There comes a time in most relationships when the conversation arises about who should pay for what, and what the long-term financial goal is as a couple. Talking money can get messy which is why having this conversation can be daunting, particularly if one partner earns more or has more debt than the other. Although your relationship may be a 50-50 commitment, your money more than likely is not which is why it is important to maintain honest, open communication about your expenses and income as well as shared and individual goals. To help you navigate this tricky conversation, we have put together a few tips to ensure fairness and avoid financial surprises.
Joint Bank Accounts
If you and your partner both work, often the easiest set up is to have a joint bank account for shared expenses as well as individual accounts where you both can manage your own individual spending money or savings goal. That way, you are both contributing fairly to shared expenses but still keep some of your financial independence. Having a joint account requires transparency, mutual trust and shows a shared commitment towards a common goal.
What if One of Us Earns More?
It is common for one partner to earn more than the other. If this is the case, then it probably isn’t fair to split basic living expenses 50-50. Instead, make a list of all your living expenses and work out the total amount based on your pay frequency (weekly, fortnightly, monthly). Depending on what the difference is between your salaries, work out a fair percentage to contribute to the total amount. For example, if you earn $60,000 and your partner earns $40,000, you should contribute 60% of the living expenses and your partner the other 40%. It might turn out that the lower earning partner wants to contribute more to the shared living expenses, but this shouldn’t be expected and always remember to keep things as fair as possible.
Saving for the Future
Setting a joint savings plan can be very exciting once you decide what you are saving towards. Whether it is a short-term goal like a holiday or a long-term goal to buy a house, having a plan in place always makes it seem more real and achievable. You will likely reach your shared goals faster if you have a separate account set up so that you can see the savings growing without any money coming out of it.
Most relationships these days come with baggage of some sort. Financial baggage such as personal loans, or credit card debts acquired prior to meeting one another can often put your joint savings venture on hold or slow it down. If your partner has more debt than you do, you may be willing to help them pay it off sooner so that you can both achieve your joint savings goal quicker. You may also consider offering to pay a higher percentage of the living expenses or for the “fun things”, like date nights, to free up some of your partner’s cash so they can put it towards their debt. If you or your partner decide to pay off your debt without the help of the other, sit down and work out how long it will take so that you have a set end date to the debt being paid off. That will offer reassurance to both parties that there is an end to the debt and a start to the joint savings.
Every relationship is different and so how you decide to set up your finances will also differ to other couples. It is important to maintain honesty and openness with your partner when it comes to talking finances, so always do what works for both of you. For further advice, get in touch with the team at Preston Finance and Insurance.