Happy finances, happy couples. Six steps to ensure financial happiness in 2023
You and your love don’t have to become another separation or divorce statistic.
You simply need to find a way to respectfully communicate with each other about money — and follow these six steps to better finances in 2023.
Get on the same page
Do you and your partner have a clear idea of where you want to go, and what you’d like to accomplish in the next five years? Getting on the same page is all about understanding your common goals like home ownership (or not), starting a family (or not), purchasing a vacation home, or becoming debt free.
This is the fun part of financial planning — dreaming of the future and creating practical strategies to make it all happen. If you two don’t see eye to eye on where you’re headed, make it a priority to see a relationship counsellor. You probably have company benefits for this — so use them.
Scrap your emotions and sort out your accounts
There’s no room for finger pointing, name calling or dwelling in the past when it comes to money management. Sit down together and open your financial backpacks to form a combined list of your assets and liabilities.
Total them all up and determine your net worth. Your net worth is what the two of you will need to focus on growing to ensure your dreams (those from the previous step) become reality.
Financial transparency is key to this step (even if it’s painful) and will build trust. If you unpack something about your spouse that you don’t like, talk it through with respect. Everyone has a financial past but that doesn’t have to ruin the future.
Curb overspending
Overspending leads to debt and is often the root of arguments between couples … especially when one of the partners is the primary culprit. It also causes serious relationship stress.
Overspenders and savers can live in harmony, but only if they’ve got a plan to spend within their means.
This involves sticking to a budget and including fun expenditures within it.
Get out of debt
Debt limits your ability to chase what’s most important — your dreams for the future.
Form a plan to get rid of consumer debt first (e.g. credit card balances, lines of credit and car loans) followed by nonconsumer debt like your mortgage. The beautiful thing about crushing debt is your household cash flow improves dramatically once the first one is eliminated.
No matter who brought the debt into the relationship, if you want to get out of debt faster so you can build up savings and reach your goals sooner, then both partners should contribute to the joint goal of being debt free.
But, if you want to keep debt repayment separate, it’s OK. You’ll simply live with the cash flow limitations of one partner, and that needs to be respected.
Invest like a pro
You’ve probably heard that you should invest 10 per cent of your gross income (before taxes). It turns out that wealthy couples actually invest 15 to 20 per cent. It’s what allows them to ensure they’re prepared for a long retirement, because these days, thanks to medical advances, we are outliving previous generations.
The best approach to investing well as a couple is to utilize tax advantaged retirement savings plans (TFSAs and RRSPs), choose high-quality investments and get good advice early and often.
Design your financial plan together
Couples with a financial plan simply have more money — like two to three times more when they retire.
Pull your dreams and financial strategies together in a comprehensive financial plan. Sure, life will change and you’ll need to update it. But, your plan will be a compass that guides your finances so that your dreams actually happen. So stop talking about it and make a plan.
To reach your full financial potential as a couple you’ll need to focus on balancing between your financial, personal, and professional goals because together they will make you and your honey happy and wealthy.
This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.