Aaron Clarke is a certified financial planner and wealth advisor at Halpern Financial.
Money can often be a complicated topic with your partner in normal times, but the pandemic has only increased that financial stress for many couples. Even in the best of times, if there is a misalignment of what each person finds important and the couple can’t talk about these differences, it is bound to be a pain point.
Here are a few helpful ways to navigate challenging financial times with your spouse or partner — and maybe even improve your long-term financial picture at the same time.
Start with your Perspective
Even beyond the traditional “are you a saver or a spender,” everyone has a different relationship to money.
Dr. Brad Klontz has identified a number of “money scripts” that inform how you make financial decisions: Money avoidance, money worship, money status seeking, and money vigilance are just a few.
If one person who self-sabotages their wealth accumulation is paired with someone who is vigilantly focused on saving and frugality, you can imagine how there could be stress. Communicating and learning to row in the same direction is critical to successfully planning and achieving goals.
What’s mine, what’s yours, and what’s ours?
There is no right or wrong answer. However, what is important is to have a clear understanding. This applies to both accumulating assets and paying down debt.
Does each person have free rein to spend their own money, or is all money communal? Perhaps it’s something in between, where each person has some money to spend freely and the rest for joint expenses and saving?
Will you both contribute to one partner’s student loans or credit card debt?
How will you use extra money, like bonuses or even stimulus checks? Should they go toward joint financial goals, or do you see them as individual? It doesn’t have to be black and white; some of the bonus could go toward saving to buy a house, and another portion could go toward a fun reward for your individual hard work.
It is especially important to know your plan when extra money comes in the door if someone is a business owner or if there is only one income.
If you plan on getting married, would you want a prenuptial agreement? If one or both people are business owners, or bring significant assets or debts to the marriage, it can be a way to legally protect everyone’s best interest.
Which strategy best suits our financial life together?
Once you come to an agreement on priorities, how will you logistically combine your financial lives? It is important to have some way of tracking your spending, saving and investing. Consider some of the following:
Online apps for saving and investing
Cash envelope system for budgeting
A combination of digital and non-digital strategies: for example, using a notebook or whiteboard to track daily expenses, while using apps for automated savings and billpay.
Who is responsible for financial tasks?
Both partners should be aware of how to view and access the financial accounts, but one may just enjoy it more. If one person is very detail-oriented while the other is big-picture, it can work well together. Maybe the detail-oriented person can focus on day-to-day spending, while the big-picture person can focus on the overall strategy and progress toward goals.
Where do you currently stand and where do you want to go?
Before going on any journey, you need to enter a starting destination in your GPS. Take stock of your current financial life together, so you can chart the path to your future.
Has the pandemic changed your employment or income?
Many Americans are dealing with less income and more job uncertainty due to pandemic pressures.
Make sure your emergency fund is healthy well before you need it. How many months of runway do you have? If you had three months of emergency reserves, now may be the time to squirrel away even more — if possible — by limiting your discretionary expenses.
Although the CARES Act allows more flexibility for withdrawing funds from retirement accounts, avoid taking from a tax-advantaged account if at all possible. Depending on the type of account, there may be requirements on paying it back with interest. You could also be taxed, with penalties, if you do not meet the requirements.
If one partner suddenly becomes unemployed, be sure to do the following:
Determine how long your cash reserves will last, and cut expenses as necessary to prevent overspending.
Review your current health insurance.
Are we protected if one of us becomes ill or passes away?
Review your healthcare and life insurance and determine what you need to ensure you have the appropriate care for yourself and your family members. Work with an independent insurance agent who has access to competitive markets to determine how much insurance you need, and the most cost efficient way to own that insurance.
What will we do about childcare?
While the decision to have children is not financial—it certainly has a financial impact! Parents need to come to an agreement on childcare options, whether one parent will stay at home full or part time. Again, the pandemic has forced many families to stay at home, but think about whether your current path is sustainable and what you may want in the future.
Where do you want to be in the future?
What do you see in your future?
Perhaps working remotely or the loss of a job has prompted you to consider a new way of living. Do you want to move and seek opportunity elsewhere? Would you ever consider a long-distance relationship for a while, if it would accelerate your joint long-term goals? Think creatively to figure out how to get from where you are today to where you want to be in your future together.
Read more information and tips in our Family section