We all know that there are certain life events that need financial planning. This should be easy if you are single. You only have to consult yourself and no one else. There will be no arguments and you get to bear the burden of deciding everything yourself.
However, if you are in relationship and you live in the same house you need to become a team when deciding on your finances. Whether married or living together or if you only rely on one income or two, it is important for you to take time to sit down and talk about your finances. And beyond talking about it, it is vital that you make your financial plans together.
Financial planning, whether done alone or as a couple is very important. According to an article published on LetsMakeAPlan.org, planning allows you to build your money for your future. It allows you to set up your finances so it can support the type of lifestyle that you want to have. It does not take much to plan your money. All you really need is a pen and a paper – or a really great digital financial tool.
The article discussed the study titled “Financial Profiles of American Household,” revealed that in 2013, around 90% of Americans indulge in some form of planning. Some go for the very simple plan to the more complex.
While you do not have to go for a more complex financial plan, you need to try and cover at least the salient parts of your finances. This means going over your income and the expected expenses that you will spend over the period you are planning for.
Questions to ask while planning your finances for next year
Financial planning as a couple is generally more complicated compared to doing it on your own. It does not matter if only one person handles the finances or both of you handle your own money. Living under the same roof means you have joint expenses. At the very least, these require some discussion.
An article from GoodHousekeeping.com mentionedthat there is no right way to discuss money as a couple. However, lack of communication is one of the many ways that it could go wrong for you. It is very important to communicate. Even if you are not the one handling the money or you are not earning any, your input is still very important. You should still have a say when it comes to managing and deciding where your money will go to.
To help you become wise with your money, here are important questions that you need to ask each other while planning your finances.
- Where should we compromise? While couples usually have something in common, there are those who are completely different from each other. In most cases, you will always have a spender and a saver in the relationship. It is true that saving is more important but make sure that you compromise and allow for expenses to happen. As long as they are planned, they will not be destructive. Learn how to compromise so both parties will feel satisfied. This is not only applicable to spending. Even your goals should be open for compromise.
- How will you reach common goals? One of the reasons why you need financial planning is to help you reach your goals. This is why a part of the planning process is to create a budget. You need to lay out how your monthly expenses will stand versus your income and see how you can fund your financial goals. Decide if you need to cut back on some of your expenses and how both of you will contribute to that sacrifice. If you need to cut back on anything, you this needs to be clear between the two of you.
- Who will be accountable? Ideally, you want both of you to be accountable. However, in most cases, only one is really needed to handle the savings and spending – at least, in monitoring that everything is going as planned. While this responsibility is done by one, the other should act as the support system – which will make both of you accountable. This is what will keep the both of you committed to your financial plans. By declaring the accountability early on, you can minimize the blame game when something goes wrong.
- When you will discuss your financial plans again? The last question that you need to ask yourself is when will you repeat this meeting? Just like you need to constantly check on your budget, you should also continually check if your financial plan is on track. If you will do this, it has to be done as a team as well. You can do this on a quarterly or monthly basis. It all depends on the both of you.
The bottomline is, you need to keep the communication open. Make sure that you are on the same page at all times. Not only that, you have to learn how to deal with financial mistakes that the two of you will commit. There will be mistakes along the way. You need to be forgiving, understanding, and yet firm with each other. Honesty is important if you want to make sure that your financial planning efforts will result in something fruitful.
Importance of making financial plans as a team
There are many reasons why you need to make financial plans together. One of them is to keep your finances from destroying your marriage. There are several studies that revealed how a lot of couples are torn apart by negative financial issues. You do not want this friction in your marriage because it can destroy the trust that you have for each other. If you think that infidelity is a big problem, wait until you hear about how many households have fallen apart due to financial infidelity.
One step that will keep financial issues from hurting the both of you is through financial planning. Here are the specific reasons why this is important.
- You will both feel accountable. If you plan together, you will both feel accountable. You will both feel like this is a plan that you both need to work hard to complete.
- You can strengthen your relationship while building your future together. For couples, there is nothing like planning for the future to bring you closer together. The thought that you are about to go through the same things and journey in the same direction is enough to make you feel unified. Not only that, it makes the relationship seem to last forever.
- You get to understand each other better. When you plan, you discuss your dreams and aspirations. Knowing what someone wants to have in the future is a great way to peek into their very hearts.
- You can both satisfy each other’s wants and needs. Since you are communicating what you want to happen with your money in relation to your future, you get to understand the wants and needs of each other. That should get you one step closer to knowing your partner further.
You eliminate misunderstandings and future disagreements. Lastly, you get to eliminate any money-related fights in the future. If you have plans for your money, you get to understand who is right and who is wrong. It is not to help with the blame game but to assist in resolving the mistake that was made. According to a study cited in an article from FinancialPost.com, couples who fight about money more frequently has a higher chance of ending the marriage in divorce. You want to avoid this as much as possible and financial planning is one of the ways you can do this.