By Dr. Eugene Brink
Getting married is no small matter and neither are finances. Planning a life together with someone requires compromise, (often tough) decisions and in the end, comfort and satisfaction.
Finances, or financial troubles and strife, in a marriage or even a serious relationship is one of the main reasons people end up in splitsville. Incompatible views on how money should be managed and especially how it is spent are oftentimes insurmountable.
For many couples the management of money is a subjective and important matter – you’ll know what works for you. But for many couples the management of money is treated as an afterthought and best left post-honeymoon, despite its gravity.
If you fall into the latter category, here are some tips to get you started. Don’t leave it until you tie the knot to untie the knotty matter of couple finance!
- Discuss everything
This might sound like a self-evident truth, but it is astonishing how many couples seem to neglect this vital yet simple step. “Talking about money with your partner can be difficult, but it’s essential to setting up a secure financial future,” advises Bank of America (BOA).
You also need to know what topics are relevant when having these discussions. “Take the time to honestly discuss your short- and long-term financial goals, whether they are to save for a home, pay off credit card debt, go on a dream vacation or finally get that motorcycle. Be careful not to criticize your partner’s goals – remember they are just as important to him or her as yours are to you. From there, work together to make a list of the top goals you both want to achieve, making sure it’s both fair and manageable.”
Personal finance expert Laura Adams says it all begins with candid and respectful conversations about your beliefs, concerns and goals. “You’ve heard the saying that ‘opposites attract’ in the personalities of couples. Financial behaviours and habits in couples can be very different as well.”
For instance, are you a compulsive spender or a strict saver? Do you swing for the fences or take a conservative approach with investments? Are you at ease with or terrified of debt?
“A quirky financial tendency that endears you to your significant other in the beginning, such as being a free spirit who lives and spends money in the moment, may be an irritation down the road.
“So, watch out for potential problems that may need to be addressed, such as overspending, keeping money secrets or refusing to create a budget. Be honest about both of your good and bad financial habits before merging your finances as a couple.”
Also, have regular discussions about your financial goals as these may change over time, according to BOA.
- Working together fosters success
Adams says when you’re a committed couple, it’s smart to strategise and organise your life in unison. “You can accomplish much more together than you ever could apart.”
Decisions such as having a separate or joint account should be something you decide together. Each has its merits and demerits and the two of you should decide which option is best. And if you have opted out of doing joint finances, it’s time to wrest back control. “Why? Because what you do with your money together will affect the finances of each of you. It’s especially important as you get older, as women tend to outlive men and can often be plunged in at the financial deep end,” reports Goodhousekeeping.com.
If you’re not a natural expert, take baby steps to improve your money confidence. Also, talk to your partner about splitting financial tasks.
After discussing your goals and income, it’s time to split the expenses and responsibilities. Draw up a detailed budget, listing all the expenses and agree on who pays what. If you earn different salaries, it is (for the sake of fairness) wise to divide it proportionally, although this won’t always be the case. As mentioned before, this could be quite subjective so find something you’re both comfortable with.
Then, create bank accounts. Joint accounts simplify household expenses and work wonderfully for many couples. However, it does have its drawbacks, such as a spendthrift partner digging into a more tight-fisted one’s money or maxing the overdraft. A partner’s bad credit history could also have negative ramifications for purchasing joint assets, such as a home.
There is a third way between joint and separate accounts. “A system of ‘yours, mine, ours’ works best for many couples, with a shared pot for household expenses and separate accounts for personal spending,” Goodhousekeeping.com contends.
Bank of America, 2019, “Couples and money: How to navigate money matters without rocking the boat”, https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/manage-money-as-a-couple.
Goodhousekeeping.com, 31 March 2016, “How successful couples manage money”, https://www.goodhousekeeping.com/uk/consumer-advice/a560313/how-successful-couple-manage-money/.
Laura Adams, 14 May 2018, “4 Ways to Manage Money Better as a Couple”, https://money.usnews.com/money/blogs/my-money/articles/2018-05-14/4-ways-to-manage-money-better-as-a-couple.