Finances can play a big part in relationships. Vicky Shaw finds out how to set good strategies in place and avoid money fall-outs. So, love has blossomed and you think you've found the perfect partner - but are you financially compatible? Understanding each other on money issues can go a long way to making or breaking a relationship.
“Whether you’re married, living together or just getting to know one another, it’s crucial both parties understand each other’s finances and know how they view money management,” says Emma-Lou Montgomery, associate director at Fidelity International (fidelity.co.uk).
“Being open to discussing the long-term financial plans you may have, and vice versa, can save having a lot of issues further down the line.”
Here, Montgomery shares eight tips for making sure your finances flourish in your relationship…
1. Don’t be afraid if one of you is a saver and the other is a spender
In a balanced relationship, having one keen saver and one more comfortable spending (within reason) can be beneficial – if it’s clear who’s responsible for what financially in the relationship. The saver can encourage a healthy attitude towards financial saving goals – be it a first home, an adventure holiday, or just cash for a rainy day. On the other hand, the spender may take on monthly living costs and cover expenses like socialising with friends and family.
2. Don’t leave your partner in the dark
All too often, couples leave one of the parties completely in the dark over bigger commitments, like savings or retirement plans, leading to misunderstandings and tension.
The money and your financial security belong to both of you, so make sure you both have at least a basic understanding of the state of your finances. It may feel daunting at first, but talking openly about your finances is so important, both when fostering new relationships or maturing in a long-term relationship or marriage.
3. Be honest
Many people hide debts from their partner – often out of embarrassment. But honesty really is the best policy. If you’ve come to the point when securing a joint loan or mortgage makes sense, it’s crucial any unpaid debt or blips on credit scores come to light. A supportive partner will work with you to find a solution. If they’re not up to it, then better you know now rather than later.
4. Communicate when one of you earns more than the other
Pretending you earn more than you do when you first meet might seem like a good idea, but eventually the shortfall will become apparent. Communication here is key. Some couples have separate bank accounts, others keep a joint account for household expenses, some agree to split bills equally, some do it in proportion to their income, while others divide up the outgoings, with one person paying the mortgage/rent and another responsible for utility bills, for example.
5. Don’t let ‘outside’ interests/expenses become a source of conflict
It may be that you have children from a previous relationship who need your financial support, or a hobby that requires a substantial financial outlay. If you aren’t open about the costs with your partner, these ‘outside’ expenses can become a source of conflict. Be up-front and honest, so you both can ensure you’re able to factor them in to your shared budgeting.
Often, keeping a separate pot of money or a separate account for these expenses is a good way to ensure they’re accounted for and covered. Separating them out also means they’re not a constant niggle to your partner. Setting up a direct debit to cover these costs is another way to make it easier.
6. Discuss the future now
For example, if you both want to travel the world later in life, factor that into your finances now to make sure that when you do travel, you can travel in style.
7. Don’t be afraid to take control
While it’s good to plan together, make sure you also take responsibility for your own finances – whether it’s by opening a new savings account or contributing more into a pension.
8. Protect yourself and your partner
Nowadays, many people choose to live together for longer before getting married or without tying the knot at all. However, this can be an issue in terms of your finances. You could consider setting up an agreement to ensure that both parties are protected and assets are divided as you would wish.
