Our firm works with many young couples with careers in medicine — with either one partner or both in practice. Whether a long-term committed couple meets in college, in medical training, or after earning a physician's income, they will quickly have to manage the financial side of the relationship.
While many couples discuss their views on marriage, children, and where to live early on, they often leave money out of the conversation. The problem is that this lapse may cause serious issues down the line. In fact, according to a study by the American Psychological Association, almost one third of adults with partners reported that money is a major source of conflict in their relationship.
The good news is that whether you've been in a relationship for 10 weeks or 10 years, it's never too late to have that conversation.
Attitudes and Situations That May Arise
You may be surprised at how peoples' views about money can be so different — with family background, knowledge, values, and experience all coming into play. Understanding these different perspectives can open the door to making sound financial decisions that meet each other's needs, individually and as a couple.
Let's look at a variety of areas that will be helpful in your discussion.
1. Understand each other's financial beliefs and background.
The financial situation each person grows up with inevitably affects their financial values and behaviors, making it a good starting point.
For instance, my wife and I grew up in very different households when it came to money. My family always seemed to have enough money; it wasn't a source of conflict in the home. Not so for my wife, whose father's income wasn't steady, with the burden falling on her mother, which caused a lot of fighting and family stress.
As you can imagine, our respective backgrounds led to different ideas and attitudes around money. So how do you begin to understand where each of you is coming from?
Here are some basic starter questions for your discussion:
What did your parents teach you about money?
Are you a spender or a saver? How much do you save each month?
What is your credit score, and how important is it to you?
What assets and debts do you have, and how do you feel about your status?
What are your financial goals, individually and as a couple/family?
What are your fears about money?
2. Agree on an overall approach to money.
How will you decide who pays for what? It all depends on your general approach. One example is whether to keep finances separate, combine them, or some combination. Looking at my marriage, for example, the idea of a shared checkbook is anathema to my wife, and we've never had one. For us, the "yours, mine, and ours" approach helps us agree on which payment comes from which account.
By agreeing on an overall approach, we avoided many finance-related conflicts and set the stage for having healthy discussions about our finances in the future.
3. Avoid surprises.
It rarely ends well when one partner makes a significant purchase from a joint account — and it comes as a surprise to the other partner.
There are several ways to prevent this, such as setting a spending limit on a purchase before needing to confer with the other. Another option is to set a monthly "discretionary" allowance that each person can spend without accounting for it.
4. Discuss different comfort levels of spending vs saving.
Many couples have different opinions about how much to spend and how much to save. The saver is focused on accumulating money, which may leave the other partner feeling deprived of moderate enjoyments, such as eating out, traveling, or making home improvements. At the same time, if the lower-spending partner thinks the other person is spending too much, it can cause them anxiety.
In this case, the couple could consult with a financial planner to identify solutions that balance relatively conservative savings with sufficient spending money — providing enough comfort for both partners and preventing guilt and recriminations. In more extreme cases, a financial therapist who is trained to address marital money matters can be found at the Financial Therapy Association website.
5. Figure out how to balance different earning levels.
We often advise couples in which one earns significantly more than the other. It can be difficult for couples with unequal earning power to figure out how to deal with buying large purchases, such as a car or home, and even everyday expenses, such as minor home repairs and groceries. As a solution, many couples use a proportional approach — using a percentage of earnings as a yardstick.
6. Be comfortable with how to fund retirement.
A looming topic for any couple is how to fund their retirement. This is even thornier when couples earn unequally. The best advice is to act as a single economic unit that maximizes their overall financial health. For example, a physician earning $300,000 can max out their retirement plan contribution, fund a backdoor IRA, and maybe fund a 457 plan or health savings account. If their partner earns $30,000, they don't have the same savings options.
In this case, the best solution as a couple requires being comfortable with the higher-earning partner helping to fully fund the lower-earning partner's tax-favored retirement vehicles.
7. Identify the best way to handle financial matters — together.
Just like one member of a couple may always handle all the laundry and the other the lawn care, sometimes one partner will take on all of the financial matters, such as the family budget, investments, tax management, and insurance. Be aware that there are several hitches to this method.
Often, the responsibility is based on the relative amount of time the partners spend on household responsibilities both outside and inside the home. However, the partner who doesn't handle the money increasingly loses knowledge of the finances over time — making it harder to make good decisions together.
Furthermore, the partner who doesn't handle the finances may blame the other for a financial setback. And even more, the uninvolved spouse may be left clueless in the event of a divorce or death of the financially knowledgeable partner.
Benefits of Handling Finances as a Couple
These discussions aren't always easy. If the conversation becomes heated, take a time-out and revisit it later — but don't just drop it. When it comes to finances, you and your spouse or long-term partner may not always see eye to eye. But with good communication and an understanding of how you each view money, you can work together on ways to realize your shared financial goals.
The above article is intended for informational purposes only. Please consult a legal or tax professional regarding your situation.
He practiced internal medicine in the Twin Cities for 11 years before making the transition to financial planning for physicians, beginning in 1998.
Joel's wife is a radiation oncologist, making him all too familiar with the stress of medical practice.
Knowing firsthand the challenges of practicing medicine, Joel's passion is making the lives of physicians easier by helping relieve them of financial worries.
Connect with him on LinkedIn or on his website.
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Any views expressed above are the author's own and do not necessarily reflect the views of WebMD or Medscape.
Cite this: Joel S. Greenwald. How Can You And Your Partner Reach Your Financial Goals? Discuss These 7 Money Topics Before Tying the Knot - Medscape - Dec 20, 2021.