Making Cents: Six financial rules every couple should follow

THERE was a strain beginning to form in their relationship, one that I thought was rock solid. And surely nothing could, or ever would come between them, but I was wrong.

I'm referring to a couple I've known very well for years. They don't live in Ireland but on a journey home a couple of months ago, she confided in me that things have been a little different in recent months.

And the problem was money.

It wasn't a secret to either that they had different money styles and money meant different things to each of them. He was a penny pincher and she was a spendthrift. They accommodated each other's intricacies and that was fine for a while, but things were beginning to niggle both, much more in the past year.

They’re not married, not that that matters and have been together for 15 years. He earns more than her, but they split their rent and bills in half. When she begins to run short at the end of each month, the unfairness of their arrangement begins to annoy her. And when he has to bail her out, that grates on him.

He’s older than her and I think he’s beginning to realise that retirement isn’t a million miles away and this might be the trigger as to why he suddenly has become much aware of what they are spending their money on each month. And if he feels he’s supplementing her, that’s money he could be using and probably needs to be setting aside for himself when he’s no longer working. And, that’s me guessing by the way, it mightn’t be the reason at all.

If he only told her, we’d all know what was bugging him.

And the exact same thing was happening every month, but their interpretation of the event couldn't be more different. Both feel they are being taken advantage of, but they keep how they’re feeling to themselves for fear of creating an argument. It is better to say nothing, but internalising how they feel, is just making them feel worse about the other.

And they're not unusual either, this happens with other couples all the time.

Anyway, given what this couple are going through, it was a trigger for me to think about what advice I would give to a dual earning couple, and six areas sprang to mind. And they were formed out of working with married and unmarried couples for the past 30 years and listening to them and observing the strategies they've employed and seeing which have created the best outcome for them.

They may not work for everyone, but are worth considering, nonetheless.

1. Split your monthly outgoings based on what your income is, as a % of your combined income

If you earn €2,000 and your partner €3,000, then your contribution towards your monthly rent/mortgage/utilities bills etc. should be 40% of the overall cost (€2,000/€5,000)

For example, if all your bills amount to €1,750 per month, your contribution should be €700.

If you split it down the middle i.e. €875, you're left with 56% of your income, whereas your partner is left with 71% of theirs, and that's just not fair. If you apportion costs to income earned, your left with 65% of your income and your partner is left with 65%.

2. Have one joint account for bills but two separate accounts for your own use

Couples always ask me whether they should have just one account for everything or separate accounts from one another. And my answer is always the same - whatever works best for both of you. My wife and I work from just one account, and it works fine for us. We’ve always operated our finances that way.

But that mightn't work for others either.

I think the hybrid approach works well i.e. have one account for all your bills and direct your personal contributions to it every month, and then have a separate account you both operate independently from each other. That might lesson arguments about what each other spent and on what.

3. Track your spending

Regardless of whether you operate your accounts separately from one another, individually or collectively you need to track what you are spending your money on. Following the money is key to developing good financial habits and becoming financially secure. Unless you know what you are up against, it's impossible to set and accomplish goals you both want to achieve.

4. Set your goals and priorities together

Communication is vital. You need to tell each other what’s important to you.

You might want to save more for retirement than your partner does. They may want to spend more on things right now than you do, because it gives them more pleasure than saving for something they can’t connect with because it's so far away.
You both need to understand how each other feels and when you do, you both need to accommodate each other by making compromises, and I think having a financial adviser involved would help no end in this regard, in finding that happy medium. You’ll still feel happy, you're contributing enough to your pension, while sitting on the runway with your partner, waiting for take-off.

5. Everyone needs to be involved

If you don't like dealing with money, delegate but don't abdicate responsibility to your partner.

If they're happy dealing with utility providers because you hate doing that, then great, but that doesn't mean they take over everything either. You both need to be involved, even if it's doing something very small.

And it's great having both involved, particularly if things become challenging for whatever reason i.e. redundancy, drop in income etc. It's great knowing you have someone to talk to and someone who can help put a plan together with you. It's unfair having everything on just one person’s shoulders, where all decisions are left to them about how you spend your money and what you need to cut back on etc. so having everyone involved playing their own part, big or small is important.

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This is often referred to as financial infidelity and some studies reveal that as much as 40% of people admit to hiding debt, savings, and spending habits from their partner. And the millennial group, those aged between 23 and 38 are twice as likely to hide money or accounts from their partners than any other generation.

And it’s become easier to conceal accounts from your partner, because most accounts are on-line, with very little evidence appearing in the mail, that would raise suspicions.

Finding out a partner is keeping things from you, and that something could be very innocuous, might lead someone to think, what else are they hiding from me?

When there is a breakdown in trust, it can destroy a relationship, so be honest and upfront about your finances from the outset, and let your partner know exactly what you have or haven’t.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie