Money can be such a decisive subject, so much so lawyers consider the first working day of the year as “Divorce Day” as couples with mounting financial frustrations typically reach breaking point after the holiday season.
So, whether you’re married, living together or just getting to know one another, it’s crucial both parties understand each other’s finances and know how they view money management. Being open to discussing the long-term financial plans you may have, and vice versa can save having a lot of issues further down the line.
This week, we are working with Emma-Lou Montgomery over at Fidelity International to offer up some suggestions for harmonious finances;
1. What happens if you’re a saver and they’re a spender (or vice versa)
There’s no need to be afraid if you seem to be at odds financially. In a balanced relationship, having one keen saver and one more comfortable spending (within reason) can be beneficial – if it’s clear who’s responsible for what financially in the relationship.
The saver among you can encourage a healthy attitude and ensure you meet any financial saving goals be it a first home, adventure holiday or just for a rainy day. On the other hand, the spender may take on monthly living costs and cover expenses like socialising with friends and family – being transparent about your roles and responsibilities is key to this type of arrangement being a success.
2. Don’t leave your partner in the dark
All too often couples leave one of the parties completely in the dark over bigger commitments like savings or retirement plans, which isn’t ideal and can lead to misunderstandings and tension. The money and your financial security belong to both of you, so make sure you both have at least a basic understanding of the state of your finances and know where to go to seek support and guidance on the issues you’re less confident about. It may feel daunting at first, but talking openly about your finances is so important, both when fostering new relationships or maturing in a long-term relationship or marriage.
3. Be honest
A worrying number of people hide debts from their partner. In fact, embarrassment is the biggest reason for couples keeping their debts a secret. But, as per the adage, honesty really is the best policy – no matter what stage your relationship is in. If you’ve come to the point when securing a joint loan or mortgage makes sense, it’s crucial any unpaid debt or blips on credit scores come to light – if it’s hard to talk in private imagine the embarrassment later down the line. A supportive partner will work with you to find a solution. If they’re not up to it, then better you know now than face the consequences later.
4. If one of you earns more than the other
Pretending you earn more than you do when you first meet might seem like a good idea at the time but eventually the shortfall will become apparent. What works for your relationship will differ for others – but communication must be top notch, so no one misunderstands who’s responsible for what. Some couples have separate bank accounts, others keep a joint account for household expenses, some agree to split bills equally, some do it in proportion to their income, while others divvy up the outgoings, with one person paying the mortgage/rent and another responsible for utility bills, for example.
5. If you have ‘outside’ interests/expenses
It may be that you have children from a previous relationship who you support financially. Or it could be that you have a hobby or interest that requires a substantial financial outlay. If you aren’t open about the costs with your partner or spouse, these ‘outside’ expenses can become a source of conflict.
No matter your relationship status, it’s best to be upfront and honest about these expenses so you both can ensure you’re able to factor them in to your shared budgeting. Often keeping a separate pot of money or a separate account for these expenses is a good way to ensure they’re accounted for and covered. Separating them out also means they’re not a constant niggle to your spouse or partner. Setting up a direct debit to cover these costs is another way to make it easier.