Discussing finances as a couple may not be the most romantic of topics, but it’s an important thing to regularly discuss with a partner.
Emma Watson, Head of Financial Planning and Advisory Services.
From how you manage it to what your day-to-day spending is like, sorting finances as a couple can differ greatly to managing your own money as a single person. Where you previously only had to budget and save for one, and think only about your own needs and wants, suddenly there is another person to account for, including their life goals and financial habits. Emma Watson, Head of Financial Planning & Advisory Services at Rathbone Investment Management, shares her top tips on how to manage finances as a couple.
Consider your financial compatibility
‘Financial Compatibility’ is very important to the long-term success of a relationship. It’s not only about pounds and pence, but also attitudes, aims, and beliefs. If you are to share a lifetime with someone, it helps if you are both on the same wavelength when it comes to your life goals. Do you both have the same aspirations such as starting a family? All life goals will require saving so it's good to know you are on the same path early on in your relationship. As part of this take some time to figure out your money style. For example, is one person more of a saver than a spender or vice versa? It’s best to be open and realistic about this so it’s clearly understood in the partnership.
"Do you both have the same aspirations such as starting a family? All life goals will require saving so it's good to know you are on the same path early on in your relationship."
Think about what’s yours, mine, ours
Every couple manages their finances differently, whether that’s splitting everything 50:50 or having one salary used to pay for everything day-to-day and the other to save for the future - it’s whatever works best as a couple. For those who feel comfortable to, setting up a joint bank account can help keep track of your joint expenses. However, before signing up to this be aware that if one person has a bad credit rating, as soon as you have an account together you will be ‘co-scored’, and your credit ratings will become linked. Whether you’re married or not, it’s wise to maintain your own financial independence too by keeping your own bank account and savings.
Keep financially balanced
"It’s very easy in a relationship to have one person take the lead in managing all the finances and bills. But this can leave the other person quite vulnerable without even realising."
It’s very easy in a relationship to have one person take the lead in managing all the finances and bills. But this can leave the other person quite vulnerable without even realising. For example, if the main bill payer or ‘finance controller’ became seriously ill or passed away, would the surviving partner know how to access their finances or how to pay the bills? Having regular, open conversations about your finances, including who your suppliers are and how you access your accounts, are crucial so you’re prepared for if the worst were to happen. Keeping both your names listed/registered on accounts can also keep you protected from being locked out of your finances. For example, any bank account held in your name solely will not be accessible to the other partner if you were to pass away, so it’s worth considering how your emergency fund is kept and where the day-to-day money for expenditure comes from.
Understand your rights if you’re not married or in a civil partnership
"If you’re not a married couple or in a civil partnership, you need to be aware that the same legal and financial rights do not apply as if you were."
Whether you’ve been with a partner for 2 years or 20 years, if you’re not a married couple or in a civil partnership, you need to be aware that the same legal and financial rights do not apply as if you were. For example, if you were to break up, unless you are joint owners of a property, you have no legal rights to remain in the home if you are asked to leave. If you are living together, or thinking about it, it’s worth considering making a cohabitation agreement to ensure you both know where you stand. Cohabitation agreements will set out your rights to property and assets and you can agree the split between you and have a solicitor draw it up.
Make a will
Writing a will is one of the most important things you can do for any loved one, particularly children, as it means they can be financially cared for and protected for when you’re no longer around. It’s common for many people to only write a will when children arrive, but really, they should be written and updated at important life stages, including when you get married. Many people don’t realise that whilst marriage will invalidate your current will, divorce does not and so unless you update your will you may still be benefitting an ex-partner. There are several different types of wills you can have, so it’s best to speak to each other and an adviser on what would suit best. A will is an important legal document that will ensure your expressed wishes, such as how to split your estate, bank accounts, and any personal items are carried out.
Communication is key
"Open and honest conversations about your financials ensures financial compatibility and mitigate worries down the road."
Even the most compatible of couples can struggle to communicate about money matters. Often, bringing up the subject can feel a little uncomfortable, so scheduling some time to talk about your finances can help. Come prepared with a list of your concerns or goals can help progress the conversation in ensuring you’re both on the same page and more aligned when discussing your financial future. Open and honest conversations about your financials ensures financial compatibility and mitigate worries down the road.
If you would like to find out more about any of the topics discussed above, or to arrange an initial meeting with one of our financial planners to discuss your situation, please get in touch with us.