Businesses need financing for start-up costs or to fund expansions. Depending on your business, you have several options for raising the necessary capital. In addition to using your savings, the most common methods of financing are debt financing by obtaining a loan and equity financing by selling shares in your business. However, there are other creative options, such as purchase order funding, crowdfunding, or using a credit card.
Identify business lenders. Debt financing is probably the most common way to finance your business. You take out a loan and agree to pay it back over a certain amount of time. The lender charges interest and makes a profit that way. The most common business lenders are the following:
Commercial banks. If you do business with a bank, you can stop in and ask how to get a business loan.
Small Business Administration. The SBA technically doesn’t make loans, but it will guarantee loans for small businesses. This means if you default, then the SBA will cover the loan. Whether your business qualifies as “small” will depend on your industry.
Online lenders. Generally, online lenders have looser lending standards and won’t require that you pledge collateral. However, you’ll need to make sure the lender is reputable by checking with the Better Business Bureau and a local consumer protection agency.
Gather necessary paperwork. A lender will need to analyze your business’ finances before extending a loan. Collect the following paperwork, which most lenders require:
resumes for all owners and managers.
business plan.
personal and business tax returns for the past three years.
personal and business credit reports.
personal and business bank statements.
accounts receivable and accounts payable.
business licenses..
articles of incorporation or organization
commercial leases.
Update your financial reports. You’ll also need to submit financial reports to most lenders. Make sure you have created the following and that the information is updated.
Signed personal financial statements from any significant owner of the business. Generally, you’ll need a personal financial statement from anyone who owns more than 20% of the business.
Balance sheet for the business. This is the snapshot of your business and contains information about assets, liabilities, and owner’s equity.
Income statement. This document shows your business’ profitability during a specific period of time.
Cash flow analysis.
Review your credit history. Unless your business is established, a bank won’t lend to the business. Instead, they will lend based on your personal credit history. Review your credit history and clean up any errors before applying for loans.
Common errors include inaccurate balances, wrong credit limits, and accounts listed inaccurately as in default or collections.
Dispute errors online or by writing a letter to the credit bureau that has the error. The Federal Trade Commission has a sample letter you can use.
Find collateral to pledge. It might be easier to get a secured loan that is backed up with assets pledged as collateral. If you default on the loan, then your lender can seize the assets. Because of this added protection, banks might require collateral if you don’t have an established credit history.
You can pledge a variety of assets as collateral. For example, you can pledge your vehicle, home, equipment, or other assets. Talk to banks about their specific requirements.
Fully document the condition and value of your collateral. For example, you may need to have your collateral appraised.
Compare loans. After you submit an application, the lender should decide whether to approve you. Generally, it takes two to four weeks to hear back. If you applied to more than one lender, then you should compare the loan details.
Interest rate. Find out what percent will be charged annually on the loan.
Fees. You may have to pay an origination fee or other fees. Read the fine print to find out the fees charged.
Prepayment penalty. If you want to pay off your loan early, then some lenders might hit you with a fee for the privilege.
Length of repayment. Check how long you have to repay the loan. Generally, the longer the loan, the less you will pay each month. However, the total amount you pay will be higher.
Submit your application. Provide all requested information and double check that it is accurate. If you have questions, contact the lending officer you have been working with. Submit your application with all supporting documentation and keep a copy for your records.
Businesses need financing for start-up costs or to fund expansions. Depending on your business, you have several options for raising the necessary capital. In addition to using your savings, the most common methods of financing are debt financing by obtaining a loan and equity financing by selling shares in your business. However, there are other creative options, such as purchase order funding, crowdfunding, or using a credit card.
Identify business lenders. Debt financing is probably the most common way to finance your business. You take out a loan and agree to pay it back over a certain amount of time. The lender charges interest and makes a profit that way. The most common business lenders are the following:
Commercial banks. If you do business with a bank, you can stop in and ask how to get a business loan.
Small Business Administration. The SBA technically doesn’t make loans, but it will guarantee loans for small businesses. This means if you default, then the SBA will cover the loan. Whether your business qualifies as “small” will depend on your industry.
Online lenders. Generally, online lenders have looser lending standards and won’t require that you pledge collateral. However, you’ll need to make sure the lender is reputable by checking with the Better Business Bureau and a local consumer protection agency.
Gather necessary paperwork. A lender will need to analyze your business’ finances before extending a loan. Collect the following paperwork, which most lenders require:
resumes for all owners and managers.
business plan.
personal and business tax returns for the past three years.
personal and business credit reports.
personal and business bank statements.
accounts receivable and accounts payable.
business licenses..
articles of incorporation or organization
commercial leases.
Update your financial reports. You’ll also need to submit financial reports to most lenders. Make sure you have created the following and that the information is updated.
Signed personal financial statements from any significant owner of the business. Generally, you’ll need a personal financial statement from anyone who owns more than 20% of the business.
Balance sheet for the business. This is the snapshot of your business and contains information about assets, liabilities, and owner’s equity.
Income statement. This document shows your business’ profitability during a specific period of time.
Cash flow analysis.
Review your credit history. Unless your business is established, a bank won’t lend to the business. Instead, they will lend based on your personal credit history. Review your credit history and clean up any errors before applying for loans.
Common errors include inaccurate balances, wrong credit limits, and accounts listed inaccurately as in default or collections.
Dispute errors online or by writing a letter to the credit bureau that has the error. The Federal Trade Commission has a sample letter you can use.
Find collateral to pledge. It might be easier to get a secured loan that is backed up with assets pledged as collateral. If you default on the loan, then your lender can seize the assets. Because of this added protection, banks might require collateral if you don’t have an established credit history.
You can pledge a variety of assets as collateral. For example, you can pledge your vehicle, home, equipment, or other assets. Talk to banks about their specific requirements.
Fully document the condition and value of your collateral. For example, you may need to have your collateral appraised.
Compare loans. After you submit an application, the lender should decide whether to approve you. Generally, it takes two to four weeks to hear back. If you applied to more than one lender, then you should compare the loan details.
Interest rate. Find out what percent will be charged annually on the loan.
Fees. You may have to pay an origination fee or other fees. Read the fine print to find out the fees charged.
Prepayment penalty. If you want to pay off your loan early, then some lenders might hit you with a fee for the privilege.
Length of repayment. Check how long you have to repay the loan. Generally, the longer the loan, the less you will pay each month. However, the total amount you pay will be higher.
Submit your application. Provide all requested information and double check that it is accurate. If you have questions, contact the lending officer you have been working with. Submit your application with all supporting documentation and keep a copy for your records.
There are many benefits to an owner financing deal when purchasing a home. Both the buyer and seller can take advantage of the deal. But there is a specific process to owner financing, along with important factors to consider. You should begin by hiring people who can help you, such as an appraiser, Residential Mortgage Loan Originator, and lawyer.
Part 1 Hiring People to Help You.
1. Hire an appraiser. Both the buyer and the seller should hire their own appraiser to determine the value of the house. The seller receives an appraisal in order to select a price for the home, and the buyer gets an appraisal to confirm that the selling price is fair. You can find an appraiser in the following ways:
look in the Yellow Pages, ask for a referral from a mortgage company, bank, or realtor, contact your state’s licensing agency.
2. Hire a real estate attorney. Both parties should work closely with a real estate attorney. A real estate attorney can draft all of the necessary paperwork. The attorney can also protect your interests. For example, the buyer can include a protection clause just in case the property has to be sold in response to a life changing event, job relocation or loss, divorce or death.
You can get a referral to a real estate attorney by contacting your local or state bar association. Bar associations are organizations made up of attorneys, and they often provide referrals to their members or can help you find an attorney.
3. Get advice from a Residential Mortgage Loan Originator (RMLO). A Residential Mortgage Loan Originator can give you advice on how to manage owner financing in a way that is transparent and compliant with regulations. When you owner finance a home, you are essentially providing the buyer a loan until they complete their payments on the home. Since you want your agreement to be clear and binding, it's good to work with a mortgage professional.
Your RMLO can help ensure that your owner financing documents are compliant with the Safe Act and Dodd Frank Act.
Make sure your RMLO is properly licensed by your state. Check with your state’s Department of Business Oversight or equivalent state office to check.
Part 2 Preparing for the Sale.
1. Get approval if you still have a mortgage. Owner financed sales work best when the owner has title free and clear or the owner can pay off the mortgage with the buyer’s down payment. However, if the seller still has a large mortgage, they need to get their lender’s approval.
Check whether you can pay off the mortgage with the buyer’s down payment. If not, then contact your mortgage company and discuss that you want to sell the house.
2. Consider performing background checks to control risk. Both the seller and buyer should perform background checks on each other. Many owner financed sales are short-term, for five years or so. At the end of the term, the buyer is expected to refinance and then make a “balloon payment,” paying off the balance of the loan. As a seller, you will want assurance that a buyer can get a traditional loan at the end of the contract term, which means you definitely want to check their credit history and employment.
In fact, sellers should consider having buyers complete a loan application. You can verify references, employment history, and other financial information.
Buyers also benefit from background checks. For example, they might discover that the seller has been financially irresponsible. If the seller still holds a mortgage on the home, there is a risk of default.
3. Determine loan details. One advantage of an owner financed sale is that the seller controls details about the financing. Because the seller is assuming a lot of risk, they should come up with terms that protect them. Talk with your attorney about what the terms of the loan should be. Consider the following.
a substantial down payment (usually 10% or more), an interest rate that is higher than usual (though less than your state’s maximum allowable interest rate), a loan term you are comfortable with.
4. Ask your lawyer draft a purchase and sale agreement. You want to protect yourself legally by making sure that you have all of the necessary legal documents prepared. Your real estate attorney can draft a purchase and sale agreement, which both seller and buyer will sign. This document provides information about the following:
closing date, name of the title insurance company, final sale price, details about a down payment, if any.
contingencies which must be met for the sale to proceed, such as an acceptable inspection and a clear title report.
5. Draft a promissory note. The seller also needs the buyer to sign a promissory note or other financial instrument. Your lawyer can draft this document for you. It should contain the following information.
borrower’s name, property address, amount of the loan, interest rate, repayment schedule, terms for late or missed payments, consequences of default.
6. Have your lawyer draft a mortgage. The mortgage provides security for the loan. Your lawyer should also draft this document for you. The mortgage is what allows you to repossess the house should the buyer default on the loan.
Part 3 Completing the Sale.
1. Agree on an interest rate and term with the buyer. Your RMLO partner will calculate the agreed upon amount based on a specific period of time and if you have agreed on a balloon payment. Remember that not every state allows balloon payments.
For example, you can base monthly payment amount on a hypothetical 30-year mortgage, but schedule payment of the remaining amount in 5 years (balloon). The RMLO will also create required disclosures for the seller/lender.
2. Close the sale. Both the buyer and seller should have independent attorneys who can review all paperwork to make sure that it is complete. You should schedule a closing to sign everything and make copies.
3. Hire a loan servicer to manage payments. The seller should talk to their lawyer about whether they want to hire a loan servicer. If they do, then their lawyer can recommend someone. A loan servicer provides many important services.
collects the mortgage payments, sets up an escrow, handles tax statements and payments, makes insurance payments, processes payment changes, performs collection services, if necessary.
4. Record your mortgage or deed of trust. You can record it in the county land records office. Doing so will allow the buyer and the seller to take advantage of tax deductions. Making the deal official in this manner also proves that the sale took place.
Part 4 Deciding Whether an Owner Financed Sale is Right.
1. Analyze your situation as a seller. Owner financed sales are rare, and you shouldn’t jump into one until you have thoroughly considered your situation. Think about the following.
You usually must own the house free and clear of any mortgage. Otherwise, you will need your lender to give you permission to sell.
Taxes can be complicated and you’ll want to hire a tax professional to help you.
You might have to go through the foreclosure process if the buyer stops making payments. This can be costly and time-consuming.
However, you may make much more money on an owner financed sale than if you sell the traditional way.
2. Determine if an owner financed sale is ideal as a buyer. Buyers usually like owner financed sales because a seller might be less choosy than a bank or mortgage lender. However, you should consider the following.
You might have to come up with a larger down payment than you normally would. The owner-seller is taking a risk by financing your sale, and in return they might want a larger down payment or higher interest.
Owner financed sales often close faster than other sales.
You need to be sure you can make the balloon payment if one is written into the contract. If you break the contract, then you could lose the house and all of the payments you have made up to that point.
3. Talk with professionals if you have questions. In addition to working with a real estate lawyer, you might want to meet with a tax professional, such as a certified public accountant. Ask about the tax benefits of an owner financed sale compared to selling outright.
If you are a buyer, then you should talk about how to raise your credit score so that you qualify for a traditional mortgage when the balloon payment comes due.
4. Make sure your buyer can cover the balloon payment. Owner financing is most often used when the buyer or property does not qualify for a conventional loan. This means the buyer may not have the resources to cover the balloon payment at the end of your term. Discuss your buyer's options before entering into a contract with them.
If you are a buyer, make sure that you have your options for paying the balloon payment lined up before you agree to the seller's terms.
5. Consider a lease-to-own option. This option is often more advantageous for the buyer and less complicated for the seller. You and the person interested in your home will lock in a potential sale price for the home, as well as a lease agreement ranging from 2 to 5 years. During that time, the person will pay you rent on the home, with a portion of that rent going toward a down payment on the house. After the lease ends, the person can choose to proceed with the sale as arranged, or they can opt to walk away.
If they walk away, they don't get a refund on the extra money they paid toward the down payment.
If they do walk away, you'll need to relist your home.
Tips.
The seller should ask that the buyer purchase homeowner's insurance and confirm the seller as mortgagee.
The seller should establish a land contract. With a land contract, title doesn’t pass to the buyer until the final payment has been made. Discuss this option with your attorney and see if such a contract is feasible.
There are many benefits to an owner financing deal when purchasing a home. Both the buyer and seller can take advantage of the deal. But there is a specific process to owner financing, along with important factors to consider. You should begin by hiring people who can help you, such as an appraiser, Residential Mortgage Loan Originator, and lawyer.
Part 1 Hiring People to Help You.
1. Hire an appraiser. Both the buyer and the seller should hire their own appraiser to determine the value of the house. The seller receives an appraisal in order to select a price for the home, and the buyer gets an appraisal to confirm that the selling price is fair. You can find an appraiser in the following ways:
look in the Yellow Pages, ask for a referral from a mortgage company, bank, or realtor, contact your state’s licensing agency.
2. Hire a real estate attorney. Both parties should work closely with a real estate attorney. A real estate attorney can draft all of the necessary paperwork. The attorney can also protect your interests. For example, the buyer can include a protection clause just in case the property has to be sold in response to a life changing event, job relocation or loss, divorce or death.
You can get a referral to a real estate attorney by contacting your local or state bar association. Bar associations are organizations made up of attorneys, and they often provide referrals to their members or can help you find an attorney.
3. Get advice from a Residential Mortgage Loan Originator (RMLO). A Residential Mortgage Loan Originator can give you advice on how to manage owner financing in a way that is transparent and compliant with regulations. When you owner finance a home, you are essentially providing the buyer a loan until they complete their payments on the home. Since you want your agreement to be clear and binding, it's good to work with a mortgage professional.
Your RMLO can help ensure that your owner financing documents are compliant with the Safe Act and Dodd Frank Act.
Make sure your RMLO is properly licensed by your state. Check with your state’s Department of Business Oversight or equivalent state office to check.
Part 2 Preparing for the Sale.
1. Get approval if you still have a mortgage. Owner financed sales work best when the owner has title free and clear or the owner can pay off the mortgage with the buyer’s down payment. However, if the seller still has a large mortgage, they need to get their lender’s approval.
Check whether you can pay off the mortgage with the buyer’s down payment. If not, then contact your mortgage company and discuss that you want to sell the house.
2. Consider performing background checks to control risk. Both the seller and buyer should perform background checks on each other. Many owner financed sales are short-term, for five years or so. At the end of the term, the buyer is expected to refinance and then make a “balloon payment,” paying off the balance of the loan. As a seller, you will want assurance that a buyer can get a traditional loan at the end of the contract term, which means you definitely want to check their credit history and employment.
In fact, sellers should consider having buyers complete a loan application. You can verify references, employment history, and other financial information.
Buyers also benefit from background checks. For example, they might discover that the seller has been financially irresponsible. If the seller still holds a mortgage on the home, there is a risk of default.
3. Determine loan details. One advantage of an owner financed sale is that the seller controls details about the financing. Because the seller is assuming a lot of risk, they should come up with terms that protect them. Talk with your attorney about what the terms of the loan should be. Consider the following.
a substantial down payment (usually 10% or more), an interest rate that is higher than usual (though less than your state’s maximum allowable interest rate), a loan term you are comfortable with.
4. Ask your lawyer draft a purchase and sale agreement. You want to protect yourself legally by making sure that you have all of the necessary legal documents prepared. Your real estate attorney can draft a purchase and sale agreement, which both seller and buyer will sign. This document provides information about the following:
closing date, name of the title insurance company, final sale price, details about a down payment, if any.
contingencies which must be met for the sale to proceed, such as an acceptable inspection and a clear title report.
5. Draft a promissory note. The seller also needs the buyer to sign a promissory note or other financial instrument. Your lawyer can draft this document for you. It should contain the following information.
borrower’s name, property address, amount of the loan, interest rate, repayment schedule, terms for late or missed payments, consequences of default.
6. Have your lawyer draft a mortgage. The mortgage provides security for the loan. Your lawyer should also draft this document for you. The mortgage is what allows you to repossess the house should the buyer default on the loan.
Part 3 Completing the Sale.
1. Agree on an interest rate and term with the buyer. Your RMLO partner will calculate the agreed upon amount based on a specific period of time and if you have agreed on a balloon payment. Remember that not every state allows balloon payments.
For example, you can base monthly payment amount on a hypothetical 30-year mortgage, but schedule payment of the remaining amount in 5 years (balloon). The RMLO will also create required disclosures for the seller/lender.
2. Close the sale. Both the buyer and seller should have independent attorneys who can review all paperwork to make sure that it is complete. You should schedule a closing to sign everything and make copies.
3. Hire a loan servicer to manage payments. The seller should talk to their lawyer about whether they want to hire a loan servicer. If they do, then their lawyer can recommend someone. A loan servicer provides many important services.
collects the mortgage payments, sets up an escrow, handles tax statements and payments, makes insurance payments, processes payment changes, performs collection services, if necessary.
4. Record your mortgage or deed of trust. You can record it in the county land records office. Doing so will allow the buyer and the seller to take advantage of tax deductions. Making the deal official in this manner also proves that the sale took place.
Part 4 Deciding Whether an Owner Financed Sale is Right.
1. Analyze your situation as a seller. Owner financed sales are rare, and you shouldn’t jump into one until you have thoroughly considered your situation. Think about the following.
You usually must own the house free and clear of any mortgage. Otherwise, you will need your lender to give you permission to sell.
Taxes can be complicated and you’ll want to hire a tax professional to help you.
You might have to go through the foreclosure process if the buyer stops making payments. This can be costly and time-consuming.
However, you may make much more money on an owner financed sale than if you sell the traditional way.
2. Determine if an owner financed sale is ideal as a buyer. Buyers usually like owner financed sales because a seller might be less choosy than a bank or mortgage lender. However, you should consider the following.
You might have to come up with a larger down payment than you normally would. The owner-seller is taking a risk by financing your sale, and in return they might want a larger down payment or higher interest.
Owner financed sales often close faster than other sales.
You need to be sure you can make the balloon payment if one is written into the contract. If you break the contract, then you could lose the house and all of the payments you have made up to that point.
3. Talk with professionals if you have questions. In addition to working with a real estate lawyer, you might want to meet with a tax professional, such as a certified public accountant. Ask about the tax benefits of an owner financed sale compared to selling outright.
If you are a buyer, then you should talk about how to raise your credit score so that you qualify for a traditional mortgage when the balloon payment comes due.
4. Make sure your buyer can cover the balloon payment. Owner financing is most often used when the buyer or property does not qualify for a conventional loan. This means the buyer may not have the resources to cover the balloon payment at the end of your term. Discuss your buyer's options before entering into a contract with them.
If you are a buyer, make sure that you have your options for paying the balloon payment lined up before you agree to the seller's terms.
5. Consider a lease-to-own option. This option is often more advantageous for the buyer and less complicated for the seller. You and the person interested in your home will lock in a potential sale price for the home, as well as a lease agreement ranging from 2 to 5 years. During that time, the person will pay you rent on the home, with a portion of that rent going toward a down payment on the house. After the lease ends, the person can choose to proceed with the sale as arranged, or they can opt to walk away.
If they walk away, they don't get a refund on the extra money they paid toward the down payment.
If they do walk away, you'll need to relist your home.
Tips.
The seller should ask that the buyer purchase homeowner's insurance and confirm the seller as mortgagee.
The seller should establish a land contract. With a land contract, title doesn’t pass to the buyer until the final payment has been made. Discuss this option with your attorney and see if such a contract is feasible.
Financial reports, also called financial statements, demonstrate a company's financial position over a specific period of time. Most businesses and organizations provide financial reports to their Boards of Directors, shareholders and investors on a monthly, quarterly or annual basis. They are reviewed to identify trends, successes and problems within a company's finances. These reports are often prepared by accountants or financial teams, but they are not complicated to read. Read a financial report by paying attention to the balance sheet, income and cash flow.
Steps.
1. Identify the time period covered by the financial report. Usually, the top of the report or statement lists the time period.
2. Look at the balance sheet. The balance sheet lists the assets and liabilities of the company.
Take a look at how the balance sheet is set up. In some reports the assets will be listed on the right, and the liabilities on the left on other reports the assets will be listed first and on top, and the liabilities below after the assets.
Read the assets. Assets include cash, investments, property and other things owned by the company that have value. The assets are listed in order of liquidity. The most liquid assets, such as cash, are presented first.
Review the liabilities. Liabilities are debts or obligations that the company owes to others. These include rent, payroll, taxes, loan payments and money owed to other vendors or contractors.The liabilities and equity section are combined to produce a balance with the asset component. The equity section gives a break down of the value of money invested and re-invested in the business.
Notice the difference between current liabilities and long term liabilities. Current liabilities are things that need to be paid off within a year. Long term liabilities will take more than a year.
A balance sheet must always balance that is, the sum of assets must be equal to the sum of liabilities and equities. If that is not the case, it is usually the first sign of a badly reported financial Statement.
3. Look at the income statement. This will show you how much money the company earned over the specified period of time. Any money that was spent in earning that income will also be reflected.
Read the top line, which should say "sales" or "gross revenue." This reflects the amount of money the company made by providing its products or services, before any expenses are deducted.
Look at the cost of goods sold. This is the negative figure directly below the revenue/ sales figure. This figure represents the direct expenses incurred by the business in making the revenue/ sales figure.
The Gross profit which is the difference between the sales/revenue figure and the cost of goods sold represents the profit made by the business before operational expenses are deducted. This figure is always a positive number, if it is negative, it means the business is not viable.
Review the operating expenses. These include the costs of doing business, such as salaries, advertising, salaries and miscellaneous expenses.
Notice the depreciation line. This reflects the cost of an asset over the amount of time it can be used by the company.
Check the operating profit, which is the amount of money the company made after the operating expenses are deducted, the operating profit is the Gross profit figure less the total operating expenses figure.
Look at the amount of interest that was earned and paid. These are called Finance costs if interests are paid or Finance income if interests are earned. A business inures finance costs when it has borrowed money at an interest like wise a business earns Finance/ Interest income when it has lent money at an interest or invested in money market securities. .
Check the amount of income tax that was subtracted.
Read the last line of the income statement. This reflects the net profit or loss.
4. Look at the cash flow statement. This will tell you how much cash the company has available. It will also track the money coming in and out of the company during the specified time.
Read about the operating activities first. This section analyzes how the company's cash was used in order to reach its net profit or loss.
Check the investment activities. This part of the cash flow statement shows any income from investments or assets that were sold.
Look at the financing activities. This tracks what the company did to pay back or acquire things such as bank loans.
5. Review any narratives. Accounting professionals will often provide a paragraph that provides an overview of the financial report.
6. Look through supporting documentation if you have questions. There are usually back-up or supporting documents available, such as receipts and invoices, that help explain transactions.
Tips,
Remember that all of your financial reports will be included in audits and tax preparations. Ask your accountants if you have any questions or feel unsure about what you are reading.
Schedule an independent audit at least 1 time per year in order to make sure your financial reports and statements are consistent and accurate.
Money and finances are one of the most common sources of conflict for couples. Money problems can stem from not being open about your finances and having differing views of how money should be spent. To help prevent fights about finances, discuss each other’s views about money, come to a compromise that respects both your values, communicate about your finances openly, and set goals to help keep your finances in order.
Method 1 Discussing Your Views About Money.
1. Talk about your view on money. One of the money problems that arises between couples is due to their differing position on money. Some people are spenders and others are savers. These two mindsets can strongly clash. To help get past this problem, you should talk about these differences.
During this discussion, talk about whether you are a saver or spender.
Having open communication about your ideas and feelings on money can help you start to solve or eliminate problems.
For example, you may say, "I believe that money is hard-earned and should be enjoyed." Alternately, you may say, "Saving money is important to me. We work too hard for it to spend it often."
2. Discuss what money means to you. Often, the arguments about finances aren’t about money specifically, but about what money means to the people in the relationship. To help prevent any financial arguments, you and your partner should explain to each other what money means to you and what it signifies. This can help you understand each other.
For example, you may think that saving money means safety and security. You may think that saving money or spending it can show love and affection. Saving money may make you feel in control and like you have power.
You may feel that you deserve to spend your hard earned money on yourself, or you may feel that you deserve to save your hard earned money for future plans.
Determine if you or your partner use money as a way to measure success, status, or keep score with others.
Make sure to discuss any fears you have about money and the way that your family approached money growing up.
For example, you may say, "Saving money makes me feel safe. When we were growing up, we had no money, so having a savings account helps me feel like I'm taking care of my family."
3. Acknowledge your differences about money with an open mind. After you have discussed what money means to both of you, you should use the opportunity to understand each other’s position and ideas about money. You should not point fingers or try to make one of your right and wrong. There is nothing wrong with having different values about money. You have to work towards understanding, accepting, and compromising.
For example, work on understanding why your partner feels that spending money is something they have earned and deserved. Try to see how saving money makes your partner feel in control and safe.
Both you and your partner are two different people, which means you are not going to have the same opinions about everything. Communicating about your ideas of money can help prevent and avoid misunderstandings.
If your partner has illogical, irresponsible, or contradictory ideas about money, that is a separate issue. You want to accept different ideas about money, yet help your partner work through illogical money ideas that may harm your family.
Try saying, "I understand that you want to save money though I like to treat myself for my hard work. Can you explain to me why saving money is so important to you? I will explain to you why I think we deserve to spend some of our money."
4. Compromise with both of your sets of values. After you have figured out what each of you feels about money, you can then work on a compromise. Compromise means you both stay positive as you find a way to negotiate both of your values. Find some common ground that benefits you both. You should work on finding ways for both of your to compromise equally so one person isn’t giving up more than the other.
For example, you may come to a compromise where you set aside money each month to spend on yourself while your partner sets aside a similar amount to save. You both can come to an agreement on what things are considered special splurge purchases, and decide what you want to save money on to purchase or invest in in the future.
5. Take a break and come back to the discussion. If you and your partner are discussing money and start arguing or yelling, stop the conversation and go do something else. Stepping away for a moment will help you and your spouse have time to calm down and think more logically about what has been said.
You and your partner will not always agree about money. However, it is crucial that you learn how to compromise so you can meet everyone’s needs and address each other’s concerns.
Method 2 Communicating Effectively About Finances,
1. Be open about your finances. One way to help prevent arguments about money is the be open about your finances with your partner. This helps each of you be on the same page, so you won’t be keeping secrets about money or lying about money. These behaviors can cause problems and arguments.
When your relationship gets to the point where you start sharing bills and financial responsibilities, you should be open about all of your finances. This includes your debt, income, and financial obligations.
Tell your partner, "I want to share my finances with you. I have some student loan debt, a car payment, and two credit cards."
2. Keep your partner in the loop. You should share vital financial information with your partner so that you both stay informed of each other’s financial situation. This includes any changes to your income, tax returns, and credit reports. This helps maintain honesty and communication between you, and you can avoid potential problems if you keep something from your partner.
This often happens at the beginning of a partnership, when you let your partner know your financial situation. However, you should continue doing this throughout the relationship, especially if things change significantly.
For example, you may say, "My credit report has changed recently due to my recent bill payments. I'd like to go over what changed the credit report with you."
Another way to prevent arguments is to agree to text or call if you are thinking of purchasing something over an agreed upon spending limit, such as $100. If you or your partner is out shopping and finds something above the agreed upon limit, then sending a quick text or making a quick phone call may prevent an argument later on.
3. Establish weekly money talks. Another way to help prevent fights about money is to discuss any minor problems before they can turn into something worse. Getting together with your partner once every week or two to discuss the budget and any minor problems can help keep the lines of communication open and help prevent fights.
For example, you may get together and discuss how one of you spent more on groceries than was budgeted, or another minor financial problem. Addressing the problems early can help prevent the small things from turning into major problems.
You may say things like, "We went over the budget on groceries, but by cutting a few corners, we can adhere to it next month."
4. Talk about how you will approach helping out family. Many people help out family members financially. However, this can cause a lot of problems and arguments. To help prevent this, talk about what you and your partner want to do about helping out family members so you have a procedure in place.
For example, you may decide to help out a family member up to a certain dollar amount or a certain number of times each year. You may decide that you want to help out certain family members but not others. Discuss these issues with your partner and come up with a solution that you both can handle.
You may say, "I understand that your parents struggle, but we can only afford to help them for this set amount of money three times each year."
Method 3 Setting Financial Goals.
1. Create a budget. Budgets can help prevent a lot of arguments about money. Budgets create a solid plan for your money so there won’t be any questions or confusion about where the money goes and when. Budgets give you and your partner a guide to help stay on track where money is concerned.
If one partner has trouble adhering to the budget, you can look at the numbers and find areas that need improvement or adjustment.
Make sure to budget in money for extra purchases, such as an impulse buy or going out to dinner.
Include each of your money interests in the budget. If you like to spend money but your partner likes to save, budget those things in each month.
If budget has a negative connotation, consider calling it a “spending plan” instead of budget.
2. Share financial tasks. To help keep the financial responsibilities even and a joint effort, come up with a way share tasks and assign a duty to each person. This helps take all the pressure off one person and lets you work together to manage your finances.
For example, you may pay the bills while your partner makes and maintains the budget. You may focus on the savings account while your partner invests money.
3. Come up with long term goals. Figure out what your long term goals are for your money. Do you want to invest? Are you saving for a new car or house? Are there kids in the future? Do you want to take vacations? Each of these future plans are important. You should discuss what you and your partner want in the future and come up with a way to approach it.
Most of these purchases require pre-planning and saving. Prioritize what you want to save your money for.
4. Approach finances as a team. To help keep your finances running smoothly and eliminate any potential conflicts, work on your finances as a team. Even though one person may be in charge of the budget or paying the bills, you should talk about these ideas and sit down once a month to discuss the month’s finances.
You may decide to pay bills together and do the budget together instead of assigning the task. You may also switch back and forth and do a different financial task each month.
5. Consider having separate accounts. If finances and spending habits are a frequent source of frustration in your relationship, then you and your partner might consider setting up separate bank accounts and just maintain a joint account for your shared bills and savings. This may help to prevent arguments about finances if you each have a set amount of money to spend on whatever you want each month.
6. Seek professional help. If you and your partner fight too often about finances, you can seek professional help. You may want to visit a therapist who specializes in resolving conflicts in relationships. This can help you get past any barriers and help you learn how to compromise.
You may also want to visit a financial planner. Financial planners can help you figure out how to budget and compromise on financial issues.
Money and finances are one of the most common sources of conflict for couples. Money problems can stem from not being open about your finances and having differing views of how money should be spent. To help prevent fights about finances, discuss each other’s views about money, come to a compromise that respects both your values, communicate about your finances openly, and set goals to help keep your finances in order.
Method 1 Discussing Your Views About Money.
1. Talk about your view on money. One of the money problems that arises between couples is due to their differing position on money. Some people are spenders and others are savers. These two mindsets can strongly clash. To help get past this problem, you should talk about these differences.
During this discussion, talk about whether you are a saver or spender.
Having open communication about your ideas and feelings on money can help you start to solve or eliminate problems.
For example, you may say, "I believe that money is hard-earned and should be enjoyed." Alternately, you may say, "Saving money is important to me. We work too hard for it to spend it often."
2. Discuss what money means to you. Often, the arguments about finances aren’t about money specifically, but about what money means to the people in the relationship. To help prevent any financial arguments, you and your partner should explain to each other what money means to you and what it signifies. This can help you understand each other.
For example, you may think that saving money means safety and security. You may think that saving money or spending it can show love and affection. Saving money may make you feel in control and like you have power.
You may feel that you deserve to spend your hard earned money on yourself, or you may feel that you deserve to save your hard earned money for future plans.
Determine if you or your partner use money as a way to measure success, status, or keep score with others.
Make sure to discuss any fears you have about money and the way that your family approached money growing up.
For example, you may say, "Saving money makes me feel safe. When we were growing up, we had no money, so having a savings account helps me feel like I'm taking care of my family."
3. Acknowledge your differences about money with an open mind. After you have discussed what money means to both of you, you should use the opportunity to understand each other’s position and ideas about money. You should not point fingers or try to make one of your right and wrong. There is nothing wrong with having different values about money. You have to work towards understanding, accepting, and compromising.
For example, work on understanding why your partner feels that spending money is something they have earned and deserved. Try to see how saving money makes your partner feel in control and safe.
Both you and your partner are two different people, which means you are not going to have the same opinions about everything. Communicating about your ideas of money can help prevent and avoid misunderstandings.
If your partner has illogical, irresponsible, or contradictory ideas about money, that is a separate issue. You want to accept different ideas about money, yet help your partner work through illogical money ideas that may harm your family.
Try saying, "I understand that you want to save money though I like to treat myself for my hard work. Can you explain to me why saving money is so important to you? I will explain to you why I think we deserve to spend some of our money."
4. Compromise with both of your sets of values. After you have figured out what each of you feels about money, you can then work on a compromise. Compromise means you both stay positive as you find a way to negotiate both of your values. Find some common ground that benefits you both. You should work on finding ways for both of your to compromise equally so one person isn’t giving up more than the other.
For example, you may come to a compromise where you set aside money each month to spend on yourself while your partner sets aside a similar amount to save. You both can come to an agreement on what things are considered special splurge purchases, and decide what you want to save money on to purchase or invest in in the future.
5. Take a break and come back to the discussion. If you and your partner are discussing money and start arguing or yelling, stop the conversation and go do something else. Stepping away for a moment will help you and your spouse have time to calm down and think more logically about what has been said.
You and your partner will not always agree about money. However, it is crucial that you learn how to compromise so you can meet everyone’s needs and address each other’s concerns.
Method 2 Communicating Effectively About Finances,
1. Be open about your finances. One way to help prevent arguments about money is the be open about your finances with your partner. This helps each of you be on the same page, so you won’t be keeping secrets about money or lying about money. These behaviors can cause problems and arguments.
When your relationship gets to the point where you start sharing bills and financial responsibilities, you should be open about all of your finances. This includes your debt, income, and financial obligations.
Tell your partner, "I want to share my finances with you. I have some student loan debt, a car payment, and two credit cards."
2. Keep your partner in the loop. You should share vital financial information with your partner so that you both stay informed of each other’s financial situation. This includes any changes to your income, tax returns, and credit reports. This helps maintain honesty and communication between you, and you can avoid potential problems if you keep something from your partner.
This often happens at the beginning of a partnership, when you let your partner know your financial situation. However, you should continue doing this throughout the relationship, especially if things change significantly.
For example, you may say, "My credit report has changed recently due to my recent bill payments. I'd like to go over what changed the credit report with you."
Another way to prevent arguments is to agree to text or call if you are thinking of purchasing something over an agreed upon spending limit, such as $100. If you or your partner is out shopping and finds something above the agreed upon limit, then sending a quick text or making a quick phone call may prevent an argument later on.
3. Establish weekly money talks. Another way to help prevent fights about money is to discuss any minor problems before they can turn into something worse. Getting together with your partner once every week or two to discuss the budget and any minor problems can help keep the lines of communication open and help prevent fights.
For example, you may get together and discuss how one of you spent more on groceries than was budgeted, or another minor financial problem. Addressing the problems early can help prevent the small things from turning into major problems.
You may say things like, "We went over the budget on groceries, but by cutting a few corners, we can adhere to it next month."
4. Talk about how you will approach helping out family. Many people help out family members financially. However, this can cause a lot of problems and arguments. To help prevent this, talk about what you and your partner want to do about helping out family members so you have a procedure in place.
For example, you may decide to help out a family member up to a certain dollar amount or a certain number of times each year. You may decide that you want to help out certain family members but not others. Discuss these issues with your partner and come up with a solution that you both can handle.
You may say, "I understand that your parents struggle, but we can only afford to help them for this set amount of money three times each year."
Method 3 Setting Financial Goals.
1. Create a budget. Budgets can help prevent a lot of arguments about money. Budgets create a solid plan for your money so there won’t be any questions or confusion about where the money goes and when. Budgets give you and your partner a guide to help stay on track where money is concerned.
If one partner has trouble adhering to the budget, you can look at the numbers and find areas that need improvement or adjustment.
Make sure to budget in money for extra purchases, such as an impulse buy or going out to dinner.
Include each of your money interests in the budget. If you like to spend money but your partner likes to save, budget those things in each month.
If budget has a negative connotation, consider calling it a “spending plan” instead of budget.
2. Share financial tasks. To help keep the financial responsibilities even and a joint effort, come up with a way share tasks and assign a duty to each person. This helps take all the pressure off one person and lets you work together to manage your finances.
For example, you may pay the bills while your partner makes and maintains the budget. You may focus on the savings account while your partner invests money.
3. Come up with long term goals. Figure out what your long term goals are for your money. Do you want to invest? Are you saving for a new car or house? Are there kids in the future? Do you want to take vacations? Each of these future plans are important. You should discuss what you and your partner want in the future and come up with a way to approach it.
Most of these purchases require pre-planning and saving. Prioritize what you want to save your money for.
4. Approach finances as a team. To help keep your finances running smoothly and eliminate any potential conflicts, work on your finances as a team. Even though one person may be in charge of the budget or paying the bills, you should talk about these ideas and sit down once a month to discuss the month’s finances.
You may decide to pay bills together and do the budget together instead of assigning the task. You may also switch back and forth and do a different financial task each month.
5. Consider having separate accounts. If finances and spending habits are a frequent source of frustration in your relationship, then you and your partner might consider setting up separate bank accounts and just maintain a joint account for your shared bills and savings. This may help to prevent arguments about finances if you each have a set amount of money to spend on whatever you want each month.
6. Seek professional help. If you and your partner fight too often about finances, you can seek professional help. You may want to visit a therapist who specializes in resolving conflicts in relationships. This can help you get past any barriers and help you learn how to compromise.
You may also want to visit a financial planner. Financial planners can help you figure out how to budget and compromise on financial issues.
