How to Have the Dreaded Money Talk with Your Partner
Talking money is hardly romantic, but it’s totally necessary for any serious relationship. Whether you’ve got a ring on it, are domestically partnered, or sure you’re in it for the long haul — regular money talks are a must.
Not to get all Debbie Downer, but divorce and widowhood are distinct possibilities for all married women, and one study found that women’s household income falls 41% after a divorce and 37% after a spouse dies. Compare that to 25% for men suffering the same fate, and it’s clear that for women, staying in the loop — even if your partner handles all the finances — is just smart planning, like a will or life insurance.
A recent Ellevate Network poll shows that about 85% of women surveyed are actively involved in managing finances with their partner, and only around 3% let their spouse handle everything. Whether you’re hands-on or laissez-faire, there's no “right” way — every couple does what works for them. But no matter what your arrangement is, getting together with your partner for a regular "deep dive" into your financial picture can give you more peace of mind, at the very least.
So here’s how to get started.
Step 1: Gather your important financial documents
You’ll need to calculate your net worth and sketch out a budget, and this requires getting all your proverbial ducks in row: your most recent statements for checking and savings accounts, any debt you’re carrying, and investment accounts. While you’re at it, if you haven’t seen your insurance policies or a living will, ask your partner to dust those off and bring them to the table as well.
Step 2: Calculate money in, out, saved, and invested.
Hopefully, there won’t be any huge surprises here. But if you see you’re spending more than you earn, investing before you pay off high-interest and unsecured debt, or you’re left with too little at the end of the month to invest well, you’ll need to recalibrate your budget. See where you can cut down spending so you can pay down debt aggressively, and make sure you’re “paying yourself first.” This means saving up 3-to-6 months of expenses in case of an emergency, and investing in a retirement account.
Step 3: Get your goals together, and plan for them.
If you’re not sure what to invest in, start with your retirement. I can’t overstress how important this is for every woman. Think a company 401(k) is enough? Maybe for your male partner, but remember, women outlive men by a 5+ years. We also make less than they do (for now) and we take more career breaks. This means we need even more to retire, so contributing more of your income to a diversified portfolio — in addition to your company 401(k) plan — is generally a smart move. Be clear with your partner on why this is important.
Step 4: Paint your retirement picture
This is where the “dreaming big” happens. When you and your partner leave the daily grind for good, where do you want go? A big Victorian house by a lake? Or do you want to downsize to a condo and travel the world? Once you’re clear on what you’re planning for, you can assign a specific number to your goal.
Step 5: Check on your other investments
You may have other investment accounts outside of retirement, and that’s great! But how are your joint assets allocated? If your partner is “in charge” of these accounts, make sure you’re on the same page, riskwise. For instance, if the equities of smaller companies or emerging markets comprise most of your portfolio, you may experience dramatic ups and downs. Maybe you’d be more comfortable with a diverse mix of exchange traded funds, and allotting less to riskier options.
No matter where the conversation takes you or what your financial plan looks like, the key here is to talk, keep talking, and ask lots of questions. If it seems that neither of you have all (or any) of the answers, it may be time to look for smarter, streamlined planning options (like Ellevest!). We’re launching later this year to help women take control of their finances.
This article was originally published on LinkedIn and on www.Ellevest.com. Ellevest is a digital investment platform that is re-imagining investing for women, to be launched in 2016. Sign up for early access here.
For information about Ellevest, a Securities and Exchange Commission (SEC) registered investment adviser and its financial advisory services, please visit the firm’s website (www.ellevest.com) or the SEC’s Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).
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