Should you combine finances with your spouse?
04 Oct, 2020
I don’t trust you
I remember the first time someone I was going out with thought that it would be a good idea to combine our money. We were on holiday and prior to going I had scrimped and saved so I had enough money to have a good time. If my memory serves me correctly, I was pretty happy with myself for achieving my savings target.
We didn’t live together, we didn’t even live in the same town but I knew enough about him to know that he was a “buy now pay later” kind of guy with heaps of things on HP, plus I knew he had credit cards and personal debt. He was generous too and I worried that his generosity could turn into ‘our’ generosity with the corresponding interest payments. I think his suggestion that I transfer all of my money into his bank account so that it was “easier” when we had to pay for things on our holiday horrified me and although I can barely remember the holiday itself I can still very much remember the feeling of losing my:
A. Money
B. Independence
C. Control of the situation
So, I said no. Put simply, even though I was quite young then, I didn’t trust him to handle my money as well as I could.
He had Mummy issues
The next time the conversation came up many years had flown by and I was seeing someone more seriously this time. He was actually pretty good with money, probably too good actually because he earned well but he was also quite the scrooge and let’s face it, no one really likes a tightwad. He was also quite controlling. Plus, he came with unresolved emotional baggage because he had been burned by a woman in the past, big time. It was a case of financial infidelity and the woman who ripped him off was his own mother.
He worked remotely and was based overseas with no access to online banking or the internet (because neither really existed!!!) so his pay was deposited into his bank account back home. He had given his dear loving Mum access to his accounts so she could pay his bills as they came in. Which, to her credit, she did, but she also had an addiction to shopping, a terribly unhappy marriage and no self-control. By the time he returned home after six months away, having worked his guts out and earned high wages, she had spent the lot. I can’t recall the figure, but it was probably about $50,000, it was certainly every cent he had earned. True story.
As a couple, we did talk about money which was a really good thing and I knew his financial situation and he knew mine but it was fair to say that he had some big unresolved issues when it came to his upbringing and how his family handled money and they very much came through in our relationship. In hindsight, it must have been a pretty big thing to get your head around, your mother stealing from you. So when the conversation between him and I turned to joint bank accounts it was a resounding “hell no” from him. Which in the end, I was extremely grateful for, turns out his issues with his mother were just the tip of a very deep iceberg!
The nicest person I know
Time went by and I met Jonny. My own mother was deeply concerned about our relationship because having seen me pick a few duds in the past she said of Jonny “something is not quite right about him, he is FAR TOO NICE”. The disapproval of my mother made him even more attractive to me, of course.
When we met he had finished his study, was debt-free and was working full time and I was in my final year of university. Although I had no student loan (having worked and paid cash for my study) I was stone cold broke, with just enough money to get me through my final year. So, I think that from the get-go we actually talked about both of our financial situations because the reality would have been if he said “let’s go out for dinner” I would have said, “Sorry, I can’t afford to go out to eat”. From the beginning we were just really honest about where we were both at, neither of us recalls any secretiveness about our own situations and if we went out, he would often pay, because I literally had no money for anything other than bare bones living. I do remember not liking being dependent on him in that way, always stepping back when the bill arrived, so I think we were always more likely to go out and do free stuff, so I didn’t have to constantly feel like I was bludging off him. He, of course, was so darn nice he just thought, “I earn my own money now, I’m happy to share, I’m hungry, let’s go out to eat”!
He remembers a night out with friends early in our relationship where I apparently straight up asked him what he earned (it was $50,0000). He does not think he would have offered up that information, but because I asked him straight up it seemed a question worth answering, with no agenda to it, just a level of curiosity.
So, our money relationship was pretty open and easy from the very beginning and we found the balance between me being broke and him having money.
When I got my career up and running and we started living together, we kept our money separate and when a bill came in for electricity or rent we simply paid half each. At the supermarket, we split the bill in two. At a restaurant, we did the same. The more time we spent together the more annoying this got because we were doing everything together all the time anyway! So, a few years into our relationship, we got a joint bank account. He banked with ANZ and I was with Westpac so we chose a different bank entirely, which happened to be the National Bank.
Later on we got married (we eloped while on holiday overseas, much to my Mum’s horror as it turned out she quite liked Jonny after all), moved cities and I think that we finally combined all of our money when we bought a house together. We didn’t do it out of tradition, more out of practicality, it just seemed logical and easier to bring everything together.
The house deposit was all his doing (I’d not been working that long) and his Mum had advised him soon after he started working that he should invest a portion of his income, so he had, into managed funds that grew to a $40,000 house deposit which gave us a real head start.
We have never referred to “your money” or “my money”, even when he out-earned me on occasion. I do recall there being a time when I might have tried to call it his money, but, once again, being the nice bloke he is he was adamant that we were a team now so it just became “our money” and we talked through how it was going to be spent. We never gave each other allowances, there was never any need because we both understood that within reason the other could buy whatever we wanted, without jeopardizing the family. We just fell into a routine of handling our money well and considering how the impact of the individual decision we each made was going to affect the other. To this day, with presents being the exception, neither of us spends money that the other one doesn’t know about.
When we had our daughter and I quit work to be at home with her, it was hard to give up my income, because I felt I was no longer contributing financially, but of course, my contribution to our family was just as valuable, raising our child. We made sure we were mortgage free prior to her arrival and were in a financial position that meant we could live off one income. To this day I can’t recall us ever having a disagreement about money, it causes us zero anxiety in our relationship. It was not until I started blogging that I came to realise just how fortunate we are to have found such common ground.
With me at home full time, it was also at this time that we actually separated some of our finances again. Why? Because of the tax advantages of doing so. He was earning $100,000 and I was earning $0. I was beginning to start investments and had they been in joint names we would have paid more tax, if in my name only I was on a lower tax bracket, it just seemed the logical thing to do.
Now, many years later things remain this way, with some things in our joint names and some just in my name. But now, BOTH of us only work part-time and both of us are now actually back on the same tax rate! So, we have started to have conversations about putting things in both of our names again, with the main reason being if I were to die suddenly, it would be a pain for him (even with my will clearly stating my wishes) for him to access things.
Perhaps it is because of this that I’m particularly in tune with the conversations I’m having with people about shared finances lately because a lot of people don’t bother changing things because of apathy or laziness! Which is kind of where I’m at!
SO, that’s a bit about me and I finally ended up at the point of this blog post…
Should YOU consider merging finances with your husband, wife, life partner if you have been together for quite a while?
To answer this I tried to write a concise bullet point list but I failed miserably, the reason being that I understand that relationships are complex and there is no one size fits all approach. In the ideal world it would look like this:
Two people meet and fall in love, combine their lives and their money together and spend every day working together for the good of the team!
But life is not like that, it’s a haphazard path where one decision merges into the next and it’s only hindsight that shows us when we made key decisions - or perhaps where we SHOULD have made key decisions. So, I’ve picked some headings and written some notes about each below, so pick and choose what applies to you and if I’ve missed anything that you think would be useful to someone else, please add it in the comments below.
TRUST + HONESTY
Such a hugely critical thing for any relationship to have. I trust Jonny completely to have our best interests at heart, as he does with me. Prior to combining our money, neither of us had ever shown any sign that the other was doing anything underhand like opening up credit cards without the other knowing, buying things they were keeping secret from the other or making a large purchase without consulting the other first. We have always been honest and open and that creates trust. If you don’t trust your partner, you need to talk to them about why, it might just be a misunderstanding or your gut instinct might be quite correct, but you won’t know unless it’s discussed.
WHEN IS THE RIGHT TIME?
I think that if you are married or defacto, own property together and have kids together or other shared assets, it’s probably the right time after all your lives are intertwined so much already. If you can trust each other to do all those things surely you can trust each other with your pay cheques?
THE NITTY GRITTY DETAIL
From very early on we just talked about money. As I mentioned above, Jonny recalled us sitting in a pub in Dunedin with friends and I straight up asked him how much he earned, not because I was scoping him out as marriage material, but just because I would have thought it was interesting to ask the question. He had studied and been working for a year or two by then and I probably just wanted to know if all that study was worth his while. I seriously don’t understand what the big deal is with discussing money and I think that a lot of the reasons we don’t discuss it is because we think it will show up our own failings. But I think that if we did talk about money more we would each make fewer mistakes. Now, we include our daughter in the many money conversations we have and we talk about the boring day to day transactions, or how much we each earn and invest. It’s all out in the open and there is no fear around money. Many people tell me that their issues with money stem from watching their parents struggle and I’m determined for that NOT to be the case, I want her to see that we have got this sorted.
IT HELPS WITH BUDGETING
By knowing each other's complete financial picture it can really help with your budgeting because you know exactly what you have coming and going so you are less likely to have surprises come your way. You will be more likely to move providers, change suppliers and shop around too because if you decide to change the way you pay a bill, it comes from one joint account and not two separate ones, it just cuts down the barriers to entry and the doubling up on fees and bank accounts. Plus, when it comes to investing, the bigger the collective stash, the bigger the return!
MADE SOME DUMB DECISIONS
Even if we did dumb stuff, we decided on it together! Like buying many many brand spanking new cars. In hindsight, these were financially dumb purchases, but we went into them as a team, albeit an ill-informed team, but we learned from our mistakes together! Being financially united does not protect against stupidity, but at least there is no blame if something does go wrong.
SET GOALS AS A COUPLE
If you are both aiming for and contributing to the same savings account for something, you are likely to achieve it faster if you combine forces because you can each see the progress of the other. If you were instead saving up for something separately you also have to make sure you are communicating about that. It would be a shame to reach your target of $10,000 saved for the trip of a lifetime, only to realise that your partner missed the same target and will then delay your travel plans. Strive for common shared goals.
WE KEPT OUR OWN IDENTITY
It surprises me that a woman will change her surname when she gets married, giving up a huge part of her identity, her own NAME for goodness sake, but won’t combine finances because she wants to maintain her independence. Say what?
POCKET MONEY
Pink and Blue Money, His and Hers allowances, Pocket Money; whatever you want to call it, giving each other a set amount of money to spend each week is something I’ve never felt the need to try in my own relationship. To be honest the thought of having “an allowance” makes me cringe and would make me feel that I’m not worthy of being trusted with the debit card! We give our small daughter pocket money, but as adults, we can spend how we please but we just have an unwritten agreement that any spending we do will have an impact on the other, so let’s chat about it first. We don’t have to ask permission, more of a “I’m thinking of doing this, what do you think” kind of a conversation. It comes back to trust again, I trust him not to put us into financial trouble by making selfish decisions with our money. But if he wants to buy himself a coffee using the family debit card, well go for it!. Even better, buy me one too!
WHEN THE INCOME STOPS
I think that it’s a really vulnerable time financially when you first have a child because suddenly the person who stays at home has either no income or decreased income for a period of time and they become solely reliant on their spouse. If your money relationship is not equal by that stage, that’s when issues can creep in. Imagine your partner referring to the family income as “my money” when you have just lost the ability to earn any because you are raising ‘their’ child? That is where money can be used as a weapon of control in a relationship and it is vital that you watch for signs of this to stop it in its tracks.
TEAMWORK
If a couple were each given a car in Bluff and were told to drive to Cape Reinga, they would both plot different routes to get there, arriving at different times and having had different experiences along the way. Same with your money, it’s hard to achieve a common goal if you are doing things independently and differently from each other and working together will streamline your journey and prevent one of you from getting lost. Over our working lives we have each earned varying amounts of money, sometimes high, sometimes low and sometimes not at all, so having combined shared income and a common approach of this money is “ours” is important. Whoever makes it shares it because we know that roles can reverse as the years go by.
MY PARENTS WERE NOT GOOD WITH MONEY
I don’t know how often I have heard this and I have concluded that if you grew up in a household that struggled with money or used it poorly, it has a direct influence on how you handle money as an adult. Many people take many years to shuck off the bad money habits they learned from their parents or they simply take those money habits into their relationship. I was extremely lucky to hook up with Jonny because his parents gave him a really sound financial education growing up which countered my own lack of financial education. So, together we have muddled through.
DEALING WITH DEBT
My hope for others is that any debt is discussed VERY early in the relationship and that you help each other decide how it’s going to be tackled. I’m not saying that you pay off someone else's debt, but think about it, if you help them devise a strategy to pay it off themselves, then IF your relationship progresses to something more permanent, they will come into it in a much better financial state. Win! If your relationship becomes permanent, I do think that in the interests of “our money” that all debts, no matter whose they are, become “our debts” and they get paid off together. It surprises me to meet couples where one is struggling under the burden of a debt while the other - who apparently loves this person with their heart and soul - says’ “well, they took on the student loan before they met me, so it’s theirs to sort out”. I think that’s the wrong attitude because having debts hanging around will have an impact on BOTH of your financial futures.
SECOND TIME AROUND
Divorce is the quickest way to halve your net worth. I once chatted to a guy who said he was “onto his GST marriage”:
Marriage 1 Failed - he lost 50% of his net worth
Marriage 2 Failed - he lost a further 25%
Marriage 3 Failed - he lost a further 12.5% - which at the time was the GST rate
So, if you are coming into a new relationship after the ending of a previous one, instead of combining everything, I would encourage you to protect your assets and a formal agreement is certainly a good idea in the first instance because remember, after three years the Property Relationship Act comes into force meaning that if you split, you will have to split your assets and liabilities 50/50. Not overly romantic I know but you do need to protect yourself should it happen again. As the years roll by and the trust strengthens, well then you can ‘renegotiate’ but don’t let love blind you and make sure you protect what’s yours. I know of many people who create a relationship agreement first time around too and I’ve seen some of those relationships end a few years down the track with both parties following out the terms of the agreement. Just talk about it early on would be my advice here!
WHO IS PAYING FOR THE NURSING HOME?
A thought that crosses my mind is if you are thoroughly committed to keeping your money separate from your long term spouse, say you own your own car, make your own investments, own half the house that you both live in, I wonder what’s going to happen when you are old and infirm if one of you has come out financially better off due to a higher income or better investment decisions? Is one of you going to the fancy privately run rest home and the other to the state run one across town? Hmmm?
S/HE IS JUST NOT INTERESTED
Jonny has said that his only interest in money is actually making it.
And next, he wonders what he can buy with it.
I’m quite different, I’m intrigued by the details and all the different levers I can pull to steer our financial frigate. Therefore, because he is not interested in all the details, I just keep him informed with what I’m up to and if there is a decision to be made, I’ll get his input. I just take care of all the day to day stuff, because that’s what I like doing. He knows where he can access this information anytime he wants - or he can just ask me anytime but one thing is for sure, we take the time to talk about it and share.
And finally...
WHAT I’VE OBSERVED
I’m fortunate to have this blog and have the privilege to speak to so many people about “money stuff” and a very common scenario is that of a couple who have been together for a long time yet they still keep their money completely separate from each other. They are trying to achieve their own goals and unsurprisingly things are just not working. There is often debt hanging around, uncertainty over where they are headed and a feeling that they are not working as a team and as the years go by things get worse and not better. They feel distant from each other.
I think that part of this is apathy, it used to be that you would meet someone, get married and combine money, it was quite black and white. But not anymore. So, I think that a lot of people wander into a relationship that steadily progresses to a long term thing, they may or may not get married and there seems to be no “line in the sand” moment where combining money is the thing to do. So, the years go by with each maintaining their own money structures, with maybe a joint account for household stuff. They just never quite get around to making a more formal arrangement.
When I speak with people now who have been in a relationship for a long time, either de facto or married I am constantly surprised that they don’t know their own spouse’s financial situation. They know everything else about each other, just not what they earn, what debt they have, what savings or investments they have. To me, NOT knowing that stuff is akin to not knowing where my husband was born, grew up and what his first car was! I spoke with a woman recently who gave me some clarity around this when she explained that she ‘stayed out’ of her husband's financial life because she didn’t want to create conflict because growing up in her home there was constant conflict around money.
But when I speak to people, particularly for my podcast, many say that one of THE pivotal moments that got their financial life on track was when they got their partner completely on board and for the very first time in their relationship they worked together with their money for a common goal and this often means just bringing all of their money together. They then succeed with money as a team.
SO, I guess that all I’m trying to say today is if you have been in a relationship for a number of years, are committed to him or her being “the one”, you trust each other and have combined everything else in your life (your wardrobe, the bathroom cabinet, your home, your children, your pets), then why not your money? The status quo is always up for change and I can certainly share with you that those I talk to who are completely on the same page with money do far better financially than those who are not and it’s simply because they are working together towards a common goal and life is so much better when you share it with someone else. So, all I’m asking is that you just have a think about it, or even better, have a chat with your significant other about it.
