Do you like spicy dishes, while your partner prefers bland comfort food? Do you and your partner share the same enthusiasm for spooky rides? Of course, you and your partner don’t have to love the same thing. After all, opposites attract.
Not liking the same thing is okay, but not knowing and understanding what your loved one prefers can lead to conflict, especially when it comes to money.
Before the two of you decide to put a lot of money into an investment – whether it’s property, stocks, or even your child’s education fund – here are some tough questions you must ask yourself.
1. What didn’t you like about your parents’ money management methods?
For the most part, their view of finances is based on how they were brought up. Some were taught by their parents from an early age while others learned entirely from the circumstances. To understand how your spouse manages their money, you must first understand the seed that was planted years ago.
Asking this question will give you some insight into how important good money management is to your spouse.
Here are some other basic questions you can ask to get a better idea:
- How much money do you need in a savings account before you consider yourself financially secure?
- At what level of assets would you consider yourself rich?
- Would you be prepared to accept paid employment rather than paid employment?
- How much are you comfortable spending on your family in general, rather than on yourself?
2. Are you comfortable with high return, high risk investments?
You may not even know that you and your spouse have different views about what risk is or about risk appetite when it comes to investing.
Are you the daredevil in the relationship or are you both just putting your money in a savings account? These are the things you will discover by asking this question.
It is important to build an investment portfolio based on both of your risk appetites in order to avoid conflicts in the future.
3. How much can you afford to lose now while still maintaining your current lifestyle?
If there is a difference in priority when it comes to financial security, it’s best to find out before anything untoward happens to your joint investment.
Know the limit of the other. This question will open up another side of your spouse that you might not discover in your regular conversation. Will losing the money you invest put you both completely in the niche? Or can it be easily brushed aside as a lesson learned? Determine this before you put any money into your investments.
Always look at the numbers: when you have low income, little savings, little time to accumulate, or a high amount of debt, you probably don’t want to invest at high levels of risk.
4. Are you comfortable making a joint investment?
In order to collaborate financially, the risk is shared between two people. If you and your loved one decide to merge your finances, you both need to decide how to handle the money, and may even consider splitting the investment between the two of you. For example, one may take retirement accounts and the other an external investment portfolio, or vice versa.
It helps to keep track of everyone’s progress towards common goals, to ensure that your overall household finances are well balanced.
5. What are your financial goals?
In order to invest your money as a couple, both need to be clear about short and long term financial goals. Some of the questions you need to answer are: When do you want to buy your first home (if you haven’t)? When do you want to finish paying off your first house? Are you planning to retire and at what age? When do you want to earn your first million?
These five questions will help you and your spouse understand where you are each in financial management. With this understanding, future conflicts can be reduced or avoided entirely.
By taking into account individual investment preferences, an appropriate investment portfolio can be established to achieve set goals. Of course, investments should not stand in the way of building up an adequate emergency fund for the family. When you are financially comfortable in both aspects, then the fun begins.
This article was first published in 2014 and has been updated for freshness, accuracy and completeness.
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