The best way to manage your finances for a healthy and happy relationship?
It could be something boring like an electricity bill or your TV licence, or you might be saving up for a holiday, a wedding, or even a new home.
But when it comes to joint spending, what’s the best way to make it work for you both?
As with any part of a relationship, how you manage your combined finances will depend on your circumstances
It’s estimated that one in six couples have entirely separate bank accounts as they value financial independence over pooling their cash, according to a study by AIG Life.
For those that choose to share their wealth, some opt to use a joint account for all transactions, while others transfer a portion of their wages into a communal pot while maintaining separate accounts for spending.
As with any part of a relationship, how you manage your combined finances will depend on your circumstances, and there’s no right or wrong answer so long as both of you are on the same page.
But while many of us may have had a few problems managing our money with a partner when we were in the early days of our relationship, things become more complicated when children come into the mix and one partner reduces their working hours to provide care.
Suddenly, the once-even playing field doesn’t seem so fair, as one of you suffers a pay cut to provide unpaid childcare.
What’s more, the change in dynamic can raise questions such as, are you using a joint account to pay for any spending for your children? Does this parent who has cut their hours at work find themselves dealing with the bills that come with kids? Who’s making up the shortfall in earnings?
However you work this out, it needs to be fair to both partners, and the best way to do it is to be open and honest, and to keep talking about money, something none of us are very good at doing!
Things become more complicated when children come into the mix and one partner reduces their working hours to provide care
Family finances can be a feminist issue
There are 6.5 million unpaid carers in the UK, and of these, 59% are women, according to Carers UK.
This unpaid care is expected to have a value of £77bn per year, and women are also most likely to be ‘sandwich’ carers – looking after young children and elderly parents at the same time.
The coronavirus pandemic, which has seen households across the UK locked down for almost a year and finances severely stretched in some cases, has only heightened this problem.
In the first lockdown, 16% of women reduced their working hours for childcare or homeschooling, compared with 9% of men, according to The Money Charity, while the TUC says 71% of mothers who applied for furlough following school closures had their requests turned down.
The emphasis in these examples is on women, but this isn’t always the case, and it will depend upon your relationship. In any situation, there are safeguards you can put in place to make sure you and your relationship are protected financially.
With any debt you have taken out in joint names, both of you are liable for paying it back
Be your own emergency fund
While a joint bank account can often seem like a no-brainer for paying shared bills, the risks might outweigh the advantages.
Living with someone or being married to them will not affect your credit rating alone, but as soon as you open a joint bank account together, you’ll be ’financial associates’.
What’s more, the credit record of the other account holder will have an impact on your own score.
This means that if you or your partner applies for credit in the future, the lender will be able to check both of your credit records.
If your partner hasn’t repaid their debts on time or, worse, has been declared bankrupt, it may affect your ability to get credit.
What’s more, any debt you have – be it an overdraft on a joint current account, a mortgage, a car finance deal, or a loan – if taken out in joint names, both of you are liable for paying it back. This means even if one person can’t (or doesn’t want to) make the repayments, the other will be responsible for clearing it in full.
Split bills on earnings
A fairway to split your outgoings is to do it based on earnings. First, add up everything you jointly spend money on. Then look at how much you and your partner earn and calculate the percentage difference.
If you earn £30,000, for example, and your partner earns £60,000, they earn twice as much as you and therefore could possibly pay twice as much as you do for joint outgoings.
Make sure you also consider joint savings and debt payments and regularly review the arrangement.
It’s not fun at all and not an especially exciting task to set in the diary, but it can save a lot of anger and resentment building up.
Don’t forget that while you may think that this article is brilliant, it is intended for information purposes only and should not be mistaken for financial advice or recommendations.