Do you like spicy food, while your partner prefers bland comfort food? Do you and your partner share the same enthusiasm for scary rides? Of course, both you and your partner don’t have to like the same thing. After all, opposites attract.
Not liking the same thing is not the issue, but not knowing and understanding what your loved one prefers can lead to conflict – especially when it comes to money.
Before both of you decide to dump a lot of money in an investment – be it property, shares or even your child’s education fund – here are some hard questions you need to ask each other.
1. What didn’t you like about your parents’ money management methods?
For most, their outlook on finances is based on how they were brought up. Some were taught by their parents from young while others learned entirely from circumstance. To understand how your spouse manages his or her money, you first need to understand the seed that was planted years ago.
By asking this question, it will give you an insight on how important good money management is to your spouse.
Some other basic questions you can ask to get a better idea are:
- 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 wealthy?
- Would you be willing to take a commission-based job rather than a salaried one?
- How much are you comfortable with spending on family overall, rather than just for yourself?
2. Are you comfortable with high-yield + high-risk investments?
You may not even be aware that you and your spouse have different perspectives on what risk is or the risk appetite when it comes to investment.
Are you the daredevil in the relationship or are both of you contented with just putting your money in a savings account? These are the things you will find out by asking this question.
It is important to draw up an investment portfolio based on both of your risk appetites to avoid conflict in the future.
3. How much can you afford to lose right now and still maintain your current lifestyle?
If there is a difference in priority when it comes to financial security, it is best to find out before anything untoward happen to your joint investment.
Know each other’s limit. This question will open up a different side of your spouse that you may not find out in your usual conversation. Will losing the money invested completely put the two of you in the dog house? Or can it be easily brush off as a lesson learnt? Determine this before putting the money into your investments.
Always look at the numbers: when you have low income, little savings, not much time to accumulate or high amount of debt, you probably don’t want to be investing at high risk levels.
4. Are you comfortable with making a joint investment?
In order to collaborate financially, the risk is spread between two people. If you and your loved one decide to merge your finances both should decide on how to handle the money and can even consider splitting the investable between the two of you. For example, one can take on retirement accounts and the other on external investment portfolio, or vice versa.
It pays to track individual’s progress towards the common goals– to make sure your overall household finances balance well.
5. What are your financial goals?
In order to invest your money as a couple, both should be clear on the short and long-term financial goals. Some of the questions the both of you need to answer are: When do you want to buy your first home (if you have not)? When do you want to finish paying off your first home? Do you plan to retire, and at what age? When do you want to make your first million?
These five questions will help you and your spouse understand where you each stand on financial management. With this understanding, future conflicts can be reduced or avoided entirely.
Bearing in mind each other’s investment preference, a suitable investment portfolio can be drawn up to achieve the goals set. Of course, investments should not stand in the way of building up an adequate emergency fund for the family. When you are comfortable financially in both aspects, then the fun begins.
This article was first published in 2014 and has been updated for freshness, accuracy and comprehensiveness.