Personal Finance

Money and Relationships

Trying to deal with finances jointly within a relationship can be a massive headache, so how do we talk about it within a relationship?
Money and Relationships

Social norms generally agree that much like a first interview, money isn't something we discuss on first dates - but when in a relationship is the right time to discuss finances? Obviously, it's up to each relationship to decide; a few opportunities may include:

  • First anniversary: by this point you probably know how committed you are in a relationship, and may be thinking about what your future together looks like. Being able to talk openly and clearly about finances and financial goals may allow for some of those futures to come to life sooner than expected
  • Moving in: When you move in, you're likely to be dealing more with each others financial situation, as you're likely splitting things like rent, utilities and other bills
  • The wedding/commitment: While this seems to be phasing out in younger generations, there are those who believe that finances should wait until you're forever-committed to your partner before talking bank balances

Somewhere over the rainbow

It's okay to be emotional when talking about finances - by that we mean looking into your ideal future and dreaming about what that looks like: travelling internationally every year, starting a family, spending time in the home you bought...whatever it may be, get an idea of what both your personal and relationship goals are before diving into the details of the day-to-day.

If your goals and motivations don't quite line up like you expected, that's a conversation to have right there. What compromises are you each willing to make?

Lies a pot of gold

Each of us individually has a way of dealing with our own money - even if that means ignoring it. Some are savers, penny-pinchers. Others are spenders, live-in-the-moment types. Generally most of us fall somewhere in between, all with weak spots or blind spots. Both spending and saving can go too far to the extremes, it's about finding an easy, simple and happy middle ground that works for the relationship.

If you are a saver and your partner is a spender (or vice-versa) - or even if you're savers and happen to approach it in a different way or to different degrees, talking about the how and the why of your finances may help keep arguments about money from otherwise happening, especially with how tied up money and emotions are for many of us.

Talking openly about how you deal with your money and what your financial goals are can be a natural lead in to each individual's current financial situation, which at a basic level includes:

  • Income
  • Expenses
  • Assets
  • Debts
  • Credit score

This is especially important if one of your goals is savings towards a large investment like a house, as if you co-sign a mortgage the credit score of the names on the lease matters. Knowing where you stand with that can help you to make changes in order to build your credit score if poorer than anticipated, or maintain your credit score if it's good.

Plus, sometimes talking about our financial situation and habits make us realise that how we think we handle our money and how we actually spend our money are in fact different things. Sometimes this conversation is a bit of an eye-opener!

But how to split it?

As with everything finance, it's really up to you and how you work best together, especially when creating a budget. There are 3 overarching ways significant others can organise their money, and it's about what is simplest or makes the most sense for you:

  1. Completely separate: this way each keeps their bank accounts separate and someone takes ownership of paying out bills and collecting the split, much like you would with a flatmate. Talking regularly is important here as you will have less day-to-day visibility over how much is in your accounts at any given time.
  2. Completely shared: Joint banking, savings, and potentially credit cards. This allows for easier payment of shared expenses, and often works well if you have similar spending habits or financial views.

Shared when necessary: A good compromise, this is when significant others share a joint account for savings goals or shared expenses, and have their own accounts for salary and discretionary spending. Gen Y (22-36 year olds) prefer this method only marginally over shared accounts, at 53% of those surveyed.

And keep the ball rolling

Once you have your financial goals lined up and are comfortable with how you structure your financial accounts, the question becomes "what is fair?". When money contributions to ongoing joint expenses or goals are seen as unfair to any particular party in the relationship, we often end up in trouble. A few different ways people have tackled this include:

  • Proportional: Whatever your share of the household income is, this is what you chip in to the bills - so if you make 60% of the relationships income and your partner makes 40%, that same percent is what you'd contribute to shared expenses.
  • Flat contributions: I pitch in $50, you pitch in $50 - evenly split the bills, regardless of income. Depending on financial goals and money scripts, this may help alleviate feelings of either penalisation of the higher earner or condescension towards the lower earner.
  • Everything commingled: It all comes out from one account, so at the end of the day, the money is simply "ours".

A healthy relationship with money in a relationship looks different for everyone, as all dynamics are different. Taking these first steps, if you haven't already, should help you get on a more open and communicative path about finance in your relationship, so that you can happily reach your shared financial goals together (and hopefully sooner!)

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