Part I of the financial compatibility series highlights the importance of having the money conversation with your mate early in the relationship. I talked about my personal story in discovering DH's (Dear Husband) bad debt management habits, the difficulty in getting him to admit and acknowledge the gravity of the situation and how we worked together as a team to overcome it. To recap, we used some tax money and took advantage of a balance transfer credit card offer to pay off $20,000 in credit card debt. The debt repayment journey took 19 months and the balance was paid in full in December 2015.
In February 2016, things seemed to be moving in the right direction with our finances. The monkey on DH's back that was riding him for 6 years was FINALLY gone. I decided to inquire about any additional credit card balances and he casually mentioned he had a balance on a Visa card. His response was simply, "I have it under control". Having an investigative type personality coupled with distrust, I called the company directly and the balance was a whopping $10,400. I was dumbfounded and it was difficult to control my emotions of shock and anger. I just couldn't understand how he was comfortable with having $31,000 in credit card debt just a couple years earlier. I suppose he felt ashamed, embarrassed and a bit of guilt. I felt sympathy to some degree but realized there was an elephant in the room and it wasn't just the debt. It was his attitude towards money and debt management. A person's attitude towards money is more about behavior than it is about math.
In a follow up conversation, to address this problem once and for all, I went as far to say that our marriage would probably be short-lived if he continued his awful approach to money and if he persisted to hide his money problems. Some may say that that was harsh, but I was living a firsthand experience that could've easily been a part of that 40-50% statistic of marriages that fail over issues like money. Determined to not let that be our fate, I pleaded with DH to let this be the final time we allow money to be a source of dissension in our house and I asked for his commitment to be more transparent about finances.
How did we pay off a $10,400 debt with an insane interest rate? I wasn't willing to consider another balance transfer offer or monthly payments. I took the responsibility of using our taxes the following month and I handled the lump sum payment directly with the credit card company. In exchange for using marital funds twice to repay past debts, I asked him to commit to paying back the family savings for the remainder of 2016. He gladly agreed and he set up automatic deposits to our joint savings. With the exception of about 3 pay periods, the funds were transferred like clockwork over the next 9 months.
Having learned a thing or two in the first 3 years of marriage, what would I tell my 27 year old self? It's clear that I was bold enough to ask some of the right questions in the early stages, but we failed at creating and executing a financial plan. Needless to say, DH and I missed some critical points of discussion that are important to highlight:
It's okay to talk about money.
Talking about money in depth is important to understand how your partner views money. It reveals how they view saving, spending, budgeting and their overall attitude towards debt. If DH and I had really honed in on this issue earlier in the relationship, it would've exposed my bad spending habits and his poor attitude towards debt. Perhaps it would've empowered us to set some financial goals for saving and debt repayment from the beginning of the marriage.
How did your parents handle money?
What we learn about finances growing up grossly affects our relationship with money. If you come from a household where money was tightly handled, you may be more of a tightwad compared to your spouse who's more liberal with spending. Our parents taught us some great lessons - the value of education and hard work but fell short when it came to money. DH and I spent years overspending, under budgeting and operating without a solid financial plan. We're now learning to take control of our financial future to teach ourselves what we weren't taught. The changes we are making today will change the future of our family tree and create a legacy for our son. Now it's our job to shape our son's attitude towards money.
What's the total debt baggage between each mate?
Asking your partner about their debt situation reveals a financial nakedness that's downright uncomfortable. Most people have debt stemming from school loans, car notes, credit cards or a mortgage. Don't be afraid to ask your partner how much debt they have and what their plans are to repay it. An honest conversation may reveal financial mistakes that led to bad credit or a bankruptcy. Being financially naked will help determine how to move forward to repay debt, repair bad credit and how to handle larger purchases like a car or home.
What are your future goals?
We got married and settled into our new life without any real conversation about future goals which led to a lot of financial waste. Having short and long term goals will dictate your spending choices. If your goal is to travel the world for 6 months, then prioritize your finances around that goal. If eating out often represents a large chunk of cash in your monthly budget, cutting back in this area won't rob you of the ability to eat out. Rather, you'd be robbing yourself of the ability to travel the world for 6 months. Grasping that simple concept will change your spending habits and shift your focus on the goals that are most important.
Should we create joint accounts?
This has been an ongoing conversation in my household since we've been married. I'm perfectly fine with the level of openness and transparency that comes with merging all aspects of our finances. I lived on my own for 6 years and was in full control of handling my monthly bills. DH had all the bills linked to his checking account and wasn't very open to changing the way business was handled. Most people differ in their opinions on this subject. Some believe in maintaining a level of autonomy by keeping separate accounts. Others believe merging finances eliminate trust issues and can help to optimize budget planning. The most popular theory seems to be the case for having a family account where bills are paid jointly and each person has an individual spending account to take care of personal expenses. I think all points are valid and it's important for couples to decide which scenario works best for them.
Most women I know are huge proponents of having a "secret stash" as a means of security. I don't disagree since I had an account that received automatic deposits each payday from my checking account. I've since liquidated that account to fund my son's bank account. At the present moment, a "secret stash" account is no longer in line with our current financial goals. I'll explain why in a future post.
How did you (or would you) handle merging finances? Would love to hear your thoughts so drop me a comment below.