In the US, no one really talks about their money. It’s taboo—impolite, embarrassing, rude. No one wants to sit at the dinner table comparing salaries and tax brackets.
But when the time comes to buy a house, money talk is a necessary evil. Such conversations are critical to getting on the same page financially as your partner. In fact, financial disparities between partners is a leading cause of divorce when not handled properly.
Fortunately, we have some tips about having this delicate conversation on money with your partner, and coming out of it with a better idea of what you two can afford in the housing market.
Planning Before the Conversation.
Before anything, it is important to plan your conversation ahead of time. Write down questions and responses you would like to have ready when you have the talk with your partner. If you don’t already know what their yearly earnings are, it is time to find out.
Additionally, it may be helpful to brainstorm some financial management strategies to cut down on existing costs. Do you really need that magazine subscription or the deluxe package of cable channels? If you are coming into this conversation from a position of power (i.e. you earn more than your partner) take time to carefully word your conversation to avoid gridlock and tension. Some good opening lines include:
- “We might benefit from meeting a financial coach together.”
- “We should spend the night going over our budget together. Would you help me get a sense of our spending for each month?”
- Where do you think we should start our housing search in terms of pricing? What is financial stable for you?
Where to Start.
The first step of the money talk is perhaps the most difficult step. It is important that you and your partner talk about relationship goals. You don’t necessarily have to ask the clichéd question, “Where do you see yourself in 5 years?” but you should have a good forecast of where you will be in a year or two.
Further, where do you see this relationship going? Sometimes, a house is more than a purchase, but the next step in a relationship. If marriage or kids are on the horizon, that will certainly effect the size and location of your real estate search.
Next up, it is important to assess your current financial situation. Where are you both in terms of income and expenses, assets, debts, and credit ratings? Will your financial profile be strong enough to earn a favorable mortgage interest rate? Or will you have to plan to take on a little more debt? Alongside this conversation, it would be a good idea to think about ways to reduce any debts you have faster. This is where you and your partner should be getting into the nitty-gritty of financial transparency. Talk about retirement savings and compare credit scores; factor in family planning costs if that’s where your relationship is heading.
Once you have sussed out where you are presently in terms of money, it is time to look toward the future and discuss potential changes to how, where, and why you spend money. Budgeting together is the best way to start this conversation, identifying where each other can stand to shave off a few dimes.
Communication is key, especially if the money being put toward a home will come more from one partner than the other. That extra financial burden should be recognized and discussed. It is also time to compromise. Commonly, partners will have to find ways to balance the splurging problems of one partner with the intense frugality of the other.
Where to End Up.
Your conversation on financial planning should really culminate in a place of mutual understanding. You and your partner have a future ahead of you that requires, by necessity, time and money. Even if your financial situation changes in the next month or year, getting on the same financial page as your partner will give you a road map to fiscal solvency, and the ability to plan for your future years together.
With that knowledge in mind, you can come into the real estate market from a position of power, brokering deals that will suit you and your partner and provide a strong head start to a future together.
from Total Mortgage Underwritings Blog http://ift.tt/2aszdeJ
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