Combining your finances is one of the most daunting things you will ever do with your partner. Money troubles are recognized as being a major factor in relationship breakdowns, so it is important to go into this new chapter of your life with your eyes wide open and a plan in place. Read on below for five helpful hints to ensure pooling your funds won’t spell disaster for your partnership.
Have a Contingency Plan
Know that a financial emergency can strike at any moment and that it will be one of the most trying times in your relationship. As they say, ‘Hope for the best, but plan for the worst.’ However, reaching for your credit card should be avoided at all costs, as often this will lead to a spiral of debt rather than a solution to your problems. If you still find your funds lacking after shuffling your budget, consider small cash loans. While this may seem like just as bad of an idea as maxing out your line of credit, there are many small loans available these days which carry far more favorable terms alongside lower interest rates.
Communication is Key
Now that your money is combined, almost any decision you make regarding it will need to be discussed and mutually agreed upon. Communication is key across all aspects of your relationship, but it is essential when managing your funds. Expenses which are included in your budget can be easily organized, but large purchases will need to be decided upon as a team.
Keep it Separate
If fully transforming to shared funds scares you a bit more than it should, consider pooling your money for joint expenses in one account but keeping spending money and personal expenses separate. For example, the rent, electricity and water bills would be drawn from your shared account, as would your groceries, but things such as personal phone bills, gas, and luxuries would come from each individuals account.
Savings and Slush Funds
No matter what you choose to do with the rest of your money, it’s worth opening two separate shared accounts for joint savings goals and a slush fund. Each party transfers an equal amount (or percentage, if your incomes differ greatly) into both your joint savings and slush fund each pay cycle. Ideally, you want these accounts set up so that you both have to authorize any transactions, therefore eliminating any risk of potential arguments regarding the use of funds. Note that it’s perfectly okay to keep separate savings if you’re not comfortable fully combining your finances yet. All funds intended for use on shared goals such as a house deposit or holiday, however, should be deposited into the joint account.
Equality is Key
If you’ve taken the leap and pooled all of your money, it’s important to ensure that both parties have access to an equal amount of spending money. Differences in income no longer matter at this point, since all money now belongs to both of you, so maintaining equality is key in ensuring that no-one feels shortchanged or under-appreciated.
There’s another old saying to keep in mind, ‘Money is the root of all evil.’ When done correctly, combining your finances can be a positive step in moving towards your shared futures. If it is a point of contention, however, and becomes the cause of issues or fights, it could spell the end of your relationship. Make sure you keep communication open and honest at all times, and remember that there’s no shame in admitting your money was better off separate if it’s interfering with your happiness.