Do you want to buy a house, have children, retire early? These require a great deal of planning, and if you’re not on the same page or don’t share the same financial values, it’s no surprise that money is one of the main causes of relationship breakdown.
Conversation 1. Let’s get financially bare
This is not about revealing what you have early in a relationship, this is about understanding your partner’s financial psychology.
It is essential that you both get to know each other’s wallets with questions such as: are you a spender, a saver, what are your financial weaknesses or weaknesses. Interestingly, how a person grew up around money and what their parents were like about money has a big impact. So often we inherit beliefs and management skills about money from our parents.
It’s getting to understand where your partner is coming from, so you have more empathy.
Conversation 2. How will we manage our money?
According to the latest research from Netwealth, women are increasingly choosing not to share their money with their partner. But that’s not right for everyone so I think it’s good to set the options:
- Separate accounts and split each bill straight down the middle.
- Joint account– where you both pile everything up and share all the expenses
- The hybrid option – have a joint account for specific expenditure and within that account share responsibilities 50-50 or according to the share of earnings.
- Allowance model– this may sound old fashioned but it can be a good way to manage your money in certain circumstances such as, one of you is not working (on mat leave or raising children full time or returning to education ).
To be clear, there is no right answer to this conversation and it can depend on who wins what, what feels fair and doesn’t create an unhealthy power imbalance. Remember that you can switch between these options at any time.
Chatting 3. What will happen if we separate?
No one wants to think about this one but as your relationship grows and you have shared responsibilities, such as children, a house, the cost of separation only increases.
Consider a pre-nup: Marriages are on the wane, so think about protecting yourself and your partner. A prenuptial agreement sounds quite scary and is not for everyone but they are flexible and can be set up to suit your relationship, such as protecting only the assets you had before marriage. Entering a pre-nup can be a difficult thing to do but it could be worth it if you have significant assets.
Unmarried couples beware: the law does not protect cohabiting couples in the same way as married couples and it is often women who feel this the most after a relationship breaks down. You can look at a cohabitation agreement and a declaration of trust (used for property) to set out who owns what and in what proportion as well as how you will divide shared assets should the relationship break down .
If you are considering a pre-nup, cohabitation agreement or declaration of trust, your first step is to seek advice from a family law solicitor. To maximize your chances of being upheld in a court of law, you should both seek independent legal advice. You can contact your nearest Citizens Advice Bureau for help finding a solicitor.
Conversation 4. Okay, we need to talk about debt
This is a difficult and emotional subject, as there is so much shame surrounding it but it is an extremely important one. It has a huge impact on any shared life decisions you make for the future and any shared money goals. Once you’re financially linked with someone, whether it’s a joint bank account with an overdraft facility, a mortgage, a credit card, their credit rating will affect yours. This means that any debt accumulated by one can seriously affect the other person’s credit score. You can check who you are financially connected to by looking at your credit report which is free. There are three main credit checking agencies: Equifax, Experian and TransUnion.
Conversation 5. How we will spend it – or not
Even if you don’t have a joint account it’s still essential to agree on budgeting, work out how much you want to spend on shared experiences and how much is too much for you. And what are your financial priorities? What do you want to spend on a date night, for birthdays etc. Have a budget and stick to that agreement. It’s all about compromise, trust and what you’re happy to spend money on together.
6. Who does the boring bill stuff?
This is financial administration and who is responsible for paying the utility bills. There are apps, such as Splitwise that let you record and share spending together. Plug in the details and let it do the math for you. Or you may decide to have a joint account just for bills. Standing orders are great for this, and for paying back on time. Inevitably, there’s always someone in the relationship who ends up taking care of more of these things, which is why it’s vitally important and it’s usually a gender issue, don’t be left ignorant of all your financial details together.
Get a cash check in monthly: It is empowering and also very important that the other person knows what the passwords are and where all the financial assets are. Be responsible and stay on top of things.
7. What does our financial future look like?
What do you really want from your life? A great way to do this is to divide your financial goals into: short term (0-2 years), medium (2-5 years) and long term is 5 years and more. These goals will include, do you want to buy a house, is saving for a deposit a big priority for you or do you want to spend years traveling the world? It’s about asking each other whether we should be saving together for long, medium or short term goals and how we’re going to do that.
So, what about mortgages?: are you saving together, looking at shared ownership schemes, or savings to buy schemes? There are ways you can both benefit if you save for a deposit. If you both opened a Lifetime ISA, you could both benefit from a 25% government bonus each year. You can both contribute up to £4,000 a year which means you would both receive a 1k bonus from the government. You can then use this towards your first home (as long as it is £450,000 or less). Even if your partner isn’t a first time buyer but you are, you can still open one and use your savings and bonus towards your new home.
And finally, pensions: are you both saving enough for your old age? Are you maximizing your employer contributions? Everyone has a pension unless you opt out or are self-employed. If you are self employed make sure you have one! It’s about contributing what you can. But the obvious truth is that nobody saves enough.