Money and Love: How to Handle Finances in a Relationship
Relationships are filled with excitement: from the butterflies of the early stages to the joy of moving in together – they really are filled with some special moments. However, as relationships deepen and the commitment strengthens, there’s often one thing that even the best couples may argue over: how to manage their finances.
Money is a tricky thing, and it can even make or break a relationship if it’s not dealt with wisely. Talking through your money concerns can, on the other hand, be hugely beneficial for a relationship, which is why we’ve collaborated with Old Mutual to give you some guidance on what to discuss with your partner, while laying out the pros and cons of certain options.
Individual vs. joint accounts
A good place to start when discussing your finances together is deciding whether or not to open a joint account. There is no ‘perfect’ solution for couples when it comes to what should be done, because the reality is that both types of accounts have their pros and cons. Let’s take a deeper look:
Joint account
– Lower bank fees. If you are using one account, you will be paying fewer bank fees by not each paying the bank fees on your individual accounts.
– It can strengthen trust. By having access to the same bank account, you will know exactly who is spending what where, which can strengthen the trust between you, and you can ensure that each person has a fair budget to stick to.
– It can be a fairer if the incomes are unbalanced. For example, if one partner gives up their job to look after children.
– It means lack of autonomy. It means giving up the ability to do whatever you want with your money — you need to consider agreed upon rules and what is fair.
Individual accounts
– You spend what you earn and you have control over what money is used where.
– This favors the individual who makes the most money. This would be unfair if one partner gives up their job for the greater good of the children.
– Your partner won’t necessarily know where money is being spent (and vice versa) so one could overspend on luxuries while putting less towards common expenses or savings.
Finding a happy middle ground
if one of you wants a joint account and the other would like to keep their individual account, you could reach a happy middle ground. You could both keep your individual accounts from which you’d pay for things like clothes, personal toiletries and luxuries, while joint expenses like rent and household cleaning products would come out of a joint account. At the end of the day, talk through the options and decide what is best for you and your partner.
Planning for the future
When planning for the future with your partner, it’s crucial that you communicate openly with them, and that you express yourself diplomatically and honestly. The reality is that the two of you will be better off if you can work together. Here are a few steps to follow when planning for your financial future with your partner:
● Set goals together
Being on the same page as your partner with your financial goals is vital. Tell them what you want, dream and hope for in the future and then let them have their turn to express their goals. Remember, these goals need to be detailed and achievable. We would all love a house in Clifton, but few of us can afford to do so. Your goals should also ideally be something you connect with on a deep level, such as launching a company that you’re passionate about. Decide on both long and short term goals for the two of you. Think about what you have in common. It might take some prioritising and a little compromise, but chances are you’ll agree on a few certain key goals that you can make a priority.
● Formulate a strategy
Once you and your partner have decided on some key goals, it’s time to create a strategy to reach them. This will definitely mean that you’ll have to draw up a budget, and both parties need to stick to it rigidly. Support and motivate each other to stay on track and make sure that your savings is one of the very first things to come off your salary at the start of the month.
● Make a habit of checking what you spend
To ensure that you and your partner are sticking to your budget, it’s a good idea to keep tabs on your spending and balances. Use your cards for purchases so that your spending is easily trackable, or make use of one of the many money-oriented apps out there to track your spending (such as 22seven). Tracking your spending not only keeps you on the path to reaching your goals, it also allows you to pinpoint any area where you might be overspending unnecessarily, and if you are spending more than you can actually afford. This will help you avoid common financial pitfalls.
● Keep communication channels open
Money can be a highly emotive issue, and contentious issue between partners. Whatever you do, don’t let it come between you and your partner. The easiest way to not let it affect your relationship? Speak openly and honestly about all money-related issues or misunderstandings, ask them questions to see how they feel about certain things, and ask them for advice. Remember, this isn’t about one vs. the other. This is about the two of you planning for your future together. If you or your partner finds it hard to start the money conversations, you could even schedule time in once a month (or whatever suits) for budget updates or meetings. Talk about your goals and any issues or developments (such as raises, new jobs etc.). Allow yourself and your partner to use this time to discuss your thoughts, feelings, concerns and wants surrounding your goals and your plans. And make time to update any of those plans.
● Share the load
Saving can be pretty difficult, which is why it’s so much easier to save together. Not only that but it can also strengthen a bond, build trust and lessen the risk that one partner will feel resentful because they feel like they’re doing all of the saving. At the end of the day if you can honestly, kindly and healthily tackle the financial issues in your relationship, it’ll make getting to your goals not only easier, but also immensely fulfilling.
The saving and borrowing game
Another area that you and your partner need to agree, or find a compromise on, is how to save your money. Here are a couple of things to talk through with your partner:
● Build up an emergency fund
This rainy day savings fund is solely for emergencies – medical expenses that aren’t covered by your medical aid, car services, burst geysers and the like. This money should be saved in an account that’s easily and quickly accessible, but it should also, ideally, earn interest at a decent rate. Such a fund would also make it possible to avoid taking out a loan for the above mentioned expenses, which is very much the idea: to stay out of debt if possible.
● Start an investment portfolio
While you are saving for your goals and building your investment portfolio don’t forget to put money into a retirement annuity or some other kind of long-term investment. If you don’t have anything set up yet, now is a good time to start. Remember that you want to diversify your portfolio over time, putting money into different types of investments, in order to spread your investment risk.
● Borrow only when necessary
While an emergency fund should tide you over for emergencies, every now and then there’s a reason to borrow money, or buy things on credit, either because you haven’t been able to save enough or because the expense was unexpected. Be particularly careful when it comes to credit cards as it is extremely easy to overspend on them. In fact, a credit card is only a good idea if you can limit your use of it and use it as a tool to establish a respectable credit score.
Children
Children can be wonderful, but the decision to start a family is a serious one. If you and your partner have decided that you want children, you may have to make some changes to your plan.
● Adjusting long-term plans for children
The hard truth is that children aren’t cheap and you will need to make adjustments to prepare yourself financially for their arrival. Talk honestly and openly with your partner about timelines, expectations, parenting roles and ideas around how to raise a child. Once you have established timelines, you will be able to set new goals around expenses such as education.
● Think about the logistics of a stay at home parent
It’s important to consider what will happen when you do have children. Will both you and your partner keep working? Will you get someone in to help look after your child? Or will one of you stay at home to look after them? If the latter, how will that work out logistically? Will you join your accounts and keep to a budget, or will the stay-at-home parent get a salary of sorts? Whatever you decide is best for you and your partner, make sure the plan is clear and that both parties are totally satisfied with it. At the end of the day, you want these things to strengthen you as a couple, and not divide you.
Learn more
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