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There is perhaps nothing that you can do that will have a more beneficial impact on your finances than getting on the same page as your partner. Yet, getting on the same finance page as your partner can be one of the most difficult things to accomplish. In fact, I think it is facetious to imply that it is ever “accomplished”…it is really a constant process.
Since I started The Prudent Plastic Surgeon, one of the most common questions I get asked by family, friends, and readers is how to approach finances with a partner as a couple. We all know that finance and money are major points of disagreement and discontent in a relationship. Getting on the same page financially is another great example of financial well-being enhancing overall and relationship well-being.
My wife, Selenid, and I are by no means perfect. We still have disagreements about certain aspects of our personal finances. But we have successfully developed a system by which we have open and honest communication about finances. Our personal finances no longer stress us out. We are on the same page and truly are partners.
Here are 7 steps that you and your partner can take to get on the same financial page.
1. Read about finances with your partner
I put this first because this is what Selenid and I did to start our financial journey.
I’ve talked about this before but I had a copy of The White Coat Investor book for over a year before it was first opened. What I haven’t shared before is that I was not the first one to open it. Selenid was.
That was the start of a habit that we’ve continued to this day and believe in wholeheartedly. We started by taking turns reading chapters of the WCI book. We then bought a bunch of other finance books. Selenid would read one. I would read the other. Then we would switch. And we would discuss our thoughts all the way through. In fact, as I am writing this, Selenid is reading The Millionaire Real Estate Investor by Gary Keller which I finished a few weeks ago.
We also read a lot of the same blogs and listen to many of the same podcasts. But not all of them are the same. When we find something really interesting, we send it to the other one. Regardless, we make it a point to discuss what we have been reading/listening to. This at least got us speaking the same language.
Developing this habit will create another shared interest and experience between the two of you
It will also set the foundation for healthy and open discussions with your partner surrounding finances, money, and investing.
The Millionaire Next Door and Rich Dad, Poor Dad are more philosophically tilted and provocative. They will force you and your partner to examine your thoughts about money, saving, and wealth. The White Coat Investor’s book is a fantastic and easy-to-digest beginners guide to personal finance. My wife is not a physician. Your partner may not be either. Regardless, they are in a relationship with a physician and are also experiencing what the influence of medicine on finance. They may even benefit from it more than you.
2. Create a financial goals and priority list together
This is such a fun step in planning finances with your partner. Seriously.
You and your partner should set aside an hour or two and sit with each other.
Write down that things that you want in life. What would you do if money was no object? Do you want to be debt free? When do you want to have a net worth of $1 million? When do you want to retire? How much money do you want to retire (Here’s a guide to figure this out)? Do you want to support your (future) children through college? Do you want a house? How do you want to invest?
Write all of these goals down in no particular order. Now, write a “how” to achieve each goal.
For instance, if one goal is to retire with $200,000 in yearly income that means you need a $5 million nest egg (assuming a safe 4% withdrawal rate), to build a passive cash flow of $200,000 annually, or do a bit of both. Are you going to achieve this via saving and investing in the stock market, real estate, or both?
Another example, you both want to renovate your home in 5 years. How much are you willing to set aside. Are you going to save this in a high yield savings account? Are you going to put aside a constant amount each year?
Now, rank these “how’s” according to personal importance. What’s more important to you both – becoming debt free or saving for a car? One answer isn’t necessarily right or wrong. It’s what fits best for both of you.
Now you have your goals list. Next you need your priority list.
Your priority list is the ordered list of where your savings will go. Base this priority list on your ordered goals.
For instance, paying off debt to become debt free in 5 years is a main goal of ours. So, our #1 priority is to pay off high interest debt.
We are taking a hybrid approach to wealth building with both stock and real estate investing. Therefore, our #3 priority is to max out our retirement accounts with employer match. Then, #4 is to invest in real estate according to our personal strategy.
Your priority list is sort of like the technical, nuts and bolts version of your goals list. It spells out where your money needs to go to create the wealth to achieve your goals.
(See out actual financial plan including our goals and priorities list here.)
An even more granular guide to achieving your goals is your budget, which brings us to #3…
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3. Make a budget with your partner
I’ve said it before and I’ll say it again. I love a good budget. I know that makes me so weird.
It wasn’t always that way. I used to hate budgeting. We were forced to in the past because we lived in NYC with 2 kids and had very little money. A budget seemed like a restrictive tool.
Then I changed my mindset. I now view a budget as a freeing device. It is the roadmap to my financial freedom. No matter what amount of money you have, at whatever stage of life you are in, a budget should include a savings rate and plan for the future. It will keep you going in the hard times and force you to thrive in the good times.
With that being said, you need to budget with your partner to truly own your finances. You both need to agree on how much you are going to spend on each need and want. Coming up with the initial budget will not be fun. There will be disagreements. The important thing is to remind each other of your big, important goals that you already established. These goals are your why. The budget is the how.
To have only one partner be in charge of the budget makes them feel like the budget police. The other partner feels restricted unfairly. It’s a recipe for disaster. Just suck it up and make the budget together. It will get easier after the first one and then, dare I say, can be fun! I love seeing how much closer we are to our goals each month!
Bonus! Here’s a quick step by step guide to develop your budget together:
- Come up with a list of broad categories of expenses (i.e. rent/mortgage, groceries, entertainment, taxes – don’t forget taxes, etc.)
- Label each expense category as a need or a want
- Go to your bank account(s)/credit card(s) and put every single expense from the past month (1st of month to 1st of month) in an expense category
- Add up the total for each expense category
- Add up the grand total for the month and make sure it is less (or at worst equal to) your monthly income
- Do you have enough left over to save for your goals?
- If yes, great! If no, what can you adjust to make this happen?
- Aim for a savings rate of at least 20%
- Now, go through each category and decide how much you can spend while still reaching your goals
4. Review your budget together
Ok, you got through creating the budget. That’s a huge win with regards to finances and your partner!
But a budget that is not followed does absolutely nothing. It’s like a tree falling alone in the woods.
Make it a habit to review your budget each and every month. Here’s how me and Selenid do it:
- Set aside 30 minutes in the evening of the first of every month
- Sit together with the Excel budget open (or whatever budget program/piece of paper you use)
- Go through each expense from that month (checking accounts, savings withdrawals, credit purchases)
- Tabulate and total them in the appropriate needs or wants expense category
- Calculate how much above or below you are in each expense category
- Calculate how much above or below you are in total for the month
- If you saved more than expected, put it towards debt pay down, investing, or reward yourselves!
This eventually becomes a quick, semi-automated process. You both will become so on the same page that the exercise is truly painless. Again, you will be seeing how much closer you are to your goals each month!
5. Share the financial responsibilities 50/50
I would bet that the typical situation is for one partner to take care of the finances while the other has a much lesser active role. I really encourage you both to take a 50/50 stake in the finances. Regardless of who makes more money or who is more interested.
When the responsibilities are split unevenly, discontent is inevitable. One partner becomes the “bad guy” that constantly feels like she is policing the other partner. The other partner constantly feels like he is being told “no” when they want to do something, like renovate the house.
By splitting the responsibilities 50/50, each partner by definition has to be informed as to the financial situation of the pair. Both now understand how much money they have, how much they need to save to reach their goals, how much can be allocated to discretionary expenses.
Open and informed communication breeds understanding. You will suddenly find that topics that used to end in deadlock will become productive.
Of course, one partner may be stronger in one aspect of personal finance while the other has a different strength area. For instance, I know a bit more about stock investing and helped allocate both Selenid and my retirement accounts. On the other hand, Selenid has a much keener eye for investment properties and leads in this regard. But we both do our budget together and know our goals.
Each relationship will have give and take. But it should equal 50/50.
Lastly, in the event that the relationship comes to an end, both partners will be prepared to move on financially. This is obviously a touchy subject that no one plans to encounter. But still something to consider.
6. Create a system of norms around finances
All of life and medicine and wealth is about creating sustainable systems that eventually automate success. The relationship that you and your partner have with finance should not be any different.
What I mean by a “system of norms” is that there should be some rules about finances. It may be easier to describe by example. My wife and I have a rule that we must discuss purchases greater than $250 together. It’s often a very simple conversation. But it makes us both be involved. Also, we have to agree on everything that is in our budget and plan. We each have 100% veto power.
Setting these systems ahead of time will avoid some serious financial arguments. Create them when you are both neutral state of mind. Then, when they come up during an emotionally charged situation, you know the rules and are not trying to create them on the fly…leading to misunderstanding and hard feelings.
7. Celebrate together!
I get it. I think finances are fun and exciting. Not everyone does. Selenid is interested in finances, but my excitement level is much (ok, much, much) higher than hers. I still get told to talk about something else on a daily basis.
Your partner may not be as into finances as you. So make it fun! Celebrate your wins.
Pay off a credit card? Go out to a nice dinner!
Pay off a student loan? Make a bigger purchase for your home.
Get you net worth back to zero? Do the Stanky Leg!
Seriously, making the right financial decisions is a grind. It’s the definition of a marathon, not a sprint.
Remember, budgeting and financial planning may seem restrictive but it is really freeing. It provides you with a path to financial and personal well-being. That doesn’t always make it intrinsically fun during the process though.
So take time to smell the roses, and do it together!
Take these 7 steps and I guarantee that you and your spouse’s relationship will improve greatly!
Once you are finished getting through these steps, you will be ready to create a full written financial plan together. Then you are really on your way. If you need a push, here is Selenid and my unedited and full financial plan for you to use as a guide!
And remember, if you need additional help, email [email protected] to get on the waitlist for 1:1, personalized financial coaching for you and your partner with my wife, Selenid, and me!
What do you think? How have you and your partner navigated your finances? Would you say you are on the same page? What has helped? What have been points of contention? Let me know in the comments below!
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