Nothing can tear a relationship apart more than financial issues. Managing money together can set couples against each other and fester into something incredibly destructive.
We’ve been married over 40 years and, at different times, endured significant financial hardship. We’ve found that it is so much easier to cope with these strains if you have a relationship built on strong financial foundations and values.
Here are our strategies for managing money together.
1. Have no money secrets
As soon as a couple is in a committed relationship they will declare their entire financial world to each other. That means coming clean about their salaries, credit card debt, university debt, credit score, betting accounts and anything else that might affect their financial future as a couple.
It can be a tough discussion to confess all your money secrets, but it is crucial to your future as a couple. It really is the first place to start to build a household budget and set goals.
No financial skeletons in the cupboard.
2. Talk a lot about money
It doesn’t matter so much what couples do with their cash, but that they make decisions together and respect each other’s opinions.
We recommend you set aside at least 15 minutes a month to just talk about your money. Not paying bills or checking credit cards statements, but talking about the parameters of managing your finances.
Be open and be honest and don’t be afraid to disagree. Just as each relationship is unique, each couple’s financial situation is as well. It’s a time to look at the big picture financial situation and whether you’re comfortable with where you’re at.
3. Set specific goals
Successful couples come up with goals together and check in frequently to make sure they’re on the same page. This can be done as part of your 15 minute catch-ups. They break them down to short, medium and long term goals and constantly refine them.
Do you want to purchase a home together? Are you saving up for kids? Do you want to add extra superannuation? Or plan a big trip overseas? Successful couples talk about where every dollar is being spent and reset their goals regularly.
4. Divide up responsibilities
One partner should never have sole responsibility for a couple’s finances. That is a recipe for relationship disaster which can lead to financial infidelity and abuse of power.
Whether it’s opening joint accounts, paying the rent or mortgage, the power bill, superannuation contributions or other expenses, it’s the responsibility of both parties. Successful couples don’t assume their partner will take care of certain aspects, they work together to divvy up financial responsibilities.
There is no right answer on who looks after what, but it’s important to be on the same page and not let it default to one person or the other without having a conversation about it.
Partners should discuss joint bank accounts, who’s paying which bill, and how they want to use any discretionary income as a team. At the end of the day, it’s all about clear communication.
5. Protect what you have
When couples bind their lives together, it doesn’t just create an emotional bond, but a financial one as well. If something were to happen to either spouse, it’s better to be safe than sorry and know the other person is taken care of.
That means adequate insurance cover. The greater the financial responsibilities (home loan, consumer debt, children, expenses) the larger the cover to protect against losing an income stream from a partner.
Life, income and trauma insurance is essential depending on your circumstances, plus adequate coverage for major assets such as house, cars and valuables.
6. Plan for the unthinkable
Though often overlooked estate planning, such as wills, are key factors in a successful financial future. As soon as they walk down the aisle, couples should think about naming beneficiaries, executors, and powers of attorney. When kids come into play, it’s important to name guardians for them as well.
Not only that, but couples should update these documents at least every five years, as goals and circumstances can drastically change over time.
7. Never judge your partner
Everyone has different priorities, and part of operating within a partnership is to respect your partner’s choices. That includes keeping an open mind, for example, if your spouse’s spending habits differ from your own.
If you truly think your partner has a spending (or thrift) problem, then it’s time to have an honest and loving conversation with them. If you’re just annoyed that they spent money on something that you would never spend money on, give your partner the benefit of the doubt.
And pick your battles. A small purchase that doesn’t impact on your financial goals and plans is nothing to get annoyed about.
8. Live within your means
Spend less than you think that you need to, or earn. Managing money together is that simple.
It all starts with that age-old family budget which tracks expenses and income to make sure the former doesn’t exceed the latter. Then it’s the personal discipline to stick with it. To forgo when necessary and cut back when it’s right.
The reward is having money left over to achieve a goal like investing or taking that dream holiday.
9. Set strong ground rules
Your spending habits are no longer purely your own; they affect someone else as well. That’s why it’s crucial to decide how and when you’ll spend, and create a set of ground rules for handling money that works for both you and your partner.
Don’t forget every relationship needs a bit of individual independence to flourish… and that includes money. Each person needs a level of discretionary spending for which they’re unaccountable to support hobbies, gifts and passions.
10. And finally… have fun!
Saving or investing just for the sake of making more money is boring. Life is for living and a good financial relationship will help you to live better… and have fun.
Managing money together can be a point of contention, but successful couples don’t let it run their relationship. They don’t make it the ultimate goal, they use it to fuel other goals.