A new year means the time for fresh beginnings, and it’s a great reason to finally tackle serious financial topics within your relationship. This article will discuss five of the most important financial talks that every couple should have at least once a year. Even if you’ve discussed some or all of these topics previously, it’s good to make sure you are both still in agreement on money matters. If one or both of you have changed your goals, or if as a couple you’ve gotten slightly off-track, now is the time to correct course. And, if you’ve never had a sit-down conversation with your spouse or partner about these topics before, make 2017 the year you begin.
Evaluate Your Financial Situation
The first topic to discuss is an evaluation of your financial situation. Did your debt level as a couple rise or fall last year? Did someone lose their job or get a pay raise? Have living expenses changed significantly since the last conversation about money? In order to tackle the other topics, including where you want to be in the future financially, first it’s necessary to do a frank and honest evaluation of where you are right now. Evaluate changes in money coming in, money going out, and what the next few years are likely to look like from a financial standpoint.
Plan for Your Goals
Your financial conversation should include both short- and long-term goals. Short-term goals include anything you’d like to accomplish in the next year or two, such as planning a vacation or paying down high interest credit cards. Contrast this with long-term goals such as buying a home or retiring early. No matter whether as a couple you have completely merged your finances, or whether you each retain some financial independence, most of your goals will still be “couple” goals that should be agreed-upon and planned for in advance. Make this conversation an especially fruitful one, because part of the fun and excitement of a relationship is to reach for your dreams together. This is also an important opportunity to flesh out any real differences in your long-term goals, such as where you each would like to spend your retirement years. If one half of a couple is set on retiring in Costa Rica while the other imagines a rocking chair and front porch back in their hometown, then this is the time to discuss differing desires and expectations, as well as how to financially achieve them.
Discuss Student Loans
This is a topic that comes up especially frequently with young couples. Student loan payments are likely to be one of the largest monthly bills a young couple faces, but even many older couples are still repaying college loans or have recently acquired student debt because they went back to school at a later age. Because this type of debt tends to be significant, and also because it is often acquired prior to the start of the relationship, repayment of student loans is an important discussion for every couple to have.
Discuss whether student loan payments will come out of joint or individual bank accounts, whether to make the minimum payments or pay extra each month, and what is the best payment plan to be on. Although private student loan lenders don’t typically offer a variety of repayment plans, the federal government offers standard, extended, and income-contingent repayment plans. Some of these plans are better than others for married borrowers, and some are only available to borrowers who first borrowed after a certain date. Before having this discussion, it’s a good idea to reach out to your loan servicers and find out all the options for repayment. That way, the discussion of how best to repay student loans won’t be held up by questions about what repayment possibilities are available and what are not. Together, married couples can consolidate student debt payments together, making payments easier to manage. The federal government does not allow couples to consolidate, but many banks do. Please consult a financial advisor to learn more about couple consolidation.
Prepare to Pay Down Debt
It’s a very rare couple that doesn’t carry some sort of debt balance month to month. It might be credit card debt, car payments, student loans, or personal loans, but whatever its nature it deserves to be part of your 2017 financial conversation. Discuss whether any debt incurred prior to the relationship is being treated differently than debt incurred as a couple, and if so, where the funds to repay it should be coming from. A couple should be on the same page when it comes to where paying off debt falls on the list of priorities. For example, discuss how much of your disposable household income goes to debt and how much goes to retirement, a vacation fund, or an emergency fund. Having this conversation at least once a year helps manage the financial changes that inevitably affect every couple.
Update Your Budget
At least once a year you should update your budget as a couple. If you’ve never truly sat down and created a budget together, make this the year you start. This talk will differ depending upon whether you each keep separate finances and budgets in addition to a “couple” or household budget, or whether your finances are completely combined. Be honest and transparent in your budgeting discussion and try to avoid agreeing to anything that you know you just won’t be able to stick with. Looking at bank statements while having this discussion can be a helpful way to itemize costs and reevaluate saving and spending habits. If you approach budgeting in the right way, it can be the best tool you have available to plan for financial priorities and future dreams. Make 2017 the year you both, as a couple, take charge of your financial future.