Money seems to creep it’s way into everything we do, relationships are no different. Dating, marriage, and even friendship can take a turn for the worse if money becomes an issue. It would be wise for any of us to study not only the mechanics of our financials but the psychology of it. As the great Tony Robbins talks about often, 20% of what we do is mechanics and 80% is psychology.
Though living the single life can be an incredible experience, there are parts of it that we all dread. One of those is figuring out who is going to pay for what. Going through this myself, I’ve come up with a couple things to remember. I think they can be of value to all. Money can be telling of one’s character. If she hasn’t offered to pay the tab on your third or fourth date, something is wrong. This type of behavior may be telling of someone’s worldview, one that I wouldn’t like to be a part of. If things seem to be working out for a while, be mindful of certain clues they divulge. Number one on my agenda would be to find out if they are in debt. Don’t get me wrong, I’m not going to search through anybody’s purse. There are certain ways to approach this conversation. Talking about similar situations of others you know may make your partner comment on their own. Millennials are also engaging in live-in relationships, which add more logistical hurdles to jump through.
The first thing to figure out is how to split up the bills. On the surface, it sounds right to cut it down the middle. Fifty-Fifty sounds fair until you realize one person makes $40,000 more than the other. Side note, this is why financial conversations are important pre-making such a decision. Financially, the worst part of this scenario is if the relationship doesn’t work out. For instance, let’s say you rely on your partner to pay their half of the rent on the 15th but you break out on the 10th. Depending on what exactly happened, collecting payment will be in jeopardy. These are just two among many issues that may occur in such a living situation.
Let’s assume everything goes well and you decide to get hitched! Initiating a financial conversation is more imperative than ever. Talk about your goals and dreams. Figure out how you’re going to fund them. If these don’t align or your mate just won’t have this talk, this may be a red flag. Also, be smart about planning this wedding or buying the ring. Many start life together in the red because they are choosing to live by the status quo. Choose a happy beginning rather than the stress of beginning the rest of your life with tens of thousands of dollars to pay off one party.
Now that you’ve taken the plunge, it’s time to execute. Design your budget and hold each other to it, much easier said than done for most. If you’re having trouble, hire a professional or seek a couple who has been through similar times. Paying bills together or at least going over the numbers every couple weeks will make your relationship stronger. Not only that, you’ll both understand what you have or what you don’t. The claim to ignorance is effectively gone. He spend too much on those golf clubs? These periodic meetings will hold him accountable.
Friends don’t let friends lend money! The second they are a day late in paying this back will begin to deteriorate the relationship. Unfortunately, I’ve witnessed this ugliness. An alternative to this is to just outright give them the money. You’d be doing a good deed with no expectation of returning a dime. Rather than putting a financial strain on what may be a valuable friendship, it will strengthen what you already have. Of course, this will have to be taken on a case by case basis. I wouldn’t be lending anyone my last $5,000 because I’ve known them for a long time. Let’s use some common sense.
Most of time, and I mean 99% of the time, I would advice against lending family money. This can be a hard one because it will tie on the heartstrings a bit. No one wants to see their sibling or loved one incur financial difficulty. Speaking realistically, some may take advantage of family ties as they know they have some emotional leverage. My advice is to look at their track record and do some due diligence. Have the held employment for a long time? Do they have marketable skills? Or have they had to fork over some penalty and interest money to the IRS recently? The most important thing to remember is to keep your expectations low. As I said in the friend portion, if you have the money to give, it would serve much better as a gift than a loan. Odds are if you have the money to loan it, you can afford to gift it.