Successfully managing your finances as a couple

It may be that you want to save for a house deposit but your partner wants to buy a luxury car. Or, perhaps you want to continue your premium Foxtel subscription but your partner wants to save money to go on a European holiday.

If you are in a committed relationship, coming to an agreement on how to manage your money may be crucial to the long-term future of your union.

Money can be a source of conflict

Only around one-third of Australian couples discuss their personal finances or how they expect to share incomes prior to committing to a serious relationship.¹ This can mean that many people are well into a relationship before they find out that they have very different ideas to their partner about money. A recent survey conducted by MyState Bank found that almost one in five couples experiences conflict and stress on a monthly basis due to money.² More than half of us experience money-related conflict in our relationships at least once a year.

So, what is the solution?

Open communication helps reduce financial problems

Differences in attitudes towards money are not always obvious in the early stages of a relationship. Before making a long-term commitment, particularly if you plan to live together and possibly raise children together, make sure that you discuss and understand each other’s expenses, income, debt and financial plans and goals. Major discrepancies in spending patterns and savings plans, if not addressed, will only become more problematic as a relationship evolves.

Research shows that around 75% of committed couples share bank accounts and expenses.² Once you are in a committed relationship, discuss and agree on how you will share your finances. Discussions may include whether you will share all or some of your money, what kind of purchases require discussion and mutual agreement and what your savings goals are for the future. Will you invest your money and if so, how much? Will you rent or buy your home and/or make other large purchases? If children are on the cards, what sort of expenses would you expect to have in terms of holidays, health and education? If both parties are open and honest about their financial circumstances and their expectations, it can go a long way towards alleviating conflict.

Make a budget together

Part of the discussion should involve setting up a combined budget. This helps you to see what your joint financial circumstances and future goals are in black and white, and pooling your savings for things you both want can strengthen your relationship. This discussion should be ongoing and fluid because your circumstances may change. Always try to keep an open mind.

Find ways to compromise and adapt

If one person is a spender and the other a saver, there are a number of ways you can compromise to help avoid friction in your relationship. You can start by understanding where the other person is coming from. ‘Money values’ are often formed in childhood and a little empathy can go a long way.

Alternating what you do with your combined savings is one way to compromise. Perhaps one week you both put your savings into a deposit account for a property purchase, the following week you spend the savings on leisure activities. Ideally, this way, both parties will feel that they are working towards their goals.

If there are expenses that regularly cause friction, (such as buying designer clothes or sports equipment), you can create a separate ‘mad money’ account for each of you, in which a small amount of your combined savings is set aside each week. Make a rule that each person can spend this money without discussion or judgement and that any ‘problematic’ expenses must come from this account.

Joint finances should be accessible and transparent

It is perhaps inevitable that household financial administration will fall to one person in the relationship. Even so, it is important that both parties are involved in the planning and setting up of joint finances and that there is transparency around expenses and income. Both parties should have access to all accounts – there are many budgeting apps that can be shared digitally between couples. Make sure you come together regularly to look at and discuss how your finances are going.

Behaviour that can ruin a relationship

Financial secrets during a relationship are not uncommon. The MyState Bank survey found that 29% of Australians in a relationship have kept a financial secret from their partner and 13% have a secret savings account.² This kind of behaviour tends to break down trust and can destroy relationships very quickly.

Also be aware of possible red flags in your partner’s financial behaviour. Excessive spending or money-related addictions such as gambling or shopping can be financially and emotionally devastating for couples.

If you cannot agree on what is acceptable spending behaviour, or you feel the behaviour is symptomatic of larger, more complex problems, you may want to consider seeking professional help.

Dealing with debt

Another major relationship buster is unplanned debt. An American Express survey found that debt which arose from poor money management or unexpected life events had a significant negative impact on marriages, regardless of household income. It found that 41% of couples in debt argued more about money than any other issue.¹

Your Mortgage Choice broker may be able to help in these circumstances. They can look at your debts and determine if they could be consolidated or structured better to reduce your outgoings. You can also talk to your lender about arranging an achievable repayment schedule or making other concessions to help you get out of debt. Many banks have procedures in place to assist those experiencing financial hardship. A good financial planner may also be able to help you put a plan in place for spending, saving and investment decisions that you can both agree on and follow as you move forward with your life together.

SOURCES: ¹https://www.relationships.org.au/what-we-do/research/online-survey/january-2019-finances-and-relationships, ²https://www.www.mystate.com.au/details-page/articleid/308/the-mystate-bank-love-and-money-survey