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11th February, 2022
When we think about love and all things Valentine, the topic of money may not be the first to spring to mind —It’s not exactly the hottest topic to discuss over a romantic meal. However, disagreements about finances are one of the most common causes of relationship breakdown, and so communicating about the topic openly and honestly is a vital ingredient to long-term happiness.
Spending habits can vary widely, as they’re shaped by our early life experiences with money and by the examples we had growing up. Problems can occur when there is a mismatch of attitudes towards spending, or when one partner feels that shared longer-term goals are at risk of being compromised to meet shorter-term discretionary spends. Understanding each other’s perspectives is key – this requires full disclosure, and a no shame no blame environment should be created to have these conversations.
Creating a shared budget for shared expenses, from household expenditure to travel encourages and normalises communication about money. Having a shared account (as well as independent accounts) not only holds you more accountable, but encouraging and supporting each other to reach shared financial goals can improve a relationship (though be careful to overlook an odd slip up). Contributions to these expenses also should be discussed. Splitting these costs 50/50 may seem equal, but if one half earns significantly less than the other, their longer-term goals may be compromised (e.g. saving for retirement) and so this approach may be inequitable when looking at the fuller picture. In fact, by reviewing expenditure between a couple may allow for both parties to maximise their pension contributions thereby increasing tax efficiency.
The other side of the coin focuses on saving habits. Saving too little can impede your future plans, but saving too much might mean missing out on life experiences from living in the here and now. Discussions about what to save for i.e. financial planning for short and long-term goals, how much to save and what to do with savings, should be had with your significant other. Try to better understand your partner’s attitudes and experiences towards investing and risk. If one partner is risk averse and the other the opposite, open discussion can help to build a savings and investment strategy that strikes a balance both partners are comfortable with. Addressing the risk that each wants to take versus the risk you may need to take increases the chances of meeting of your goals.
Being open about what you own and what you owe is especially important as a relationship becomes more serious. Entering a contract as significant as marriage not knowing each party’s financial position could make for a few surprises, and financial reviews should be shared every now and again so both know the state of the financial union. Full transparency of your balance sheets can increase trust and grant each other the right knowledge to make healthy financial choices for you both.
Protecting those we love the most comes naturally to us, and so ensuring that your family is financially protected against something happening to either spouse, such as premature death or an illness, should be a priority. Taking out a life assurance policy might end up being the most caring thing you’ve ever done for your family. Also, if something does happen one partner, ensuring there is a rainy-day fund in place, held in joint names, means there is access to cash until affairs can be sorted. Managing the household finances will feel less burdensome if both partners have been knowledgeable and engaged in finances from early on. Life is more about the unexpected than the predictable, and having your finances in order and regular check-ins better equips couples to handle any bumps in the road.
Love can’t escape the money or financial planning chats, from the awkward ‘who pays the bill’ dance at a first date to the heartbreaking distribution of a loved one’s estate. It's part and parcel of life and shouldn’t be the elephant in the room. Though pride, shame, and sense of self-worth can easily be tangled up in discussions about money so tread respectfully with your nearest and dearest for a happy outcome.
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Warning: The information in this article does not purport to be financial advice and it does not take into account the investment objectives, knowledge and experience or financial situation of any particular person. You should seek advice in the context of your own personal circumstances prior to making any financial or investment decision from your own adviser. There are risks associated with putting any financial or investment plan in place. There is no guarantee that the plan will meet its objectives.
6 October, 2021