You go to dinner with your partner and the bill arrives – who pays?
Do you split the bill 50/50? Does one partner pay for the lot? Do you add it to a series of IOU’s to track who’s paid for what?
While money has the potential for happiness and freedom in ones life, it can be a double edged sword that causes friction among couples. Managing money in a relationship can be one of the most difficult problems faced by any couple. Married, de facto, remarried or newly together couples face a similar problem and without consideration money can lead to the demise of the relationship.
There are no one size fits all solutions to managing finances as a couple. What works for your friends or family may not work for you. This is because everyone’s circumstances are different and everyone’s views on finances differ, even between spouses.
The key to successful money management is to find common ground and agree on how finances are to be managed now and into the future. The key to finding common ground is to be honest about one’s personal feeling towards money, while appreciating where the other person is coming from.
Common Themes that come up
Joint Accounts or Separate: When to combine bank accounts & Share Bills
This is a common problem that can arise from time to time as the relationship matures from dating through to marriage, children and into retirement.
When couples meet for the first time, money management is relatively straightforward (once the sometimes awkward question of who pays for dinner is answered). It’s through the natural growth of a relationship when bigger expenses or shared living start to create friction. Think Cars, Kids, Homes, Holidays, Groceries, Utilities and School Costs.
The decision to share finances can be on seen on a continuum from share everything to share nothing. Generally, somewhere in the middle seems to work best. Many couples often have a Joint account that common expenses are paid from, with each person contributing, based on a 50/50 split, percentage of income or some other agreed method. This allows for an equitable contribution to partnership expenses, while maintaining a level of financial independence.
Importantly, having a predetermined method helps. Knowing in advance how a bill is to be paid can limit the amount of negotiation a couple must go through, every time a bill arrives.
In couples finance certainty creates confidence, which maintains happiness.
Til debt do us part: Bringing Debt to the Relationship
Debt can be a big a problem if it is not addressed. There are two common scenarios where debt can become problematic.
The first is when a partner brings current debt to the relationship. Should this partner be relegated to paying down their own personal debts or is the debt considered a ‘shared’ debt of the partnership? This can be a tough one and can be quite a sensitive topic.
The short answer is it depends. How else does the partnership manage other expenses? Do both partners have debts? Does one have debt and one have savings? Is there a financial benefit to both individuals if the debts of one are cleared up faster?
Answering these question can help to find a mutually agreeable solution.
The other kind of debt is debt that accumulates by one partner, during the partnership. The obvious question is what has the debt been accumulated on? Is it on frivolous lifestyle expenses such as shopping, trips to the pub or TV purchases? Or is one partner having to accrue debt to meet the lifestyle expectations of the other partner? Things like expensive holidays, restaurants or fashion expectations are real issues that can cause credit card debt to creep up and up.
You will notice mortgages are not addressed under debt. The reason for this is twofold; 1/ when a couple decides to commit to a large purchase, such as a car or a house, this generally tends to involve a deeper discussion that encapsulates how repayments will be made. 2/ Large expenses like a mortgage are generally treated like a household expense and can be managed in line with other bills, as mentioned above with a joint account.
This is part 1 of a 3-part look at finance for couples. In the following post we look at how to manage thrifty and spendaholic personalities, smart budgeting and working towards common financial goals.
At Perron we work with Couples to achieve financial harmony with their finances.
Contact us on (07) 5437 9243 or at firstname.lastname@example.org for an obligation free discussion to see
how we can work with you.