When it comes to financial planning, there are plenty of reasons to share the love. Money is often listed as one of the top reasons why people divorce. Therefore, it makes sense that open and honest discussions around money should be high on the list of priorities during the month of love. Whatever your relationship status however, whenever your financial well-being impact others, you need to share the love and include others in your financial planning.
While some people feel that money is not a topic that should be talked about openly, the reality is that your loved ones deserve to know where they stand in terms of your joint finances. Taboos around discussing your joint finances can cause harm in the long run and lead to unpleasant surprises for those who depend on you in any way. While it is always good to ensure your own finances are kept in order, you should also take the time to ensure you have considered the bigger, family picture. Below are some of the key reasons to consider including others in your financial planning.
Household costs need to be budgeted for together
The foundation of any sound plan is spending less than you earn. But if there is more than one party in a relationship, you need to work together to ensure this happens. This is obvious in the case of a couples, and most will say you should agree up front who will pay for what. A 50/50 split may not work well where one party earns more than the other, and failure to come to a fair agreement can lead to unhappiness and mounting resentment. However, we tend to include children in our planning less often. Children’s costs can quickly add up – and the sooner they realise the family’s financial limits, the better. Curbing expectations about excessive parties, presents or an extensive extramural schedule early can be vital. While we all want the best for our children, more is not always better, and we should never confuse love with money. Sacrifices are far easier to stomach as a family when you understand the reasons for them.
Be honest about debt
Debt is often a part of modern life, but it can quickly sink your family finances if left unchecked. Have honest conversations about when you feel comfortable using debt to fund expenses and when not. Ideally, debt should be reserved for buying major assets that you could not otherwise afford – like a property, for example. Debt should ideally not be used to fund consumer goods or consumption spending. If you ever feel like you need to hide your purchases from those closest to you, something is probably wrong. Problems often arise where one party in a relationship is careful in managing money, and the other is carelessly entering into debt. Depending on how you are married, your debt could impact your spouse and their credit record, particularly if you are married in community of property, or married out of property with accrual.
Teach your children how to work with money early on
Letting your kids know that you need to live within your means is an important first step, but you need to ensure they know how to handle the money they have early on. Every parent will find a system that works for them – and everyone is different. Whether you decide on a fixed pocket money amount or let your children do certain chores in exchange for money is up to you. Once you have decided on the rules, however, be careful not to bend them in the face of persuasive arguments driven by an urgent “want”. Encouraging kids early on to save up for that special item will not only clearly enforce the importance of saving and the value of money, but they will also be far more likely to value a special item if they had to wait (and work for) it.
Ensure you have a valid will in place
Make sure you have a valid will in place. A will does not need to be an elaborate document, but you need to ensure it is updated when your circumstances change, and that it accurately reflects your wishes. Leaving your loved ones without a will can cause a lot of heartache, uncertainty and unnecessary suffering. In addition, make sure you leave behind a clear record of your investments and policies, and that your family knows where your will is kept.