For love and money: Discussing finances in new relationships
Falling in love is a journey filled with exhilaration, excitement, and the promise of a shared future. That shared future is not just built on love alone; it's also built on trust, communication, and sound financial planning.
If that last one doesn’t sound all that romantic, give us a chance. We’ll help you fall in love with the idea.
Money and relationships: The early stages
The early stages of a relationship are filled with excitement and wonder. You're getting to know each other, building trust, and laying the foundation for a strong partnership. While you might still be in the honeymoon phase bliss, it's crucial to have initial conversations about your future together — before you get too wrapped up in a fairytale that might not be bound for the happiest of endings.
This is where healthy relationship habits and financial planning enter the picture.
“It’s important to get on the same page first,” says Scott Plaskett, a certified financial planner and CEO at Ironshield Financial Planning. Discussing your financial aspirations, goals, and expectations is essential.
Part of the problem might be that couples don’t like to talk about money, even before marriage. “The subject is only touchy if you think it's taboo. And it doesn’t need to be,” Scott says. He recommends broaching the subject when you start discussing your values and dreams for the future.
"If one spouse has a desire to travel the world and the other has a desire to live in their own home, then there's going to be some conflict there,” he says. “So, I'd suggest having those conversations [early on in a relationship].”
Financial red flags
Financial infidelity – generally defined as being dishonest about spending, assets, or debt – isn’t all that uncommon in Canada. One poll found that one in five Canadians admit to keeping secrets about money or spending from their partners. Millennials and men were more likely to report misrepresenting their finances.
So, before you’re ready to commit, put the rose-coloured glasses aside and be on the lookout for red flags. For example, look out for reckless spending that doesn’t line up with what your partner might be earning or the money they may have access to.
Hastily spending on material objects could be a cause for concern when newly dating someone, especially when those purchases are for image purposes – think a luxury car, designer clothes or fine jewelry. “It doesn't create a solid foundation to build on,” Scott says.
When to join finances
Scott’s recommendation? “Don’t join finances together right away,” he says. He cautions rushing into things and suggests only melding your money pots when you can clearly see your shared vision coming to life.
At that point, a couple can decide how much they want to contribute to their household. Discuss the pros and cons. One person may earn more money than the other and contribute more, or you agree to go 50/50 to split bills. How you choose to divide up your finances is very couple-specific, but if Scott could give one tip, it’s simplification. Make an easy plan and stick to it until it isn’t working anymore. Then, readjust as you hit new life stages.
Bonding over budget
So, you’re on the same page about the division of finances and your partner is clear of red flags. This is where a couple might consider creating a budget. How this looks often depends on the stage you’re in.
Whether you’re in the newlywed, homeowner, or having a baby stage, it’s important to develop a budget where you work towards a mutual goal and agree on what you’re spending each month.
According to Scott, an important thing to remember is that budgeting is less about pinching pennies and more about getting your money to go further. After all, financial conversations aren’t only about day-to-day spending. They’re an important way to plan ahead for the things you want.
In other words, although it might seem boring, creating a budget can actually be exciting. “I think it becomes a fun conversation when you start to realize that you are in alignment,” says Scott. “There's a positive energy that builds that says, ‘together we are better'."
At the end of the day, budgeting goes beyond numbers. It’s an exercise in communication, compromise and working towards shared dreams together.
As long as we both shall live
Preparing for a life together also means preparing for the unexpected. Saving and budgeting is always a good idea but adding life insurance to the mix also a great way to build a strong financial safety net.
“If one of us were no longer here, would we want the survivor to still have that vision and accomplish it?” Scott asks.
“If the answer is yes, then you would probably want to put some safeguards in place so that in the event something happened, the vision could still be realized for the survivor,” he says. “It’s actually very romantic.”
See? We told you it would be. So, don’t underestimate the role financial planning and life insurance can play in your love story. Find out more about North Cover Life Insurance.
Jan 4 2024