Even the most compatible of couples can find it tricky to manage their finances together. Where you previously had to think only about your own money needs, suddenly there are someone else’s financial goals and habits to consider.
So, what do people need to keep in mind about managing finances in a relationship? Here are some tips from the experts on pitfalls to avoid when managing money as a couple…
1. Not maintaining your own financial independence
Emma Watson, head of financial planning and advisory services at Rathbone Investment Management, says: “Every couple manages their finances differently, whether that’s splitting everything 50:50 or having one salary used to pay for everything day-to-day and the other to save for the future – it’s whatever works best as a couple.
“For those who feel comfortable to, setting up a joint bank account can help keep track of your joint expenses. However, before signing up to this, be aware that if one person has a bad credit rating, as soon as you have an account together you will be ‘co-scored’ and your credit ratings will become linked,” Watson cautions. “Whether you’re married or not, it’s wise to maintain your own financial independence too, by keeping your own bank account and savings.”
2. Not considering how financially compatible you are
Watson explains: “It’s not only about pounds and pence, but also attitudes, aims, and beliefs. If you are to share a lifetime with someone, it helps if you are both on the same wavelength when it comes to your life goals. Do you both have the same aspirations such as starting a family?
“All life goals will require saving, so it’s good to know you are on the same path early on in your relationship. As part of this, take some time to figure out your money style. For example, is one person more of a saver than a spender or vice versa?”
3. Being financially imbalanced
Watson says people can be left vulnerable if their other half mostly manages the finances. “For example, if the main bill payer or ‘finance controller’ became seriously ill or passed away, would the surviving partner know how to access their finances or how to pay the bills?”
4. Not knowing your rights
Watson says: “Whether you’ve been with a partner for two years or 20 years, if you’re not a married couple or in a civil partnership, you need to be aware that the same legal and financial rights do not apply as if you were. If you are living together, or thinking about it, it’s worth considering making a cohabitation agreement to ensure you both know where you stand,” she adds.
5. Only thinking about the here and now
Watson says this could include a lasting power of attorney (LPA) – a legal document that lets you appoint one or more people to help you make decisions or to make decisions on your behalf if you are no longer able to.
“Writing a will is one of the most important things you can do for any loved one, particularly children, as it means they can be financially cared for and protected for when you’re no longer around,” she explains. “It’s common for many people to only write a will when children arrive, but really, they should be written and updated at important life stages.”
6. Not making time to talk about money
Zainab Kwaw-Swanzy, a Millennial finance specialist at Barclays suggests setting aside specific time to discuss money calmly. “Make a list beforehand of what you want to discuss, and any concerns you might have. Whether that’s how much you set aside towards goals or splitting bills, it’s always good to be on the same page before spending money.”
7. Feeling guilty
It’s likely that couples will have different financial situations. Kwaw-Swanzy suggests: “If a partner makes a generous gesture, don’t feel like you have to replicate this financially. There are many ways you can show your appreciation in different, budget-friendly ways. For example, cooking a romantic dinner, helping them with a task, and simply being there for support when they need it.”
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8. Believing plans can’t be changed
Kwaw-Swanzy adds: “Our financial situation, circumstances and goals are constantly changing, and it’s important to be open, aligned and check in on a regular basis.”
9. Leaving valuable items vulnerable
Insurer Aviva settled over 300 UK claims for wedding rings being lost, stolen or damaged between July 2020 and July 2021. Theft was behind the bulk of claims, but others involved rings slipping off or being cut off following injuries. Many insurers have a “single item limit” on valuables, typically between £1,000 and £2,000. And if you’re using grandma’s antique engagement ring, fluctuating metal prices could mean it’s worth getting an updated valuation.