What is one of the biggest causes of arguments between couples? It’s not whether to have children or even how many. It’s not even who should put the bins out. It’s actually money. According to the American Psychological Association1, almost a third of adults reported that money is a major source of conflict in their relationship.
So, whether you’re married or living together, in a new relationship or part of an established couple, how you both handle your finances is as important for your happiness as it is for your bank balance.
Here’s how to handle your finances harmoniously.
1. If you’re a saver and they’re a spender (or vice versa)
Your personal situation, your income, your commitments and your goals and ambitions all shape your view on money and affect how you handle your finances.
What happens when you’re in a relationship is that your personal financial tendencies can be accentuated - negatively or positively - by your spouse or partner’s attitude to money. While you might baulk at the idea of labelling yourself as either a spender or a saver, it can be useful as a ball-park way of understanding each other’s financial outlook.
But there’s no need to be afraid if you seem to be at odds financially. Spending and saving are often seen as polar opposites, but in a relationship having one of each can be beneficial – if you handle it right.
The saver among you can encourage a healthy attitude to putting something away for a rainy day. Don’t forget that you both have an annual ISA allowance, so make sure you utilise that. While the spender among you can use their finely-honed shopping skills and a keen eye for a bargain to help trim bills and seek out a good deal.
2. If one of you likes to be in control
Taking responsibility is OK when it comes to handling your finances. Separating day-to-day money issues away from longer-term planning is common among couples, but it’s not ideal as neither of you then has the complete picture. If one of you takes control it can be a better, more holistic way to manage your money.
Both of you need to ensure that your savings and retirement plans are in place and on track. Take a look at why you’re not too young to start a pension and don’t forget to start saving into a SIPP if you don’t have a workplace pension, or you want to top-up what you’ll have. Our Select 50 range of funds makes it easier to choose where to invest.
However, make sure you share what you’re doing. Too many couples leave one of the party completely in the dark, which isn’t ideal and can lead to misunderstandings. The money and your financial security belong to both of you, so make sure you both have at least an understanding of the state your finances are in. Even if one of you just can’t release the grip on the purse strings.
3. If one of you has debts
When you are in a relationship and want to do things like get a mortgage or a joint loan or credit cards even, both parties’ financial affairs will be part of the equation.
However, a worrying number of people hide debts from their partner. Embarrassment is the biggest reason given for keeping these debts a secret. But, as Sara Davison, a break-up and divorce coach, says, being honest is essential – especially if marriage is on the cards.
“Honesty is key to a long-lasting and happy partnership. Money problems put a lot of stress on relationships, and if the information was withheld it can cause huge trust issues.
“It's always best to face up to your true financial situation and deal with any embarrassment before you take your wedding vows. If they are the partner for you, they will work with you to find a solution. If not, then better you know now than face the divorce courts later on.”
You have been warned. If you’re hiding a secret it’s time to come clean.
4. If one of you earns more than the other
It’s not uncommon for one partner or spouse to earn more than the other and exactly how you work out the best arrangement for you is your choice.
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 divvy up the outgoings, with one person paying the mortgage/rent and another responsible for utility bills, for example.
There are many ways to slice and dice it. What’s most important is that you’re in agreement about how you handle your money.
5. If you have ‘outside’ interests/expenses
It may be that you have children from a previous relationship who you support financially. Or it could be that you have a hobby or interest that requires a substantial financial outlay. If you aren’t open with your partner or spouse, these ‘outside’ expenses can become a source of conflict.
It can be all too easy for your partner or spouse to resent you spending the money ‘elsewhere’, especially if it has a knock-on effect on day-to-day expenditure. The best way to handle this is to be upfront and honest about these expenses and make sure you factor them in to your overall 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 spouse or partner. Setting up a direct debit to cover these costs is another way to make it easier.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.