Couples are used to sharing most things — family holidays, chores, the occasional dessert — but many still have a hard time sharing the contents of their bank accounts.
According to a new Fidelity survey, 43% of couples said they had no idea how much their partner earns. When asked to hazard a guess, 10% were off by more than $25,000. Their better half’s paycheck wasn’t all they were in the dark about.
More than one-third of couples surveyed couldn’t agree on the balances of their investable assets. Nearly half (48%) said they have no idea how much they will need to save for retirement in order to sustain their current lifestyle and another 47% disagreed on the amount. Boomer couples (for the purposes of Fidelity’s survey, those born between 1946 and 1964) were the most likely generation to find themselves at odds with their partner about their household finances. Sixty percent of boomers couldn’t say how much their Social Security benefit might be (F.Y.I. you can download your free Social Security statement anytime you want).
The fact that so many couples aren’t on the same page financially isn’t entirely a symptom of miscommunication or necessarily a signal that there’s an imbalance in household finance management. One of the lasting impacts of the recession has been a changing employment landscape, which has left many families with irregular incomes. More employers are leaning on contract or freelance work and by the year 2020, independent contractors are expected to make up 40% of the U.S. workforce.
“As more and more people go into freelance work, it makes it harder for people to predict their own income, much less their partner’s,” says John Sweeney, Executive VP of Retirement and Investing Strategies for Fidelity. “But when your compensation becomes more variable, it’s even more important to have budgets established and make sure you’re in line with how much you’re spending.”
Till debt do us part
Couples’ concern for their financial future paired with a weak understanding of their current financial state are a dangerous combination when it comes to retirement planning.
More than half of the respondents in Fidelity’s survey said they’re worried about outliving their retirement savings (up from 42% in 2013), yet only 21% report having actually come up with a joint retirement savings plan.
Retirement planning isn’t rocket science, but it can be a painful process, especially at the beginning. Any good financial planner will want a couple to lay out exactly what money they’ve got coming in and how much money they’re paying out toward bills and debt. Who wants to kill the romance by bringing up all those student loans you’re still paying off and the fact that you might have leaned a little too heavily on credit card debt in your youth?
And debt is certainly something couples will have to deal with. A separate study by the NerdWallet found that 35% of adults in serious relationships (married, in a civil union or living with their partner) said they carried credit card debt into their relationships, with an average of $4,100 being brought in. Men were more likely than women to carry credit card debt (42% vs. 29%). Millennials were even more likely to bring debt to the table.
One-quarter of couples with at least one partner with credit card debt said it had a negative impact on their relationship, according to Nerdwallet. For 5% of couples, it nearly ended their relationship.
Bringing it to the table
The day that you sit down with your partner and lay your finances bare is always going to be an awkward moment. But it’s necessary if you want to create a financial plan that works for both of you.
To break the ice a little, Fidelity has put together a couple's money quiz on their website, which you can take for free. It’s not going to teach you how to merge finances or strategize for retirement, but it’s not a bad first step if you’re having trouble bringing up the topic on your own.
“By having those conversations you can begin to get aligned and work toward [financial] compatibility,” Sweeney says.
Check out our video on how couples can manage joint finances below: