We'll explore how money affects your relationships and how financial intimacy plays a crucial role in the success of a partnership. I will narrate three stories today:
Valentine's Day: When money takes a precedence in a romantic relationship
Story 1: Mashi and Vaibhav were the perfect couple, they laughed, they travelled, and they dreamed big together. However, as much as they knew each other's hopes and fears, they never talked about money. Mashi had always been a saver, diligently setting aside money for a rainy day and planning for their future together.
On the other hand, Vaibhav was more of a risk-taker, investing in the stock market, hoping to hit it big. One day, Vaibhav came home with a huge win and Mashi was over the moon for him. However, a few weeks later, Vaibhav suffered a devastating loss, and the impact was felt in their household finances. This pattern continued, and the couple started to argue about money. Mashi felt that Vaibhav was not taking their future seriously, and Vaibhav felt that Mashi didn't understand his aspirations.
They went to couples’ therapy, hoping to work out their differences, but it was too late. The created rift became bad over time, and they decided to go their separate ways. Top of Form
Story 2: Sam and Sarah had been married for a couple of years now, and the couple was known for being quite into each other, happy and lively. However, their happily married life ended with a tragic end, when Sam met with an accident and lost his life and left Sarah behind with a 5-year-old son.
Sarah was left devastated and the biggest worry, which turned into frustration for herself was –she knew nothing about Sam’s finances. She was a homemaker and trusted Sam to handle the family’s finances. She never involved herself into planning any future savings, emergency funds, insurances, or investments that Sam used to make.
The only thing she used to manage was her monthly budget to buy necessities for her house like clothes, grocery etc with a particular set amount that Sam used to hand her at the beginning of every month.
Story 3: Mohit and Manav were passionate entrepreneurs who dreamed of starting a restaurant that served the best Mexican cuisine. They made the perfect team, with Mohit handling sales and operations, and Manav in charge of marketing and investments.
But, despite the business' success, Mohit felt a growing sense of unease. Manav was secretive about the financial details of the business, leaving Mohit feeling excluded and out of the loop.
However, Manav never questioned Mohit on any expenditure made to run operations of the company—was fully supportive of any financial decisions taken by Mohit for his department. But time went on, Mohit's frustration turned into dissatisfaction, and their once-strong partnership began to suffer.
These three stories are just a drop of water in the ocean of endless stories where money changed the dynamics of relationships. But why did this happen? and what could they have done differently to save themselves from such an ending?
Despite being open about many other aspects of their lives, both Mashi and Vaibhav, failed to have healthy and open conversations about their money habits, priorities, values and goals. This resulted in arguments over financial losses and ultimately, their relationship ended. If they had taken the time to understand and appreciate each other's financial perspectives, they may have been able to work together towards a brighter financial future and maintain their love and commitment to each other.
With Sam and Sarah—they both never took initiative to learn what’s going on with their financial lives. It's good to be optimistic, hope and believe that everything is fine today and will be fine tomorrow. However, Sarah’s ignorance and over-optimism brought her in a situation where she was left feeling helpless and overwhelmed after Sam’s sad demise. If they had both tried to educate themselves and open up about their finances, their outcome could have been much different.
For Mohit and Manav—the secretive and controlling attitude of Manav about the company's finances built a sense of mistrust in Mohit and he started thinking Manav had been doing this deliberately and didn't see him as an integral part of business or important enough to have money related discussions. Clearly lack of healthy conversations and transparency about money, where it is coming from and where it is going, would have built a level of trust between both.
Relationships are built on trust, communication, and mutual understanding. When it comes to finances, it's no different. It really boils down to the closeness and connection the two partners can create around their finances. What went wrong in the above relationships – was a clear lack of financial intimacy and transparency. Let’s understand what ‘financial intimacy’ is and how we can build it to have strong successful relationships.
What is financial intimacy?
Financial Intimacy is the level of comfort and openness that partners have when it comes to discussing their finances. It's about understanding each other's financial personality, spending habits, and goals, and making decisions together based on shared values and priorities. It helps partners to build a strong foundation of trust, mutual understanding, and financial stability in their relationship.
Financial intimacy is not just for couples; it's also important for friends, family members, and business partners who share financial responsibilities. By establishing financial intimacy, partners can foster a sense of security, build a solid foundation for their relationship, and work towards a brighter financial future together.
The biggest challenge with financial intimacy is— how do you handle the thought of his money, my money, and our money and what does that look like for the two of you and answering how are we going to share this topic within our relationship and how are we going to have conversations around the money that is yours and mine.
When we enter a relationship, it becomes more than just – “hey honey, we need to talk about the budget”, rather it's everything that falls under the scope of your financial picture, be it insurance, or college planning, or vacations— if it costs money it all falls under your financial intimacy.
The impact of financial intimacy on relationships
The stories shared in the beginning of this article clearly reflect that when financial intimacy is not present in a relationship, it can lead to financial stress and conflict. For example, if one partner overspends or invests carelessly without considering the impact on the joint finances, this can cause tension and arguments, like it happened with Mashi and Vaibhav.
On the other hand, if one partner is overly controlling with finances, this can create feelings of resentment and frustration, like in the story of Mohit and Manav.
Jenkins and Stantley in their book “You paid how much for that: How to win at money without losing at love” say that financial conflict may occur from Job loss, home foreclosure, lack of credit access, high levels of investment portfolio loss, and fuel and food price inflation and can also reflect some hidden relationship issues i.e., unexpressed needs and feelings like need to power, commitment, respect, and fairness— if not attended to, can cause great damage to ones’ relationship.
For example, fights over commitment rather than actual management of their finances would be like, partners fighting over whether to join their finances. Or If an individual feels that they receive little respect from their partner, they may use financial conflict to fight about these deeper issues or if one feels that he or she is not seen financially equal to the other partner, despite contributing equally to the family finances.
Financial conflict in turn may lead to depression, divorce, anxiety, and hostility between the partners. Financial intimacy helps to prevent these issues from arising by fostering open communication about finances.
How can we build financial intimacy?
Here are some practical exercises to improve financial intimacy in your relationship:
Talk over a nice money date: Start by having honest conversations about your finances. If you haven’t been discussing finances usually, then make it a task to do every week or month –to spend some good time together, over a nice dinner or lunch with a glass of wine and talk about things like your income and investments, spending habits, debts, credit scores and what are your financial goals. Encourage your partner to participate, listen actively to understand their perspective.
Financial personality rapid fire: It’s important to know your partner’s financial personality, that is his/her unique traits, habits, and attitudes towards money and financial matters. For example, individuals who are more risk-averse may have different financial goals and habits compared to individuals who are more impulsive and willing to take financial risks like in the story of Mashi and Vaibhav.
This can lead to disagreements and conflict if partners do not understand each other's financial personality and approach to money. Running a rapid fire with your partner would help you understand your partner's financial personality, ask questions like:
- Are you a saver or a spender?
- How do you feel about taking on debt, such as a mortgage or credit card balance?
- Do you prefer to invest in stocks, bonds, or real estate?
- Do you prefer to live frugally or have luxury items and experiences?
- How do you feel about discussing and making decisions about money together?
- Are you more comfortable with a tight budget or a more relaxed spending plan?
- How do you feel about taking financial risks, such as starting a business or investing in a new opportunity?
- What is your philosophy on saving for the future, such as retirement or a child's education?
- Do you have a savings plan in place, such as an emergency fund or a specific investment account?
- Do you have any debt, and if so, how do you manage it?
Practise healthy debates: Engage in healthy debates, where you discuss your spending habits and priorities and find ways to align and work together to reach your shared financial goals.
For example, if one partner is a saver and the other is a spender, find ways to balance your spending habits to meet your shared goals. I am sure you would fight a bit, agree, and disagree, question a lot, but ultimately align to some common points. See as if you’re aligning with other members of your team while planning a project at work.
Set joint goals and write them out: Work together to set joint financial goals and plan to achieve them. Having shared goals creates a sense of unity and safety in a relationship. Good practice is to have it in writing, which you can look back at and review it regularly. This will also help you stay on track and make any necessary adjustments to your plan. This can include creating a budget, saving for a down payment on a house, or planning for retirement.
Have joint accounts: Turning your money to joint accounts can be a significant step in a relationship, it requires trust and a mutual understanding of each other's spending habits. It also facilitates the sense of responsibility.
For example, you both earn, and your salaries go into one joint account—all payments towards your shared goals –investments, insurance, EMIs, vacations, monthly bills etc should be made through that joint account. Although, it's important to agree on how to handle overdrafts, credit card debt, or other financial issues that may arise.
It’s okay to have separate personal budget: If you both like to keep your personal expenses separate of each other’s knowledge, then talk to each other about it and plan a budget for each of you while planning financial goals together— good practice would be to put all the money in one joint account from where you pay for all the shared goals and have shared savings, however you can disseminate the money budgeted for your personal needs to your separate personal accounts.
Seek professional advice: If you're having trouble communicating about finances, consider seeking professional advice from a financial advisor or a therapist. They can provide guidance and support to plan you towards your financial goals and help you improve your financial intimacy and strengthen your relationship.
I feel love, money and intelligence are intertwined, these three go well together. It’s not having a high IQ or multiple degrees, in most cases it is about developing your character and approaching your relationships with genuine curiosity and empathy discussing money matters.
The way we seek compatibility on sense of humour to hygiene to political values and even pet parenting skills, we should also seek compatibility on financial intelligence to later build financial intimacy together.
By having sincere conversations about finances, setting joint financial goals, and making decisions together based on shared values and priorities, couples can build a strong foundation of trust, mutual understanding, and financial stability with successful ends to their journeys together.
Dr. Sagneet Kaur, Associate Director of Behavioural Research, Morningstar
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