Your money-making expert. Financial journalist, TV and radio personality.
How should married couples split finances and is it different for co-habiting couples?
These are just some of the questions I get asked quite regularly on TV and radio and also by you lovely readers!
Love isn’t all you need when it comes to dealing with your finances. Mixing love and money is never easy in a relationship. However, you need to face the challenges head-on, or you run the risk that your finances will tear you apart.
According to the relationship charity Relate, the main cause of rows that lead to separation is money. This scored higher than arguments about the in-laws and even higher than bedroom issues. That’s why we’ve put together this guide to show you the pitfalls to avoid and how to have a happy financial relationship with your partner.
One of the first issues you face when you move in together, is whether to merge your finances into one joint account or maintain individual accounts.
The important things you need to agree on (or compromise on) are:
The answer isn’t going to be the same for everyone.
In finding your solution, you’ll need to get to grips with your attitude to money.
For many couples, the right decision may well lie in finding the middle ground.
We surveyed over 2,000 of you and found that more than a quarter of cohabiting and married Britons blame “divorce-inducing” quarrels on outdated monetary ties.
The majority still accept that a joint bank account has the potential of building trust and openness. But one-in-four now believe that amalgamating income – and especially savings – is likely to cause irreversible “rifts” that may end in break-up or divorce.
Our survey found that
Bu whatever your situation, make sure you both know how to make the most of your savings and if one partner has a debt problem, you both need to understand how you’re going to tackle this, and tackle it together.
When you’re co-habiting you have fewer rights (and tax advantages) than married people.
You are also more likely to split up, even if you have children and own property together.
So it’s much more important to keep finances a bit more separate and keep track of your personal spending and assets.
It’s still worth considering a joint account, though, if you are paying bills together.
When you merely co-habit you have fewer rights to each other’s property and financial support. For example, if you split up:
However, if you did borrow a mortgage together to buy a house, or you bought a sofa on HP together, or took out any other loan together then you are connected financially and your partner’s credit record will be connected to yours.
This means that even if your credit record is clean as a whistle, if your partner has had CCJs (County Court Judgements), or other black marks, this can impact on your ability to borrow now and for a while in the future.
So it’s a good idea to make your partner tell you what their credit record says about them.
Make it easier by both checking your credit record for free together. That way they won’t feel that you’re having a go at them. Get your free service here.
One of the biggest money problems that couples have to deal with at some point is debt – particularly if one partner enters the relationship with more debt than the other, or builds up debts while they are together.
Various studies have found that partners lie to each other about their levels of indebtedness and this can cause problems later on if the debt becomes too much to handle.
This can be disastrous for both members of the couple, because if you are sharing your life with someone, then unfortunately, you are sharing their debt issues too.
Also, remember that your partner’s credit rating will have an impact if/when you apply for joint credit – including a mortgage.
If you’re not married yet, a prenuptial agreement may be worthwhile if you want to try to protect one partner’s assets from the other partner’s creditors. See what we say about that below
However, the priority for most couples is to deal with the debt between you – as quickly as possible. We have a whole debt section here crammed with simple but effective ways to cope with debt so get cracking.
Buying a home together is one of the biggest financial steps you can take, so make sure you know what you’re getting yourself into before you commit.
Usually couples enter a joint mortgage and become joint tenants, owning and being responsible for the whole property equally.
Unless you have a witnessed agreement drawn up stating otherwise, you share bills, the mortgage payments and if one partner dies, that share passes on to the other.
Problems can arise, however, when one partner is contributing more or in a different way to another.
For example, one might pay the mortgage and the other the household bills.
This is where a Letter of Intent or a Declaration of Trust comes in. It details several key features to your arrangement including how much each of you has paid towards the purchase, what your ongoing contributions will be, and how much each of you will receive should you decide to sell the property.
Crucially, this document can be updated if circumstances change later on.
if you’re not married it’s even more important to keep records of what you are each spending and to have legal documents showing what your status is.
Another crucial consideration for any married couple is retirement planning.
A recent survey by pensions company Prudential has discovered that one in five couples haven’t discussed retirement planning. Around three in five have no idea what income they will receive as a couple in retirement, and one in five have no idea how much their partner has in pension savings. Its study found that women were particularly at risk from this trend, as they were more likely to expect to live at least partly on their partner’s income.
Investing for your future is vital, but you may find that you disagree with your partner on exactly how to do this.
More often than not, one partner may be more willing to take risk than the other, and one may place more importance on saving than the other.
The answer lies in discussing your goals: working out how much you need to retire on and by when.
From here you can decide how much to put away each month, and what to invest in.
Your investment portfolios should compliment each other and balance out any risk, to add another layer of protection.
Because this is SUCH an important issue and making the right decision can add thousands (literally) to your annual income when you retire, I suggest you get help from an independent financial advisor now about this.
A spendthrift is someone who spends their money extravagantly or wastefully. In real terms that can mean someone who spends their money on things that you think are wasteful or someone who spends more than they (or the two of you) earn. A real spendthrift will have plenty of debt to show for it.
When you’re married, even more than when you cohabit, a spendthrift can put you in a very vulnerable position. Joint loans (including the mortgage) are responsibility of both spouses. So you could be doing your bit, but they could put your house – and your peace of mind – at risk.
If you (or they) realise things are getting dangerous, the rule is – communicate! It’s harder if they don’t recognise the problem but there are ways to tackle it:
A miser, according to the dictionary, is someone who lives in wretched circumstances in order to save and hoard money. They often won’t spend money on themselves or other people because underneath they’re frightened of losing what they have.
It is sensible to live within your means, but, if your partner goes too far, someone needs to step in. Warning signs include when they refuse to let you spend money on the basics – or the simple pleasures in life.
As Joan Rivers once said: “Trust your husband, adore your husband, and get as much as you can in your own name.”
Yes, horribly unromantic but sadly, quite a good idea now.
Ideally, I think that pre-nups should be made mandatory by the Government so that all the emotion is taken out of it.
But, if one or both of you have a lot of assets, it’s worth considering doing one,
They’re not legally binding in this country but they are increasingly used as a starting point for divorce agreements and can massively cut legal bills.
Don’t let all this put you off. As well as all the lovey-dovey stuff, being a couple has lots of financial benefits too…
So being married can make you richer – particularly if you stay together and don’t get yourselves one of those nasty, expensive divorces!