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There are lots of different ways to organise your finances as a couple and everyone has their own method for going about it. Perhaps you have a joint account as well as your own personal accounts, maybe one partner pays the other when bills arrive, perhaps you just have joint accounts and share everything.
If you are a young couple (as in, you are just starting to think seriously about a joint future) you will need to think about how you will organise your finances. As with many important issues, this could lead to a slightly uncomfortable conversation, but knowing where you are up to and creating a joint plan to fulfil financial goals is an important first step. Combining your resources in some way is a natural step but there are a few things you do need to consider before you jump straight in.
A Joint Account
It makes a lot of sense for a couple to have a joint account, even if you both still have your own personal accounts too. This is because you will often incur costs that affect both of you and it is a lot easier to pay with one account than be constantly figuring out who owes who what.
Before you go straight to only joint accounts, take things slowly and agree on a single joint account that you both pay in a percentage of your monthly income. This will make joint payments easier but will also protect you in these early stages of your relationship should things turn sour or your partner take advantage. Around 10% to 40% is recommended for a joint account like this, and you should discuss what you are both willing to put in together.
If you choose to, you could switch to completely joint accounts, however, there are no set rules here and you should do what is right for you as a couple. Don’t feel pressured to manage your money in a certain way. Do what you are most comfortable with as a pair.
A Joint Loan
Just as any two people can take out a joint account, any two people can also take out a loan. Joint loans work in a similar fashion to personal loans except that you both take responsibility for paying back the debt.
Like a joint account, a joint loan does present some risks. If one partner decides to stop making payments, the other partner is responsible for fulfilling the debt repayments themselves. This could mean that should your relationship go sour, you could end up saddled with a large debt.
There are benefits though. A joint loan will allow you to borrow more money than a personal loan exactly because there are two people taking responsibility. This means that if you are a strong, trusting couple a joint loan could be a better idea than a personal loan.
Before you take out any loan, make sure that you are confident you can make the repayments and you are making a sensible financial decision.
A Joint Mortgage
A step up from the joint loan, a joint mortgage is a huge debt but also signifies a new stage in your relationship. Living together and having joint ownership of a house is certainly a sign of strength in your union.
A joint mortgage is a good way to go about buying a house. For one thing, you are more likely to get a good deal on your mortgage and be able to borrow more using both of your incomes. Even if one of you has a larger income than the other, getting a mortgage deal together is usually the best option.
One disadvantage of a mortgage returns us to the possibility of a break up. Because a mortgage is a loan secured by the value of your house, if you do decide to break up, it is very likely that you will have to sell the house in order to pay off the mortgage. This is especially problematic as the house market does fluctuate and you could end up selling at a lower price than you bought it for.
Navigating Shared Finances
As a couple, negotiating your way through shared financial arrangements is a step towards building a long term future for yourselves. It is also a way of demonstrating your trust in each other and relieving yourselves of the constant who owes who scenario.
Though there are no real set rules about what you should and shouldn’t be doing with your finances, the most important thing is that you are both happy with the arrangement you come to and feel that it is fair to both of you. This is especially important where one partner earns more than the other, causing a financial imbalance. It doesn’t mean your relationship won’t work, just that you both need to agree on your financial roles.
If you are planning to have children later down the line, sharing finances now will also help to prepare you for family life. Kids cost a fortune to raise from babies to adults so learning how to manage your money together now is vital for managing it later on when the stakes are higher. In fact, you should make a point of discussing your financial future fairly regularly so that you are both aware of the implications of how you use your funds and what your financial goals are.
Though figuring out your finances will be a game of negotiation, reconfiguration and compromise throughout your relationship, it will become easier to trust each other and to live happily together once you have your finances under control. Money has a way of distorting even the simplest things and it is really fundamental to a strong foundation for life. You might not like to think of it that way, but you really do stand the best chance if you are both fully informed about your situation, are agreed on what you can do with your finances (whether that is taking out a loan or moving money into savings) and act sensibly with your joint finances.
