Before you move in together...
1. Assess your Financial Sanity
The first thing to establish is a deeper level of awareness about your ‘financial sanity’ and that of your partner. Things like financial personality, values and environmental influences and will have a huge impact on your level of cash compatibility, or otherwise.
a. Financial Personality
Jason Cunningham is an Aussie finance guru who wrote a book called ‘Where’s My Money – 10 sure-fire ways to keep, earn and grow more money’. In this book he talks about the range of financial personalities and compares us to birds:
• Ostriches bury their heads in the sand and don’t want to know anything about money
• Chickens pick away at their mortgage and their credit card, but never really get ahead
• Kookaburras are way too busy having a great time to bother about money
• Peacocks love to show off their money and enjoy spending money on flash cars and expensive clothes
• Eagles take a long-term, big picture view of their finances
• Magpies save everything they earn just in case they need it down the track
So think about yourself and your partner. What happens when a Peacock pairs up with a Magpie? Can different bird species cross-breed?
This is a fun way to have a conversation with your partner about a serious issue, without dwelling on the heaviness of the situation. Referring to each other as bird names and using this as a catalyst to discuss your finances might just help break the ice.
b. Values
What does money represent to you? Power, freedom, security, fun, sharing...? These are fundamental life values and will impact everything from the smallest decisions about what brand of toilet paper you buy to major decisions like what school to send your kids or whether to bail out a friend in financial trouble.
Let’s say money represents freedom for you and security for your partner, and you get a $10,000 bonus at work. You may be excited about spending it on a holiday but your partner can’t wait to use it to top up your super!
Without developing an understanding about each other’s values and the role of money to each of you, you will inevitably find yourself in conflict.
c. Environmental Influences
We are all influenced by our backgrounds and social environments and these factors can have an influence on our perception of money in our lives. For instance:
• Childhood experience – was money tight or fluid?
• Your generation – Baby Boomers were taught not to borrow and to save, save, save but Generations X and Y have more options with loans and credit
• Social pressure – are you keeping up with The Jonses?
• Mood – how does your mood effect your spending? If you are sad, stressed, tired or tipsy what happens to your spending habits?
2. Assess your Financial Status
Before entering into your co-habitational bliss, it’s important to understand what you are contributing to the relationship, financially speaking.
What does your personal balance sheet look like? So many of us have blinkers on when it comes to our financial status. Credit has made it so easy to live beyond our means and debt tends to creep up on us without much attention on our part.
Conduct your own financial audit to remove the blinkers. This can be a confronting exercise so perhaps chose a trusted friend or family member to support you.
Net Worth
I’m no financial expert, but a simple way to get a sense of your financial status is to work out your net worth. This is your assets minus your liabilities. Doing this will give you a single number that represents your financial status. It’s a tangible, real fact that cannot be denied.
It may not be pretty, but at least you can enter ‘the conversation’ with your partner, armed with accurate information.
3. Have the conversation
Once you have assessed your financial sanity and status you are better prepared to have the financial conversation with your partner. Using the bird references will help, but here are few other tips to keep the conversation on track and ensure positive outcomes for both of you:
• Set the tone as an important, but positive conversation
• Start with the big picture – where do you want the relationship to go?
• If you have any ‘bad news’ to deliver, do it up front
• Do not blame or judge
• Show your partner you understand their perspective by paraphrasing and using empathy
• Ensure that both of you have the opportunity to have your say
• Maintain a solution focus rather than problem focus – how can you work together to improve the situation?
• Develop a shared plan and agreed ground rules for managing your money
• If you can’t resolve your differences agree to get some professional support together
