Judging by the number of articles written on the topic of money in relationships, it certainly qualifies as a hot-button issue.
Does money complicate relationships? In most cases, yes.
Could working towards a mutual financial goal strengthen relationships? I’d like to think so.
Although I’m not delusional: growing your wealth as a couple comes with its own set of unique challenges.
In my opinion, if a couple wants to combine their finances and build a better future together, several things need to happen first:
They need to be comfortable talking about money with each other, without getting into arguments.
That means no raised voices, no judgments, and no veiled personal attacks. Equally importantly (I’ve observed this too many times), money issues shouldn’t be used as a proxy punching bag when one party wants to air grievances about something else that’s troubling them.
They need to be 100% transparent about their finances, including significant assets, debts and bankruptcy history.
Having debts (especially if they were taken on to buy assets or to further one’s education) shouldn’t be a deal breaker, but hiding debts could be. Always make sure that financial conversations start off on the right foot and in good faith, to avoid nasty surprises down the line.
They need to share similar spending habits and lifestyle expectations, or be willing to adapt.
Opposites attract. Spendthrifts might admire penny-pinchers’ discipline, while the penny-pinchers might find spendthrifts exciting to be around. We can’t always choose who we fall in love with, but I bet anything that couples could avoid many unnecessary fights by being on the same page about how each of them spends their money.
They need to share similar financial goals.
If a person wants to be a millionaire by the age of 38 but their partner wants to live a lavish lifestyle in their 30s and 40s, bitter feelings of resentment could arise over these choices that are fundamentally at odds with each other.
Last but not least, they need to be equally willing and invested in achieving their financial goals.
It’s important to be in synch in terms of how each party contributes to ensure that their goals will be achieved within the set timeframe.
Challenges aside, there are major financial benefits to being part of a couple that merges finances, such as:
1. Shared expenses
At the risk of stating the obvious, a lot of expenses that have to be taken on by a single person can be shared between a couple that lives together.
Among those are some of the big-ticket items like rent, mortgage, condo fees, property taxes, and utility bills.
Need a sofa for your living room? A single person has to buy one, a couple would also only buy one.
How about high-speed Internet? The same logic applies.
As a side benefit, tasks like grocery shopping, cooking, cleaning and home maintenance can be done more efficiently when 2 people are involved, saving each of them plenty of time to pursue other money-making activities (like doing overtime at work or driving for Uber).
2. Support and motivation
Living frugally is tough.
Have I been tempted to splurge a little from time to time? You bet.
But I didn’t, because my husband reined me in at the last minute and reminded me why we’re living below our means in the first place.
Without his support, I wouldn’t have made as much progress on the money front as I have, that’s for sure.
3. Faster compounding
When couples combine their earning powers, they make more, save more, and build their nest egg faster.
A bigger nest egg + the power of compounding (exponential growth year over year) = awesome!
4. More investment opportunities
But when you have substantial disposable income as a couple (because of factors mentioned above), more investment vehicles are within your reach, including elusive ones like commercial real estate and private equity.
5. Tax benefits
I mean, isn’t that the primary reason why people get married? Just kidding.
How Does Your Net Worth Stack Up?
If you’ve read my post How Does Your Net Worth Compare With The Average Canadian?, you know I’m a fan of net worth data.
In this blog post, we shall analyze net worth data for Canadian couples from Statistics Canada.
It would be interesting to know:
Given all the financial challenges and advantages that they face, how do Canadian couples fare in terms of net worth changes over their lifetimes?
Also, is your household net worth ahead of the pack based on this data set?
Let’s find out!
Here are the average and median net worths of Canadian couples at different stages in their lives:
Age Group Median Net Worth Average Net Worth
Under 35 Years 106,000 277,300
35 to 44 Years 287,100 542,100
45 to 54 Years 612,500 982,300
55 to 64 Years 918,600 1,414,500
65 Years and Older 762,900 1,167,500
Globally speaking, the numbers here are quite impressive at a first glance.
However, the discrepancy between the averages and the medians is nothing to sneer at. Median net worths are noticeably lower, and paint a more accurate financial picture of the typical Canadian couple.
As you already know, median is the midpoint of a series of values, so that means half of the population within the same age group have net worths above the median value, and the other half below.
While the wealthy 1% is pulling up the average net worth across the board (which explains why the average values are higher than the medians), at least half of the Canadian retirees have less than $762,900 to their names, which doesn’t sound terrible at all until you realize that this number includes the primary residence. So the actual nest egg from which an income can be drawn in retirement is even smaller in size.
Assuming that the primary residence is conservatively estimated to be worth $300,000, their investable assets are $462,900 at most. Applying the 4% rule, this translates to $18,516 per year. $18,516 in perpetual income isn’t awful, but it doesn’t exactly spell out “comfortable retirement” either for people who live in the metropolitan areas of the country.
To add fuel to the fire, folks are carrying debt into their retirement. Even though the median debts for couples older than 65 are only $36,000 – not an Earth-shattering amount but can still be financially crippling if the interests on these debts are high.
With all that said, there’re no shortage of wonderful places within Canada where it’s possible to live comfortably on little. Plus, defined benefit pension plans, the Canada Pension Plan (CPP) and the Old Age Security (OAS) programs can always come to the rescue during retirement. So it’s not all doom and gloom at all.
Want to track your own net worth? Feel free to download my net worth spreadsheet.
Does anyone want to chime in on the topic of money in relationships? Be my guest!
Emergency fund? Vacation fund? Post-apocalyptic shelter building fund?
Whatever you’re saving for, the EQ Bank Savings Plus Account will keep your hard-earned dollars safe, cozy and growing at an everyday interest rate* of 2.45%.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.