There is an old saying, often directed by worried fathers at daughters who are in financially unstable relationships: “When there is no money coming in the door, love flies out the window”. There is a ring of truth clanging here. No matter how strong a relationship, arguments over money can take the shine off even the most glowing of couples.
But how do you stop the money wars?
First up, analyse your own beliefs and views about money. Your childhood can be a useful predictor of how you will interact with money. In general, people who grow up in households with restricted funds watching their parents stress about money, may get the message that making money is difficult. Someone who grew up in a wealthy environment may have the belief that making money is easy. Both scenarios can bode well for a healthy financial future provided the lessons are properly directed.
The book I Can Make You Rich by Paul McKenna tells the story of a man who had repeatedly failed at running a business. Each time he got within touching distance of a successful venture it would collapse. When he examined his early childhood messages about money he recalled, age 7, announcing to his mother that he wanted to make a lot of money one day. His mother’s response was alarm. “Oh no darling, don’t do that, people who make a lot of money have heart attacks!” she warned. The lesson? Deep in his subconscious, this man believed that if he made a lot of money he would have a heart attack, so he sabotaged his efforts. Once he came to terms with the limiting beliefs he held about money, he was able to move ahead and succeed.
Every day we are bombarded with messages about money and these determine how way we engage with it. By understanding your own money beliefs and long-term financial goals it will be easier to work with someone who may have different ideas.
THE GAME PLAN
It is easy to become caught up in day-to-day activities and lose sight of long-term objectives. Take the time to set up a game plan for your financial future and use it as a template for moving forward. Once you have your own financial plan in place you can then determine how it will fit in with a partner’s (assuming there is one).
Circumstances vary greatly within individual relationships but to keep it simple let’s look at three scenarios: dating, living together and marriage.
Keep it simple at this stage: by all means merge your hearts, but not your money.
- You pay for your stuff, your partner pays for theirs and you share the cost of entertainment. Never lend your partner money.
- Another big no-no is to sign surety on a debt your partner wants to incur. If the relationship comes unstuck so could your bank balance.
- If your partner starts to show signs of financial ineptness do not ignore the warning signs. A red alert is: forgetting their wallet when things need to be bought, avoiding phone calls (could be creditors); or they spend like a millionaire but you know they don’t earn like one.
- Don’t buy anything jointly or buy things that cannot easily be divided.
If you decide to move in together you need to sit down and get to know each other’s spending habits, saving habits and views on money management. Make sure you list your current debt positions. The principle is that finances should be kept totally separate: if you find out he/she is not the one for you there will be no complicated money issues.
The rules are:
- Split expenses fairly. Discuss upfront who will be paying for what and your respective responsibilities in running the household. If you are furnishing a home together one buys the fridge, the other the washing machine – if you go your separate ways you keep what you bought.
- If one of you already owns the home, beware of falling into the trap where one pays for the groceries, phone bill and electricity while the other pays off the bond. It means one of you has nothing to show for what they put in, while the other gets a paid-off bond out of it. There is a document called a co-habitation agreement that you can have drawn up by a lawyer stipulating what you are entitled to in a live-in relationship. This can be amended each year as assets accumulate.
- Expenses should be divided according to what you earn. A simple arrangement would be to work out, in percentage terms, what each person can afford from his or her income.
- Repeat after me: keep separate cheque accounts and credit cards.
- The lease on the property should be the responsibility of both parties. If he decides to move to Mongolia with his massage therapist or she meets George MacDelicious, at least they are contractually obliged to cough up their share of the rent.
Managing your money as a married couple
The circumstances change somewhat when you get married as you have to agree on what you as a couple want to achieve. Your expenses will increase because you may want to buy a home and perhaps have children.
Oliver Werneyer, a product development and actuarial specialist for Liberty Life, advises: “Things like life assurance; disability coverage and a good long term investment plan become necessary when a couple gets married. This will definitely push up expenses.”
Heed the following:
To make sure that you retain a sense of personal freedom, each of you should have an allowance to spend on any whimsical item. Agree on the amount and do not sneak back into the kitty.
Werneyer says both parties should manage the family finances. Keep your partner up to date with the day-to-day expenses so that he/she understands how much it costs to run the household.
Each party should be party to every investment decision and take an active interest in the progress of your joint savings.
- If your partner insists on “going it alone” you will have to be firm and advise them it is your right to know. Put things into perspective with the question: “What would happen if you suddenly became incapacitated or died?”
- It is critical you establish your involvement in joint finances early on in the relationship. If you take a back seat for 10 years and suddenly become interested your partner may become defensive (especially if they are not doing a good job) and you could be in for a fight.
- Keep separate cheque accounts, especially if you both work. The same applies with credit cards.
- Werneyer urges that both partners should have a retirement plan. “Insurance company statistics show that very few people have saved sufficient funds for retirement. One pension is not usually sufficient to support two people in retirement.”
- Set up an automatic system of tax-deferred retirement saving. Debit orders are a good tool to ensure you keep on track, because you quickly get used to living without the income.
- Both your names should be listed on all household accounts and investments.
- Better still, form a trust to house your assets.
Know this: money arguments and tensions will not go away on their own. If you are a saver and your partner is a spender, find some middle ground. Most important of all keep talking: make sure those lines of communication are open and set time aside every week to discuss your gripes and progress.
Liberty Group is an Authorised Financial Services Provider in terms of the FAIS Act (Licence no. 2409). The information contained in this communication, including attachments, is not to be construed as advice in terms of the Financial Advisory and Intermediary Services Act of 2002 ("FAIS") as the writer is neither an appointed representative of Liberty, nor a licensed financial services provider as contemplated in FAIS. Please consult your financial adviser should you require advice of a financial nature and/or intermediary services.