Should you combine your finances with your other half?
Moving in with your partner is a big step, and when the question of managing finances comes up, it’s often it’s easier to ignore it than make plans. But at some point, you may wonder if you’d be collectively better off pooling your money together. There’s no one-size-fits-all approach, so each couple needs to consider their individual situation. However, you should be able to achieve more financially as a couple than as an individual. Here are three different approaches to managing your money with your other half and why they may appeal to you.
Keeping it separate
Some people just don’t want to mix their finances. Many couples are meeting later in life and have thus become very independent, so it makes sense that you may not want to have that feeling of dependency on each other. Typically, you’ll have one joint account that you use to pay bills (such as mortgage or rent, food, utilities). The rest of your finances may include separate assets (such as shares and property), savings and discretionary spending accounts. As a word of caution, full disclosure is the best policy. You may be embarrassed about some debt you have or lack of savings, however it’s a good idea to talk to your partner about it. Even if you’re not combining your finances, it’s good to know your weaknesses when it comes to managing money and those of your partner. You never know, if you owe $20,000 on a credit card, your partner may be willing to lend it to you at 5% interest instead of 20% at the bank. You both win.
Meeting half way
If you decide that you want to work more closely together, yet still want to maintain some level of independence, you may like to consider having a combination of separate accounts and joint accounts each. It’s quite normal to have your own discretionary account (it’s especially good for presents) and other accounts joint. A common joint account beyond the bills account is a savings account. This may be for a house deposit, an overseas trip, or just trying to get ahead. The more you combine, the greater visibility you have on what each other is doing, the more you can keep each other accountable and the more financial advantages you may be able to gain.
Going all in
No more mine and yours, it’s all ours. There are pros and cons to this. This approach gives you both the highest level of transparency and accountability. If you’ve set some big goals together, this allows you to fine tune both what you do individually and as a couple. With this scenario, if someone has spent up big one week, you both know that you’ve got to knuckle down afterward to put aside that little bit more if you’re saving for something. As far as assets are concerned, you can make the most of being tax efficient and ensuring that negatively geared assets are in the name of the highest tax payer and income producing assets are in the name of the lower taxpayer.
You have to be comfortable with your choices, but typically the closer you can align your plans and the more you can work together, the more you can achieve. If you’re unsure about combining your finances, start slowly and make sure you keep discussing your ideas, plans and concerns. Over time, you’ll find a happy medium.