Relationships // Managing Your Money Together
Your relationship may be a 50/50 commitment, but will your money contributions be equal? Learn how to split money and bills fairly. Whether you're married or living together, there comes a time when money becomes a topic of discussion. Should couples split bills evenly? Here's the thing: Life is complicated, and money can be messy. You may earn more than your partner, or they may have more debt than you. You both have financial obligations and assets. Combining finances can be complicated. But by openly communicating about expenses and income, creating a plan that suits both of you, despite your financial baggage, and focusing on shared goals, you can avoid the main cause of relationship problems: fights over money. A study revealed that arguing about money is the top predictor of divorce. These arguments are harder to resolve and more intense than conflicts about children, sex, or in-laws. So, whether you're just starting to deal with financial matters in your relationship or have been navigating it for a while, here's how you can ensure fairness and avoid unpleasant financial surprises.
You may wonder how to manage shared expenses while still having personal freedom. It is possible to achieve both. Here's how you can share financial responsibilities and savings goals while maintaining your financial independence.
SHARE YOUR CORE VALUES (AND GOALS)
Discussing core values early in a relationship. Both partners should make a list of their values and have a conversation about them. Schedule at least 30 minutes for this talk. Talk about the words or phrases that represent what matters most to you, like community, relationships, stability, health, or freedom. Making a list that reflects your true self will help ensure that your spending aligns with your values. For instance, if health is important to you, consider investing in a personal trainer. If your partner values travel, they may prioritise a travel fund. This exercise helps explain the reasons behind your decisions.
CONSIDER MULTIPLE ACCOUNTS
One way some couples handle their finances is by having one joint bank account and setting a specific amount (for example, £1,000 each) that each person can spend without needing approval. This allows them to focus on their shared goals while also having some freedom with their personal spending. However, some couples prefer to have one joint account and separate individual accounts, especially in the beginning of their marriage. It's important to discuss and agree on the right amount for personal or shared spending, especially if there's a difference in income or irregular income. Transparency is still important even if you have separate accounts. Setting goals together can help you prioritise and plan for your future. Using a budgeting platform can help couples manage their finances together effectively.
CREATE KEY BUDGETS
Just like a couple sharing a bank account for shared expenses, they should also create a monthly budget together for fixed expenses. Decide how much each person will contribute to expenses and separate goals, regardless of whether they have separate, combined, or a mix of financial accounts. Having a spending plan or budget together, even if they have autonomy over certain accounts, is important. One way to handle joint finances is to have three separate accounts or budgets with your partner. The first account is for fixed expenses like rent and utility bills that can be set on autopay. The second account is for flexible expenses like dining out and lifestyle. The third budget is for non-monthly expenses like car insurance and summer holidays.
SET MONEY DATES
To stay on the same page with your partner, have regular money dates. Do it every few weeks or once a month, and it doesn't have to take a long time. Both of you should have a role in managing money, even if it's just checking the bank account or paying one bill. This way, you share the responsibility and avoid conflicts where one person doesn't know everything. As you start thinking of yourselves as a team, set aside time to review your finances and pay bills that aren't automated. This helps you dive into your shared financial life. Remember to prioritise your financial goals together since most of your goals now affect both of you.
MAKE MONEY RULES TOGETHER
On one of your first dates as a couple, you should sit down and discuss your money rules. These are the things you need to be clear about so that both you and your partner can feel secure. These rules may be considered dealbreakers. For example, one important rule could be to not hide any debts. This ensures that both partners are aware of their financial situation. This is important because if one partner accumulates £10,000 in credit card debt, both partners may be responsible for paying it back. In the event of a death or separation, the other spouse may also be liable for the debt. Similarly, if one person has £20,000 in debt when trying to retire together, it can negatively impact their joint retirement plans. By having a rule against hidden debts, you reduce the risk of financial infidelity, which can feel like betrayal. It's helpful to understand where you both stand financially.
What You Should Discuss
YOURS, MINE AND OURS
It's simpler for couples to have their own individual accounts for their money, but also have a joint account for shared expenses. This allows them to share the financial burden while still being financially independent. Keeping money separate can actually make a marriage happier by avoiding control issues. Having a joint account requires trust and shows commitment to a common goal. It's also important to add both names to the lease or deed to show equal ownership and responsibility.
WHAT IF ONE MAKES MORE?
It's likely that you and your partner have different incomes, which can vary greatly. In this case, splitting the mortgage equally may not be fair. Instead, do some calculations. List all your combined expenses, such as housing, taxes, insurance, and utilities. Then discuss your salaries. If you earn £60,000 and your partner earns £40,000, you should contribute 60 percent of the total expenses, while your partner contributes 40 percent. For example, if the rent is £1,000, you pay £600, and your partner pays £400.
To ensure fairness, have both you and your partner set up automatic transfers from your individual accounts to a joint account for the agreed-upon share of expenses. Review the bank statement and bills together each month. Be prepared for unexpected changes, such as higher cable or gas bills. Keep some money in your personal accounts as a backup to cover any unexpected expenses.
DECIDING WHO PAYS FOR WHAT
In simple terms, when discussing your budget, start by asking: What are our shared expenses? Things like the mortgage, electric bill, and gas bill are already established. But what about student loan payments? Or the car loan you took out before you met? And what about your credit card balance? These are personal choices, but you need to talk it out to find solutions. If your partner has a lot of debt, maybe you can help them out with the payments so they can become debt-free sooner, creating a common goal. Or perhaps you can contribute more towards household expenses, allowing them to focus on paying off their debts. If your partner insists on handling their bills alone, you can take responsibility for paying for the "fun" things from your personal account, like dinners out, to lighten their load in other ways.
SAVING FOR THE FUTURE
Your savings plan should be a decision you make together based on your long-term and short-term goals. For example, you might want to save for a vacation next year and eventually buy a house. It's important that your partner knows about and agrees with these plans. Saving together for the same goal will help you reach it faster. Agree on a comfortable savings amount and deposit it into a joint savings account every month. When calculating your savings, remember to consider your any pension contributions which are taken directly from your salary. If you're contributing 5% and your partner is only contributing 2%, talk about how you can both achieve your retirement goals and whether the contributions need to be adjusted.
HOW TO INVEST
You might want to be very aggressive with your investments while your partner prefers to keep their money in a safe savings account. If this is the case, meeting with an investment adviser could be the best way to find a compromise. You should look at your investments together to make sure you're not doubling up and that your overall strategy makes sense. Regardless of whether you seek help, both of you should know where your money is invested, how well those investments are performing, and have a shared plan for retirement. If you have different retirement timelines, you need to communicate and address those issues to avoid unpleasant surprises.
DIVVYING UP DUTIES
Managing money involves more than just sharing expenses. It's also important to ensure that both partners are equally involved in money management. Typically, one person takes on the responsibility of tracking finances, but it becomes problematic when the other person chooses to ignore how their habits impact the family's financial situation. To address this, it is advisable for couples to have regular money meetings. These meetings can be scheduled weekly, monthly, or quarterly. Regardless of the frequency, it is crucial that the person in charge of paying bills and managing accounts does not possess exclusive knowledge of the financial situation, including the amount of money available, where it is being utilised, and where it is kept.