Together with your better half, you have decide to consolidate your resources and share the expense. There is no set formula for how you should combine finances with your partner, but different spending and saving habits can be a source of conflict and unhappiness. Here are the do’s and don’ts:
The “do’s” of combining finances:
Talk about your money views and situation: Learning about and accommodating each other’s daily habits can go a long way in avoiding squabbles. The same applies to learning about each other’s spending habits: find out what does the other like to spend on, and what cannot be compromised?
Budget together: Some couples like to share all expenses, while others prefer to separate personal and discretionary spending from the common budget. Another big question is: How much does each person contribute to the budgeted expenditure? This will be pertinent when the couple’s personal incomes differ greatly. There are pros and cons to each way of planning but what is most vital is clear and honest communication.
Start an emergency fund: Throughout your relationship, you will most likely encounter unexpected expenses – cover them with the safety net of cash so you don’t have to incur any debt. A good rule of thumb is to save about 6 to 9 months’ worth of living expenses.
Take care of insurance and investment needs: If you plan on starting a family together, be sure to talk about the types of insurance needed to protect and provide your loved ones. Investing is another must-do for couples; consistently investing with a long-term perspective can be a good way to meet your investment goals.
The don’ts of combining finances:
Don’t keep secrets: It may be tempting to hide things from your partner if you have spending habits you are not too proud of. Or you may not want to reveal the amount of debt you have due to embarrassment or shame. It will not be a wise move to keep these “money secrets”, as they not only add financial stress on yourself, they may also affect your emotional security and relationship.
Neglect to plan for the long term: You might have dreamt about reaching big milestones together, but you have not made the action plan and incorporated solutions to help you get there. Wait no more! The earlier you start, the longer the runway you have for your dreams to take flight.
Every couple’s relationship is different. What works for one relationship may not work for you. Just like a financial planning strategy – there is no one-size-fits-all plan that suits everyone. Do speak with me if you are looking to customise yours.
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