Ah, love… it’s a beautiful thing, but sometimes finances and money worries can get in the way. In fact, 84% of respondents in a Money Magazine survey said that money was the source of marital tensions with disagreements about financial priorities topping the list of problems (1). So, how should one manage money and love? Here are few insights to help you keep those love lights burning and your pocketbooks full without the added strain.
The world of finances can be complex – TFSAs, RRSPs, RESPs, registered vs. non-registered – it’s a lot and it’s easy to get lost in those day-to-day decisions that shape your financial future. In most households, it’s common for there to be one person who is "in charge" or more involved in the family finances. And that is just fine, but too often this leads to a lack of communication, which is never a good thing. The outcome is that only the one person can answer critical questions like “what comes in every month vs. what needs to come out to support the lifestyle”, “which account types allow for a beneficiary”, “what are the tax consequences of withdrawals from different accounts” or “what happens if I pass away without a will”? Life is busy, but it’s important to set some time aside for an annual review with your partner to discuss the important financial matters that will set you up for success in the future.
Money matters can get intricate, so do yourself a solid and get expert advice. Consider working with a financial planner, one that will provide some clarity for your financial future. The earlier you and your partner are able to identify key financial priorities, the better. It really just depends on your needs and stage of life – are you preparing for your retirement, to purchase your first home, pay down debts, invest, send your kids to school? It’s a lot to consider, but a good start is to for you and your partner to each list your financial goals (separately), then work with a planning professional to identify the key goals to action now versus which can be deferred to another time.
Much like a home, a financial plan requires a foundation – this is where risk management comes into play. You need to understand your financial risks and where your vulnerabilities lie. Imagine spending hours putting a solid plan into place, starting on your financial path, only to discover that you or your partner have a critical illness to confront or worse. It’s simply unimaginable, but you DO have to imagine it and then actively prepare for this situation with a contingency plan. There are a number of excellent financial vehicles to protect you from unexpected risks.
It goes without saying that you can accumulate wealth with systematic savings. That being said, it’s not always that simple. Take the time to educate yourself on how to save, where to save, and when to save. Here are a few quick tips:
1. Identify your time horizon - when do you plan to use these funds?
2. Pay yourself first – don’t count on haphazard deposits to save; instead, put a systematic savings regime in place to get you to your goal!
3. Taxes – definitely something to keep in mind. What type of account best suits your savings goal?
4. Grants, bonds and special benefits – there are many plans that can help you optimize your financial goals. For example, if you’re saving for your children's education, it's a good idea to invest in an RESP that provides "free" money in the form of contribution-matching up to a certain limit. Another example is if you’re buying a new home while looking to save for retirement; investing in an RRSP will allow you to access $35,000 via a first-time homebuyer’s loan program. You have options!
Love and money – we need them both, but sometimes it’s difficult to keep them apart. We hope we’ve provided you with some useful tips here to avoid the strains of love and money – now go and give your loved one a hug!
References1. CNN. Money? Sex? What couples are fighting about. CNN Money. n.d.