Honey, leave your wallet at the door.
7 Tips to consider before sharing finances.
What a romantic notion, sharing finances, that’s how you know you are really in love, right? Wrong, but for some people sharing finances is almost a validation of their relationship, something to prove they’ve reached that amazingly loving point where what’s hers is hers, and what’s his is hers. Just joking, as a female, I can almost get away with that one. But in all seriousness, I see people every day putting the maximum trust into another person, by opening up their wallet to them and sharing, or in my industry terms, putting at risk everything they have.
Now let me be clear, I’m not against sharing finances, and I understand there is times where one person is bringing in the income and needs to support the other, or it just makes more sense to share. However, at the end of the day unfortunately we know that relationships have a tendency to sometimes not end up the way you expect, so it’s important to ensure you are protecting the most important person here, you.
Before taking this massive step with someone, or even if you have already, there is some things you need to understand and some ground rules you need to have in place, if you follow the following tips, you’ll be on your way to joint wallet bliss.
You owe what!?
You’ve lovingly committed to the person you are going to spend the rest of your days with. You’ve just discovered wedding bell bliss, growing a family is on the horizon, and then as a honeymoon present your one and only shares what they are giving you: $30,000 in credit card debt, a personal loan for a car they no longer own, and a credit rating so bad, that Al Capone would be proud.
The lesson here, I might be unique in my thoughts here as my world revolves around talking about money, but I suggest that you should get the money talk out of the way early. Maybe not on the first date, but when you think this relationship might have a future, have ‘the money talk.’ Be upfront and honest with each other, and share where you are at financially, because if this relationship progresses, you are potentially taking on their bad choices, and they are taking on yours, maybe not in the entirety, but paying debt will affect your cashflow and your ability to achieve the things you intend to do together.
I want to own a donkey farm
While you are having that awkward fifth date talk about finances… too soon? OK, when you are ready. Find out your significant others’ goals, this can include life, but also finances. Personal goals and financial goals correlate heavily. If your goal is to become the next property investment mogul, and theirs is to live the simple life and not be tied down by material things, you might come unstuck. I’ve learnt this myself. This point comes down to values, values aren’t wrong or right, they are right for you, don’t let anyone tell you they are wrong. If your significant other has very different plans for the future, best to know this early.
Bad habits are the little things that ever so slowly drive you bonkers. I’m not here to train them to put the toilet seat down, or to get her to put her makeup away. I’m here to tell you to understand your partner’s money mindset early; Are they a spender? Do they save regularly? Do they live off credit? Do they miss bill payments?
You need to understand this, take it on board, and if they’re a spender, maybe you need to sign off on any joint savings moving out of your accounts.
You need to be able to do what you want, just as your partner should. Feeling guilty for buying yourself a new bag just plain sucks, however, if you’ve compromised your family’s food budget for that bag, then you plain suck.
Each partner should have some money they spend on whatever they please, I use the figure of 10-15% of your total income split between you both. The rule should be, whatever you are bringing in as partners to the household, if you share money jointly that is, both of you should get a percentage of that which is your own, to be spent on what you want, which you don’t have to feel guilty about. So if you want to spend your ‘allowance’ on a handbag, that’s fine, if you want to spend it on old school collector Pokemon cards, that is also fine.
Know where the money goes
This one is a bit of a sad fact, as a Financial Planner, I have seen clients die who leave behind their long term partners, some who have celebrated 50 and 60-year wedding anniversaries together, that still truly love each other just as much as when they first married, something that most of us aspire to.
What they leave behind though, with all of the best intentions, is a partner that doesn’t even know which bank they bank with let alone how to access their money. It is normal to have one partner that does the finances more than the other, but make sure both partners know where their money is, how it’s getting spent, and how they can access information around this.
Rainy day fund
Everyone should have savings. If you have joint savings though, make sure you have savings of your own. I don’t want to keep bringing up the bad, but you need to protect yourself if things ever do go South. What if you have a fight and wake up in the morning and not only your house is cleared out, but your savings also?
Joint access baby
Following on from being the bearer of bad news, if you are going to have joint finances, make sure you both have access to these accounts, again if something goes wrong, you need to be able to protect your interest.
With all that said and done, have fun, share the money and the love! But go in with your eyes wide open and just the same as everything you do in business, have contingency plans or exit strategies in place, because just like business, you don’t go into it to fail, but you have to protect against the sad fact, that unfortunately, sometimes it does.Share