Tying The Financial Knot: How To Manage Money As A Couple

Every couple who commits to one another for the long-term eventually must face the financial music. Finances can be one of the trickiest parts of a relationship, particularly if you have different approaches to money management, or wildly different income (or debt) levels.

When you commit to being together, you should take some time to talk through your financial hopes and dreams, as well as the financial realities you’ll now be facing together.

Making decisions on how to spend and save money is one of the most impactful things that happen after you make a commitment like this. And that got me thinking of ways couples—whether getting married or moving in together for a common-law situation—could approach the topic of money to try and put the right financial foot forward.

Step 1: Initiate The Conversation With Fun

While it can be an intimidating step, if you’re going to get a grip on your combined finances, you’re going to have to sit down and actually talk about them.

Chances are you already know your partner’s spending and saving habits. Do they stash cash for a rainy day, or do they spend their entire paycheque as soon as it hits their account? How does this contrast with your approach to money?

Since money can be a touchy subject, approach the topic with some caution. Suggest a night at least a week in advance when you can sit down together to talk about money and future financial plans and emphasize that it’s going to be fun. This is a chance for the two of you to relax, be together, and talk about your goals and dreams.

Step 2: Talk About Your Goals And Dreams

This first conversation isn’t going to be about numbers just yet.

This is a brainstorming exercise where you don’t talk about the reality of your current situation, whether you’re sitting on top of a pile of money or getting by from paycheque to paycheque. Reality be damned, this is about goals and dreams!

Do you want to spend your life sitting on a beach teaching surfing and not living on much cash, or are you happy working in an office climbing the corporate tower to financial freedom? Or do you enjoy working for yourself as an entrepreneur, taking a bit of risk for a big reward down the road? Do you think about retirement? What does that look like? When does that happen for you?

You should each grab a pen and a piece of paper and take notes about what you both want and hope for. And hang on to these notes once you’ve finished chatting.

These notes are for the two of you to refer to occasionally as a guide to your financial (and emotional) wants and needs. Keep them in a place you both can access, but away from visitors to your home. And you should revisit these notes every year or so to see if your wants and needs have changed.

But right now, once you’ve had this initial conversation, select a time in another week or so to talk again. This time reality is on the table and full disclosure is encouraged.

Step 3: And Also To Ground Things In Reality

This can be a more difficult conversation. The truth can be a tough thing to swallow if you feel like you are a stone weighing down your financial relationship with your partner. Truthfully, the same goes for wealthy people; there’s always that niggling feeling that maybe your partner’s just in it for the money.

But honesty is the best policy here, so encourage it with your partner and yourself. Cloaking or hiding debt, a bad credit rating, or a nauseatingly large student loan will only make your relationship more complicated down the road.

And really, once you get this out of the way, everything else is going to be a lot easier. You’re a team now, working from the same information, and working toward the same future goals. It can be a difficult conversation to have, but it’s incredibly important, and can be a huge relief once it’s over and done.

With all the cards now on the table, it’s important to talk about how bills can be managed together. If you plan on buying a home or condo, what is the plan there? A co-application for a mortgage with each contributing 50% of the mortgage? What happens if someone can’t cover their share of the costs? How does paying the wireless bill work? What if one of you already pays a mortgage? Are there any cost savings for linking accounts with each other and sharing the price of data usage?

Chances are that if you’re both in this for the long haul, you’ll be able to find ways to balance these things out. You’ve probably already started to find some savings opportunities if you’ve begun to merge your living expenses (and if you haven’t yet, you will).

The important thing is to keep this conversation as honest and casual as possible with no face-dropping when the “you owe what?” hits the fan.

Step 4: Decide How You Want To Move Forward

It’s more than likely that one person will be in better financial shape than the other. That’s life. In the best-case scenario, you won’t be too far off base between each other, and will be on fairly equal footing.

There are many ways couples can move forward from here. Many couples will open a joint bank account from which they’ll pay bills and cover expenses. Other couples will decide that keeping their finances separate is more comfortable for them, and instead each agrees to take care of different bills and expenses. As long as you both agree to a strategy and are honest with each other about it, that’s fine.

When my wife and I said “I do,” so did all of our loonies and toonies. For us, it’s been a great decision allowing us to keep our account management central. That said, completely joint finances are a big commitment that has its own pitfalls. Not all couples would be comfortable with this arrangement, so I do understand and respect people wanting to have separate accounts.

Combining finances is a highly personal decision that each couple should consider carefully and set up in a way to cause the least possible friction in the marriage, while still being able to reach your financial goals.

Step 5: Create A Budget And A Financial Plan

If you’re already reading this magazine, chances are you’re looking for information on how to make your financial future as great as it can possibly be.

Congratulations on that! Seriously, so many people don’t think about their futures and how money impacts them day-to-day. So, if you’re a longtime reader, I’m sure you’ve encountered the final step when linking your financial futures and that is to make and stick to a budget.

Single people have budgets, of course, but for a joint financial future, it’s even more important. I find people I talk to really misunderstand what a budget really is, thinking it’s all about austerity or cutting corners, but it couldn’t be less true.

I think budgets relate to step 2 in this process of linking your financial futures—they’re a bit of daydreaming mixed with reality. They help you understand where your money goes and what it takes to reach the financial future you dream of, and it’s a document that helps set those goals.

People also think budgets can’t change, but the truth is budgets are being adjusted and changed all the time to fit your ever-changing life. Having kids? There’s a big budget readjustment. Buying a home? Another budget change. Wanting to travel? Change again.

The budget should be visited at least every couple of months to see if you’re on track to spend less than what you make, because this is the first step toward a successful financial union. It means you’re saving money to reach that bright financial future you’re planning together.

One thing is certain, building a financial plan with your partner through open and honest communication can ensure the future isn’t filled with financial setbacks and surprises, costing you more than you ever imagined when you first got together.

Stephen Weyman is a dedicated personal finance expert with interests ranging from saving money to credit cards—especially credit cards. This led him to create HowToSaveMoney.ca in 2010 and co-found creditcardGenius.ca in 2017. Over the years, he has been featured extensively in Canadian personal finance media, including the Globe and Mail, Financial Post, Toronto Star, CBC, and more. Outside of work, Stephen is a self-professed nerd who enjoys playing video games when he isn’t crunching credit card numbers.