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Money has been known to be one of the biggest causes of stress in relationships. Clearly, financial management is not just about money, it's about strengthening your relationship!ā¤ļø
Tips
1. Be transparent about your finances
For starters, it is essential to have an open and honest discussion about your financial habits before combining your finances. Discuss your monthly income, expenses, and savings goals with one another. More importantly, don't hold back on sharing any debts or financial obligations you may have. Understanding each other's financial habits and priorities can help you establish a budget that works for both of you and avoid any potential conflicts down the line.
2. Set short- and long-term goals
One of the first things you should do is set short- and long-term financial goals together. Determine what your goals are as a couple and create a plan to achieve them. This could include paying off student loans, saving for a down payment on BTO, or investing for retirement. Having sufficient fun money to go on that annual Europe trip together is also a legitimate goal. By setting financial goals together, you can ensure that you are both working in tandem.
3. Prioritise emergency funds
By setting aside money each month for emergency funds, you can build a strong safety net to prepare for unexpected expenses. This ensures that you're both financially secure in the event of a crisis, such as one partner losing their job or a medical emergency, thus limiting financial strain on the relationship.
4. Consult a financial planner for a professional opinion
Seeking advice from a financial planner or having an expert run through your couple's finances can be an excellent option. A financial professional can provide you with personalised advice and strategies for managing your money effectively as a couple by creating customised plans that aligns with your goals. They can also provide guidance and support as both of you work towards achieving your financial objectives together, helping you to build a stronger financial foundation and happier future!
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Strategies
Managing Income
1. Keeping separate personal accounts
Money is one of the most significant stressors in a marriage. When you and your partner choose to keep separate accounts, it may feel like you have more financial autonomy. However, it is critical to establish clear communication and financial management practices to avoid any misunderstandings.
Having separate accounts means that you will need to decide who is responsible for paying what expenses. Some couples choose to split bills equally, while others prefer to pay proportionately based on their incomes, more on that later on! It is essential to keep track of your expenses and discuss long-term savings and retirement goals together.
Pros:
Each person has individual responsibility for their spending habits and debts brought into the relationship.
Splitting shared expenses based on what is agreed upon can feel fair.
Allows each partner to save and invest their money in a way that aligns with their personal goals, without needing to compromise or adjust their plans to match their partner's goal.
Cons:
May require significant coordination and communication to ensure that both partners feel financially secure and supported in their relationship.
Can become more complex if you have children, career changes, or other major life events.
Limits opportunities for financial growth and joint investment opportunities.
2. Creating a joint account
When it comes to managing your money as a couple, joint accounts can offer a simpler approach. With both partners' income going into one account, a couple can do away with the need to divide resources or messy spreadsheets. Essentially, financial planning will only need to be done for a single entity - the family unit.
Pros:
Simplifies financial planning.
Budgeting and spending can be easily tracked using online software or smartphone apps.
Joint accounts can easily accommodate additional expenses related to children or family needs as they arise.
Cons:
Judging your partner's spending habits can lead to resentment, particularly if there is a significant income disparity.
Keeping surprise gifts a secret can be challenging.
When a relationship ends, the division of assets can be a contentious and complicated process.
3. Having both separate and joint accounts
Having a dynamic accounting system such as a combination of both personal and joint accounts can be a good solution for couples who value personal freedom while wanting to work together towards shared goals. With this method, an individual's income goes into their own personal account, with a previously agreed sum to be transferred into the joint account. The leftover money in the personal account can then be spent on one's personal wants.
There could also be multiple joint accounts for different purposes - savings, bills, and fun money.
Pros:
Allows a couple to track joint expenses easily.
The ability to work together towards a common goal,
while retaining the autonomy to buy what they want without discussing it with their partner.
Cons:
Opening and managing several bank accounts can be complicated.
May lead to less communication and transparency regarding personal spending habits.
Managing Expenditure
1. Manage bills 50/50
Going Dutch can help couples maintain their financial independence and avoid power imbalances. To some, 50/50 may feel like a fair way to ensure both partners are contributing equally to household expenses. However, splitting expenses equally may not work for every couple, as some may prefer to split expenses based on income or take turns paying for expenses. It's important to communicate openly with your partner and find a system that works best for your individual circumstances and financial goals!
2. Contribute proportionately
While having a 50/50 split may work for some couples, other couples may find it more equitable to contribute to shared expenses based on proportionality. This could mean having each partner contribute a fixed percentage of their income (e.g. both partners contribute 50% of their income) or having the partner that brings in 65% of the total income pay 65% of total bills. Such a method may be more suitable for couples who have a huge disparity in individual income.
3. Splitting financial responsibilities
Managing finances requires a lot of work, from tracking expenses to managing investments and savings. It's important to divide these responsibilities based on each partner's strengths and interests. After all, one partner may be better at managing day-to-day expenses, while the other may excel at long-term financial planning. But don't forget to have regular discussions and adjustments as your financial circumstances as a couple may change.
Splitting financial responsibilities could also mean having one partner in charge of groceries, clothing and daily expenses while another partner handles housing and utility.
4. Live off one income
For the aggressive savers, living off one income simply means acting like you guys only have one income. This means that one partner's income will be used to pay for all expenses, while the other income will be left untouched for saving and investments. This strategy can lead to reduced overspending, deliberate money decisions, faster debt repayment, and increased financial opportunities in the future. However, it may require lifestyle adjustments and may not be feasible for all couples.
The bottom line is this - there's no one-size-fits-all approach to managing your finances as a new couple, but communication, trust, and planning are key!
Remember to book your 30 min session here: FREE PLANNING
with Love,
The Dateideas Team
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