Managing Finances As A Couple
Wednesday, October 29, 2014
When I was 25, my mother told me that I should always have my own bank account, even after I got married.
My partner and I have been together for four years, living together for most of it, and engaged for more than a year. We have arguments about lots of silly things like when I toss my handbag on the couch and he sits on it, or that he “can’t find something” in the cupboards before even opening the cupboard door, or even how many reality shows I get a Season Pass to on our TiVO which means he’s unable to watch something serious and educational like the news. One thing we don’t argue about however, is money.
So I know I work for a Bank and I’m not trying to push our products on anyone, all I’m going to tell you is how we manage our finances. We have separate credit cards, and joint credit cards. We have a joint transaction and savings account that allows us to have ‘Sub’ accounts. My pay goes into my Sub-account, and his goes into his. We pay from our accounts into the main account when there’s a joint expense, like electricity, groceries, rates, or the internet. We can still see each other's accounts, as the whole transaction and Sub-accounts package is jointly owned, but it allows us to have visibility into what we are spending and saving individually. If your bank doesn’t have this kind of bank account, you can still achieve the same effect with secondary accounts.
If we need to withdraw money, or ‘hide’ money for surprises like engagement rings or little presents, we can transfer the money from our sub accounts into an individual transaction account and withdraw or use from there. We have visibility of the joint and sub accounts, and the whole amount also acts as offset against our variable home loan.
Confused yet? It does take some accounting patience, particularly at the end of the month when I reconcile all our receipts against our bills down to the line item. But if I can do it, anyone can. After all, I did fail accounting the first time around.
If he wants to buy a new surfboard, and he can afford it, then that’s his decision. If I want to have a pedicure, and have the money for it, then I’m adult enough to make the call. I still squirrel away joint savings into our luxury fund so that we can enjoy things together. We also have full ownership and pride in how much we have saved individually and collectively.
It may not work for us when we have kids, but for now, while we bicker about why he feels compelled to tell me every time he takes the garbage out, or the pervasive smell of my nail polish in the living room, we have one less thing to argue about.
At the same time, we are inspired by each other’s ability to save money, and since we’d discussed that one of the highest priority financial decisions was for us is to own property, we worked towards the same goal, with a combination of our separate and joint accounts to save the down payment on our house.
Now this works for us, but probably won’t work for everyone. Regardless, we have all heard those stories of couples that split up or struggle because of differing views about money management, so it's really about finding what works for you. I’m not by any means a relationship expert, however, my tip for keeping harmony while managing the finances is to have an honest discussion about money with your partner, and continue to do so over time.
Ask the hard questions, for example:
- Do you want to manage your money together, separately, or a hybrid version? What’s going to give you both peace of mind regarding your finances?
- If you both contribute everything into the same pool of funds, but one of you tends to spend more than the other, will the other person feel like they should spend more than they usually would to ‘even it out’?
- How much disposable income does each of you need?
- If you want to manage your money separately, what happens if one of you makes significantly more than the other – does it matter?
- If managing separately or a hybrid model, and one of you is a saver and the other is a spender, will it become an issue when you want to buy a property or invest in something?
- Discuss the kind of lifestyle you both want to live, both in the present, and in the future. If you’re on opposing ends of the easy spender vs thrifty spectrum, it’s best to know it up-front so you can come to a compromise of where your financial goals are.
- Highlight what is important to you financially: Money for travel? Money set aside in savings or a home loan? Retiring early? A large emergency fund? Having zero debt?
- Do either of you have debts or bad credit that need to be considered?
- If there are any emergencies or urgent situations, how will you manage?
- Are there circumstances that may come up soon that will impact the finances, and how what is the best way to make sure you’re both covered – ie job insecurity, parental leave, change of career, etc.
When you plan out budgets and daily finances, make sure you include each other on the big decisions. It will help you avoid those unwanted ‘surprises’ down the road.