did, he didn’t seem to think about how his terrible spending habits affected her. “He did not seem fazed that debt collectors would take him to court and garnish his wages for the debt,” she writes. “He did not care that it affected his credit since it was already ruined. He did not care that this affected me financially as well.”
Johnson dutifully cleaned up her husband’s financial messes, but he still blazed through their savings, and eventually, when she asked him to pack a lunch and mind the balance, and he overdrew the account on the same day, she was done. “Our final joint tax return went towards paying our divorce fees,” she writes.
Determined to get it right the next time, she insisted on greater financial autonomy in her next relationship. She moved in with her partner, but this time, accounts would remain separate. No financial assets would be shared. They would split bills evenly, but she would open a backup savings account. Yet all the mutually shared goals for financial solvency in the world wouldn’t make the relationship last. It ended three years later, and Johnson ultimately wonders whether her own pendulum swing in the other financial direction was just as bad as being too invested; if her detached approach somehow could have undermined the commitment. “Did I subconsciously make building a back-up fund a priority during my relationship because I didn’t trust that the relationship would last?” she asks.
She doesn’t really find a good answer to that, but I put the question of that elusive financial sweet spot to financial expert Sophia Bera, the founder of Gen Y Planning, who guides 20- and 30somethings toward financial responsibility and has written books helping them navigate all the things they were never taught about money.
“It’s really challenging,” Bera told me by phone, of finding that perfect amount of financial vulnerability with someone. “There’s no right answer unfortunately, but I think there’s some good options.”
First off, Bera cautions couples from combining finances before they are married. She thinks too many people believe that if you share a checking account, what’s in there is half yours, and half theirs. “If you have a joint account with someone and there’s $5,000 in the account, it doesn’t mean that $2,500 is yours, and $2,500 is your partner’s,” she says. “It means either one of you at any time can take out $5,000.”
For that reason, she says you need to ask yourself how you would feel if your partner overdrew that account. “That’s why it all starts with communication about money,” she says. At MEL, we’ve written extensively about how to discuss money with romantic partners, particularly the pain point of how soon in a relationship to broach the subject. Experts say that the point when the relationship becomes serious is a good guide.
Bera also suggests having money dates, where you discuss financial goals and have a kind of state of the union, all moving toward the goal of transparency. “If you’re living with or thinking about marrying someone, you should be able to have open, candid conversations around finances,” she says. “It should be part of your normal conversation. It shouldn’t be this big, taboo thing, it should be something you’re very comfortable with doing. And the way we get comfortable with doing that is having those conversations.”
That’s easier said than done, but Bera says it does not have to be brutally serious. It could be just going out for drinks and talking about your savings accounts. Or discussing at dinner how you want to go to New Mexico in six months, and what each of you will put aside or sacrifice to make that a financial reality. “It can be a fun conversation, but also a serious one around knowing what you and your partner have,” she says.
She says it should also involve disclosing what, if any credit card debt or student loan debt you’re carrying, and what you’re doing to address that debt. “No one should get into a situation where you sign a lease and suddenly find out your partner has $10,000 in credit card debt, and is only paying the minimum payment right now, and might not be able to pay rent if an emergency comes up, because they have no emergency savings.”
Most Americans can’t handle a $500 surprise bill! Are you building up your emergency savings? https://t.co/Q8KxHL5Ucf
— Sophia Bera, CFP® (@sophiabera) January 14, 2017
But isn’t it okay to just say my money is mine, and yours is yours, and let’s just split things as they come up, as Johnson did in her second relationship? “Not really,” Bera says. “What if one of you makes $150,000 and the other makes $50,000? Then you should be splitting things by the percentage of what you make.”
That’s why she often recommends the “yours, mine and ours” approach to people she counsels. “Maybe you have a joint account set up for household bills,” she says. “Maybe that’s the account for rent, groceries, utilities, and you each contribute a percentage to that. But then you each have your own checking account to pay your own debts, your own personal spending, or build up another savings account or get on track to retirement, all funded out of your personal checking.”
Bera says this is a good common ground for a lot of people to start from. She also recommends that a couple who lives together and is aiming toward marriage and financial unity try to live off only one person’s income. One person’s salary may go to living expenses, while the other person’s could go to reaching financial goals, whether it’s debt eradication, vacations or retirement. “Then people tend to be on the same team more,” she said. “And don’t see it as my debt or your debt; it’s just at the center of the table.”
But what about people like Johnson — what if you end up marrying someone who, no matter what you discuss or try to work through financially, just has terrible money habits that drag you down and limit your potential as a couple? “Therapy?” Bera says. “Honestly, you need to get on the same page. And you also have to decide how much you want to invest in bailing this person out, you know. If you’re always saving the day, that’s not the best situation.”
While Bera says she’s working with young people who are just now looking at how to pay off student loans, start a family or start contributing to retirement, she says that most people still tend to want to share finances with their partner as not just a practical consideration, but a symbol of their commitment. “I think most people do want to think of money as ‘our money’ and not yours or mine,” she said. “But they also want to understand the why of it today more. ‘Why should I put more toward retirement? Why is there a benefit to combining our finances versus keeping them separate?’ They just want it to make sense.”
And if that seems daunting, you can take it in stages, as long as the goal is transparency. Like getting a dog before you have a baby, try a joint savings account for a first goal, she says. And take it from there. “Some people have a baby anyway, even though having the dog wasn’t going well,” she says. “And you’re like, ‘really?!’”
She knows it’s because so many of us grew up in households where money was treated like sex — it wasn’t talked about, and there were lots of rules around not talking about it.
“Let’s put an end to that,” she says. “We don’t have to be like our parents.”