How to Talk About Your Household Income and Debt

Money & Relationships Side view of happy smiling couple sitting at the table and talking while having breakfast

Avoidance isn’t a solution. In fact, it’s the anti-solution. So, what are the results of not talking about your money – your household income and your debt (yes, debt!) – with your partner?

Consider this: studies show that couples who talk about money are in happier relationships, meaning they smile and laugh together more, they like spending time together more and, it’s quite possible though not quantifiable, they hear birds chirp more.

More to the point of this article, though, studies also show that couples who talk about money do better with their money. Their incomes are higher, their debts are lower and their investments performance is better.

None of this is to stay that talking about money with your partner is easy. In fact, bringing up the topic alone has been known to make people break out in sweat. So, as a couple who talks about money all the time, here are some suggestions to bringing up these sensitive topics, such as your household income and debt, with your partner.

1. Wait until you’re both calm and collected

Money’s inherently a hot topic for many people. It stirs emotions, usually negative, in most of us. That’s because we tie so much of our self-worth to our income, our net worth and our visible standard of living (i.e. our stuff).

The single biggest mistake couples make when talking about money is waiting until the worst time. It doesn’t help to bring up this topic when one or both of you are feeling emotional.

If one of you lost your job and your household income has taken a dig, it’s not an ideal time to broach the money topic for the first time. When you’re physically or emotionally stressed about your debt is not the best first time to talk about your money.

Therefore, wait for a time when you’re both calm and collected and it’s an appropriate place to bring up this topic. A common recommendation is to do so when you’re in a public place, such as a restaurant or coffee shop.

Additionally, we recommend not necessarily having your first talk about money when you’re in public but rather propose scheduling a time to talk about it in the future. The future may even be later that day, but you don’t want your partner to feel backed into a corner.  

Simply saying, “Hey, we both have financial goals. I feel like it would be good if we talked about our goals and what it will take to achieve them. Can we talk about our finances on Sunday evening?” will go a long way to bringing up the conversation without either of you feeling attacked or caught off guard.

Pro Tip: Blame the reason you want to talk about your household income and debt on reading this article. This will ease your partner’s discomfort with you bringing it up.

2. Schedule regular, recurring conversations

Couples don’t need to have the same financial goals to be successful, but they do need to be able to support each other’s pursuits in their individual goals. This is impossible if neither of you knows anything about your individual and collective goals.

In coaching couples, we’ve found the best way to get and stay on the same page is to schedule regular, recurring money meetings. Even just talking 15-minutes a week about your money will go a long way to achieving both your income and debt goals. If you find that meeting weekly is too frequent, schedule your talks at least monthly. Maybe have them in tandem with paying your bills and balancing your personal budget.

Pro Tip: With whatever regularity works for you and your partner, schedule and commit to meeting the same day and time each week or month and then avoid conversations about money outside of this time. This will help control the conditions under which you have money talks.

3. Know your household income and debt

A great follow-up meeting with your partner in discussing your financial goals calculating your true household income and total debt.

When it comes to income, most of us talk in round, inflated figures because we use the quoted annual figures our employers give us. We neglect to deduct taxes and benefits, such as health and retirement benefits. Thus, we don’t know what we truly bringing home each payday or each month, and we mistakenly assume we have more spending money than we do.

The same can be said for debt. Many of us don’t know how much debt we have because – well – it can be scary.

Believe us! We know.

However, avoidance isn’t a solution. The only way to tackle a problem is to accept there’s an opportunity, identify the challenges and create a plan to address your financial challenges.

Once you accept that you have debt, calculate exactly how much debt you have, including all types of debt: mortgage, auto, student loan, individual credit cards and any other debts or loans, including personal loans. Then, calculate how much money each debt is costing you.

To do this, on a spreadsheet list in their own columns:

  •       all your current types of debts
  •       your balance for each debt
  •       the interest rate you’re paying on each debt
  •       your average annual cost for each debt

In many cases, lenders provide an average annual estimate of what your debts cost you. Using their estimate is fine.

Once you’ve itemized each of your debts this way, it’ll be easier for you to track your plan to pay your debts off.

Pro Tip: Couples often struggle with managing their money because they have disparities in income. Here are three ways to address that.

4. Set income and debt goals

It’s not enough to know where you currently stand with your household income and debt. You need to know where you want them to go. With your partner, set household income and debt goals. Ask yourselves:

  •       What are our income goals over the next 1, 3 and 5 years?
  •       How much do our individual incomes need to increase to reach each goal?
  •       Where do you want your debts to be in the next 1, 3 and 5 years?
  •       How much in monthly payments must you pay toward each debt to reach each goal?

Write these goals down on a piece of paper and review them regularly, maybe when you have your regular, recurring money meetings.

Pro Tip: A great way to set and reach goals is to follow the S.M.A.R.T. system. The S.M.A.R.T. system says to set goals that are Specific, Measurable, Attainable, Relevant and Time-bound.

5. Create a plan and check it regularly

Once you ‘ve jotted down all this information, map your plan to reach your household income and debt goals.

Discuss with each other how you’ll achieve your income goals. Know whether one or both of you need to take action and what kind of action you need to take, such as getting a job promotion, changing employers or changing careers. Then, determine what steps you need to take to make each action happen.

When you know your debt goals, calculate the priority to pay off your debts and what your monthly payments need to be to achieve those goals. Finally, avoid the most common mistakes people make when paying off debt.

The clearer you are with the individual steps needed to achieve your household income and debt goals the more likely you are to achieve them. Once your plan is mapped, plan to update and track your progress during your regular and recurring meetings.

Pro Tip: Downloading and using the Mint app is a great way to keep track of your financial goals.

With a strategy to start and continue talking about your household income and debt goals, you and your partner will have better quality time together and reduce your financial stress. This will make you happier individuals and a happier couple – and happiness is what it’s all about.

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