Mixing Love and Money

If dreams were thunder
And lightning was desire
This old house would’ve burned down a long time ago.
John Prine

It’s Valentine’s Day and love is in the air. That’s my annual cue to remind us of the interpersonal challenges we face when romance merges with finance.

Consider these questions:

1. Did you enter the relationship with different assets and liabilities?

Does one of you bring a trust fund, but the other is paying off student loans? Is one of you expecting an inheritance in the future? What is the most equitable approach to balance your mismatched net worth?

2. Do you have different incomes?

Should you split the living expenses equally, proportionally to your incomes, or in some other manner? Is one of you opting out of the workforce temporarily to be the primary parent? And, if you’re married, the lower earning spouse may face a higher tax rate while the higher earner may end up paying a bit less. What’s fair?

3. Do you have different attitudes on saving, spending, and borrowing?

Does one of you prefer to max out a Roth IRA every year, while the other prefers to spend all available cash? It’s hard to do both. Does one of you want to borrow for a wedding celebration and the other wants to elope?

4. What is your risk tolerance?

Does one of you want the comfort and safety of bank CDs but the other believes in aggressively investing in growth stocks with a long-term horizon?

5. How much do you contribute to charity?

Does one of you support the NRA but the other supports the Coalition to Stop Gun Violence? Should you donate to both or neither?

6. Do either of you have children from a previous relationship or other relatives who require financial support?

How do you reconcile the conflicting commitments?

7. How much of your kids’ education do you want to fund?

Did one of you work and borrow your way through college and the other had parents pay for it?

8. Do you need a will?

Maybe, but especially so when you have kids.

9. How much life insurance should you have?

If you have kids and a mortgage, more than you think. Stick with term insurance.

10. Have you updated the beneficiaries on your retirement accounts?

Ensure they reflect your current wishes.

11. Do you want a joint bank account?

Maybe, but in this age of venmo and google spreadsheets, it’s not necessary.

12. Do you want a joint credit card?

There’s never a good reason to share liabilities if you don’t have to; I recommend not doing so.

13. If you’re married, your taxes may change.

You may want to adjust your withholding rate and also circle back to my second point.

Mixing love and money is a journey — hopefully lifelong — and your relationship will benefit from an explicit and shared understanding of these dynamics.

Questions?  Get in touch

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