Talking about your finances is certainly near the bottom of the list of fun activities you can do with your partner. But the plain fact is that owning your own home, travelling abroad, or even purchasing an investment property is all quite appealing. However, you won’t be able to reach these goals unless you have an open line of communication and are aware of each other’s financial objectives.
To help you realise your financial goals, we’ve put together a guide on how to talk about them with your significant other.
Examine both your finances
Before you do anything, it’s critical that you examine where you and your partner are financially. You don’t want to make preparations to buy a house only to discover that your partner has gone bankrupt twice and is in a lot of debt. Sit down with each other before making any major financial decisions and find out things like:
- Credit scores
- How much savings you have
- What debts you have
- What investments you have
- What assets you have
This does not have to be completed all at once. Talking about money can be exhausting, especially if one or both of you aren’t in the financial position you’d like to be. To avoid stress, take things slowly and break up the discussions into smaller chunks. Furthermore, this isn’t something that should be done early in a relationship; rather, it should be done if you’re thinking about making a substantial purchase or making a major life decision. You don’t want to scare someone away on the first date by bringing up the subject of debt.
Set your financial goals
One of the most enjoyable things of discussing finances with your partner is this. Your objectives should be attainable, and your spouse should understand why you value them. The following are some of the most common financial objectives shared by couples:
- Saving for travel
- Saving for a wedding and honeymoon
- Buying a first home or primary place of residence (PPOR)
- Paying off debt
- Buying an investment property
- Saving for starting a family
If you have individual financial goals, make a list of these as well. You don’t want to become so wrapped up in wanting to buy a house together that you forget about your own aspirations, such as building an investing portfolio.
Recognise the financial advantages of collaborating
Understanding the financial advantages of working together can be a powerful motivator for you to achieve your objectives. As an example, reaching your homeownership desire as a pair is far easier than as an individual. The national median house price, according to CoreLogic, is $574,872.
To demonstrate the concept, if you want to buy a house with a 20% deposit and avoid Lenders Mortgage Insurance (LMI), you’ll need around $120,000. Because this is more than most people make in a year, combining two paychecks can make saving for a deposit much easier. A shared income can also help with upfront fees like LMI and stamp duty by boosting your borrowing power.
Consider how you’ll structure your goals
It’s critical to talk about how things will be arranged before making any major financial decisions. No one enters a relationship with the intention of ending it, but things happen, and it’s vital to be prepared.
Will you be joint tenants or tenants in common, for example, if you want to buy a house together? You both own 50% of the property as joint tenants, regardless of how much of a deposit you each put down. Tenants in common takes into account how much each of you contributed; for example, if one of you provided 75% of the deposit, they would own 75% of the house. If you break up or one of you passes away, such plans can be beneficial.
Implement and achieve your goals
Setting lofty financial goals is wonderful in theory, but there’s no point in setting them if you don’t follow through on them. Being financially transparent in a relationship can help you stay on track because you have someone to hold you accountable. If your partner is overspending, encourage them to cut back and explain how it is affecting both of your chances of accomplishing your objectives.
If one of your goals is to buy a house, use our borrowing power calculator to see how much more borrowing power you could have with the two of you!
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.