Money can be a contentious topic even at the best of times, and possibly more so for people in committed relationships, which is why some couples avoid the topic completely. While that may be okay during the beginning phase of a relationship, honest, clear communication about money can actually be a major factor in cementing a happy, healthy, and long-lasting relationship. Whether you’ve just gotten married or are in a long-term committed relationship with your life partner, there are a few money-related issues you should think about.
1. Decide how to approach bank accounts
Depending on your circumstances – whether both parties work or not – you can opt to have one joint bank account, separate bank accounts, or a hybrid.
There’s no right answer to this. Each option has its benefits and disadvantages, which we go into below.
Separate accounts or a hybrid set up means you each are assigned bills that you’re responsible for. These bills or accounts need to benefit the both of you – like electricity, groceries, rent, or home loan repayments. Once these key expenses are paid for, each party is free to spend as they will.
Joint Accounts
Creating a joint account could mean fewer bank fees, simplified finances, and could help foster trust in a relationship. It could also be incredibly helpful in the event that one partner decides to leave their job to look after children, a move that would lead to unbalanced incomes.
Individual Accounts
Having your own accounts, on the other hand, helps to protect the individuals in the relationship. But while it helps partners to retain a sense of financial independence, it can also allow one (or both) partners to hide unhealthy spending habits or lavish purchases.
A bit of both
There is, of course, also the option of doing both; maintaining your individual accounts and opening a joint account for shared expenses. Going the separate accounts with joint responsibilities route means there’s no animosity when either of you has a little splurge. Once the mutually benefiting expenses are paid, you’re free to do with your money as you wish. At the end of the day, it's going to come down to clear, open communication, and what suits you as a couple.
2. Discuss your financial goals
Communication is key when it comes to managing your finances (and your relationship in general).
Tell your significant other what your dreams and goals are and listen carefully to theirs. You can even make an exercise out of it by writing down your goals for the next one to ten years. See where you have common goals and figure out your priorities as a couple which you can then work on together. It may mean compromising on some of your personal goals for now, but that's part of the journey. If they’re important enough, you'll find a way to satisfy these when the time is right.
3. Create a financial plan
Once you’ve laid out your shared financial goals in order of priority, create and stick to a budget that will help you achieve them. Remember, your goals need to be clear, specific, and realistic. They should also centre on something that you and your partner have an emotional connection with (like saving for the costs of raising a child), so that as a couple you’ll keep the motivation, support, and encouragement up. At the start of every month, take a portion of your salary out for savings before you do anything else. If either you or your partner struggles with discipline (or are simply a bit forgetful), you can set it up as a debit order.
Use our free financial tools or speak to a financial adviser to help you put together a financial plan.
4. Track your spending and stick to your budget
As a general rule, it's important to know what you’re spending where. This way you can see if there are some areas (that weekly smoothie perhaps) where you can cut costs. Living in the digital age makes tracking your spending easy. All you need is a banking app or a budgeting app like Vault22. You might find that you and your partner are living above your means and eating out a little too often. It's great for you and your partner to track your spending so you can not only stick to your budget in order to save, but so that you can also get a better grasp on where you really are financially.
5. Communicate regularly about money matters
Communicating with your partner about finances isn’t a once-off task. Be open and honest about any problems or concerns that arise as you go and ask them for advice or suggestions. It's also a fantastic idea to have regular budget meetings where you sit together and discuss your problems, goals, dreams and any unexpected developments (such as raises, promotions, or bonuses). You can use this time to come up with solutions to issues, new goals or ideas, and different ways to save or bring in some extra income.
6. Create an emergency fund
One of the things you and your partner should look at starting is an emergency fund, which is money specifically and solely set aside to be used in emergencies. Put this money in a savings account that’s easily accessible (a 32-day notice emergency fund would be pointless) and ensure that it's one that offers a good interest rate, ideally one that is above the inflation rate. It's a better idea to earn interest on an emergency fund, than to pay interest on a loan.
Learn how to start an emergency fund.
7. Invest for the future
Besides an emergency fund, you should also have a long-term investment or retirement fund or both. If you haven't started saving for your future, you need to start now. The key when it comes to investments is to diversify your portfolio and to spread your eggs over many baskets. Aim to have a retirement annuity, an emergency fund, and another form of savings to start with. If you are not in the position to start with all of those, start with an emergency fund as this will ensure that you don't have to rely on a loan when the unexpected happens.
Learn more about saving for retirement.
8. Borrow wisely
If you have diligently put money away in an emergency fund, you'll be covered for most emergency expenses. However, you might find yourself in a situation where what you’ve saved isn’t actually enough. In such cases, you need to have credit available to make up the difference. Don't make the mistake of using that credit for luxuries though, and be very discerning about what you take out a personal loan for.
9. Starting a family? Adjust your priorities and plan
If you and your partner both want children, then this is something to definitely factor into your savings plan. Children are expensive and you need to plan carefully (and ideally over time) for any new addition to the family. Make sure having children is something you speak to your partner candidly about from early on to avoid any difficult discussions into the future. If you’re on the same wavelength and can agree on a timeline, then the next step is to adjust your financial plan, priorities, and budget to ensure you save enough for your little bundle of joy.
10. Compensate a stay-at-home parent
If you and your partner both want children, then discuss the logistics around raising them. Will one partner stay at home while the other works? If so, how would you both like to see that working out? Would the stay-at-home parent be paid a salary? Or will you keep a solid and fair budget and a joint account? Whatever you decide, make sure that the decision is not only in the best interest of the people involved, but of the relationship itself.
Remember, the money conversation doesn’t stop after you get married. Revisit and refine it regularly for a long, healthy, quibble-free marriage!
Earn while you learn with Old Mutual Rewards
Have some fun discovering what money personality you and your partner have, use our various calculators to work out how to budget/save for a goal and take a fun quiz or two all the while earning Old Mutual Rewards! You don’t have to be a customer to enjoy these rewards. Register here and start having fun! And remember, if you need help organising your financial matters and planning for the future, please chat to one of our friendly financial advisers.