Do you think you should combine your finances?
20 Feb, 2022
This post is not a blog about inflation. It was going to be because I’ve had many people asking me about my perspective on it. I’ll save it for another blog. I’m not going to lie to you; I’m a little worn down by talk of both pandemic and inflation. I’m tired! To cheer myself up and lower my stress levels a notch or two, I’ve been chatting a lot to Jonny. Because he knows me, and I know him. We are a united team on all levels. It’s good to have someone to kōrero with. A problem shared is indeed a problem halved.
I’ve been having many conversations with readers about money, which is not unusual, but what is standing out a little more is that I’ve noticed that for those who keep their money apart from their spouse, once you start to pile on all the other stressors of life, cracks begin to appear. Which leads me to what’s really on my mind; relationships. I suspect that across Aotearoa, there are relationships being tested at the moment.
At a stressful time like we are ALL currently experiencing, cracks in the relationships of some couples who steadfastly keep their money separate from their spouse are spreading.
For many, raising the topic of combining money with the love of your life is a bit daunting at the best of times, and it feels far easier just to put the whole conversation to one side and focus on something else. This blog encourages you to face it head-on; start a conversation. As I mentioned above, it’s good to have a partner on the same page for all matters.
I’ve blogged about this general topic a couple of times before, and you can read them here:
Should you combine finances with your spouse?
A Guide to Talking to Your Partner About Money
50:50 split. Sounds fair?
There are many couples who are in a committed relationship who have several shared assets and may have children, but they have 50/50 separate finances. Every expense is split and each person’s incomes are their own. There is a degree of sharing, but parts are kept private for each individual. For many, this appears to work most of the time until it’s tested, that is.
Are you being tested at the moment?
Many have told me that retaining complete autonomy over their money gives them a sense of power and control, which I understand, but not knowing how the person sleeping in the bed beside you is handling their money in these uncertain times would stress me out! That would make me feel powerless, not powerful. Because, even though the pūtea is separated, you are a couple in every other way, and whereas you may have your shit together, they may not. But you won’t ever actually know.
I just can’t get my head around it. It does not make sense that you could share another human being with a person, i.e. have a child or take on an Auckland sized mortgage with someone else, but you can’t share a debit card. How can you build a life together when you keep the important stuff such as money apart, not knowing what the other is doing with theirs? Covid is stress testing this situation for many.
They won the auction.
There is a story in my whānau of my parents attending an auction together. Dad was on one side of the paddock bidding; unbeknownst to him, my Mum was on the other side of the paddock. She was also bidding. Outbidding each other in fact. You guessed it: On the same item! It’s no surprise that they won the auction, but they could have purchased the item for a whole lot less had they communicated with each other and been on the same plan!
It’s my personal view that if you are in a committed relationship with someone, practically speaking, it just makes a tonne of sense to combine your money.
If you bring it all together, two heads are better than one and two incomes are also better than one, plus, two people reaching for the same goal makes it much more likely that you will achieve it.
If you read those blogs I’ve linked to above, there was a build-up over several years to Jonny and I combining our finances. But ultimately, we reached a point where it had to happen, and there were two key questions:
Are we paddling our waka in the same direction?
Can I trust him?
Are we paddling our waka in the same direction?
Most places we want to go and things we want to achieve cost money and involve us being together. If we come up with shared goals, we find it far easier to reach them, and we halve the workload by working together.
If you and your partner are in a committed long term safe relationship, I think you should combine your finances.
Radical huh!
I say that not because I’m old fashioned, religious or think one gender rules the house. God no! Far from it, I’m a feminist at heart. I say it because it feels like you are going into a relationship with an out clause and because I receive many emails where I can see that partners are working in two different directions. It feels like you are going into a relationship with an out clause. I can understand why we keep money separate in the early days, but as the years roll by, I’ve observed that couples who never completely join together take longer to get anywhere because they have no shared vision for their money.
A fiscally independent budget meeting with Jonny.
I’m in my studio as I write this. The cat and the dog have joined me, so I must take regular breaks to pat them. It’s during these frequent pauses that my brain gets away with me, and I take a moment to daydream about a budget meeting where both Jonny and I keep separate finances…
The Happy Saver studio and my writing buddies.
We would be on our laptops (bought with our own money), in our own home (of which we each own half but can’t sell, nor modify, nor re-finance without the agreement of the other) planning the months for a shared, yet financially separate life together, sorting money into our private bank accounts.
I would lead this fictional budget meeting because I’m generally the one to talk about money first…
Now, Jonny! Let’s begin…
In bank account A (“Holiday”), you need to save $100 a week for an upcoming family trip. Are you on track?
In bank account B (“Heat Pump”), you need to save $2,000 by the end of April because the installation is in May, remember? Are you on track, Jonny? Tell me you are because I am well on my way and will reach my own $2,000 goal by March. Jonny, you might need to up your game.
Now, Jonny, in bank account C (“Pets”), you need to put in $20 each week because if the dog gets sick, you pat, walk and feed it half as much as I do, so you need to pay half for any vet bills. It’s only fair.
I did note that you withdrew $50 cash from our shared account last Wednesday. Why?
Now, about your $25,000 car loan. How are your payments coming along? Keeping up with them, OK I hope?
And Jonny, I have to share this exciting news; my Sharesies investments hit $25,000 this week; I’m so stoked!
Please keep in mind, too Jonny, is your emergency fund of 4-6 months of YOUR expenses topped up? Because if you run out of money, you need to support yourself. Don’t come running to me if you lose your job due to Covid, want to take a break from work, or your car blows up; I’ve got my own financial goals to meet over on my side of the kitchen table, OK? Just saying!
Right, Jonny, are we in agreement to work “separately but together” on our financially separate but shared future?
Great. Anything you would like to discuss?
The meeting is adjourned. Your turn to cook. I cooked last night. Turn about, remember?
Feck that, sounds like a company meeting, not a relationship! Are we together or not?
Our fictional chat above is all in jest and very over the top, but I think that many will identify with parts of it because I drew them from conversations I’ve had over the years:
A partner with debt, while the other has investments of the same value, if you put the two together, the balance is $0.
People with their own emergency fund where I ponder the reality of an emergency hitting the spouse who does not have one. Are you really going to watch them starve if a crisis hits them? Or will you begrudge them for using your money to bail them out?
Or the older couple with separate money. He retires first, yet never ‘saw the point’ of KiwiSaver or saving (but his wife did), can’t survive on a pension, and she has to bail him out. That one makes me grumpy!
Or the person who misuses the joint account. Too many beersies…
Or gets the partner to pay some expenses out of ‘their money’ and thinks they are winning. It’s a bit like always getting your friend to pick up the bill when you go out for coffee.
You have to paddle your waka in the same direction. Together. And it’s pointless in my mind to double up on bank accounts, debts and investments during the journey. It’s absolutely fine to have different interests, you can still each be your own person, combining your money and still having personal freedom.
In a recent email, I encouraged them to kōrero, kōrero, kōrero! Talk talk talk!
When you dig in and talk about things, if you have kept your money separate for a very long time, you will find differences, but you might also find a lot of common ground. Build upon that, and you will quickly get the hang of what motivates you both and where the money is coming from and going to.
But I earn more than them?
So.
Another reason people tell me they keep their money apart is because one out earns the other. Because individual incomes ebb and flow over time, in my experience, it's far easier to have a single pot of money that is ‘ours’, not separated into what each brought into the relationship.
Throughout our life together both Jonny and I have outearned the other at various stages. But neither is keeping score.
On a practical level, if you collectively choose to have a child together and one of you can’t work because you are caring for your gorgeous little one, it’s an unfair burden to tell them that they are not pulling their weight financially in the relationship. If Jonny had, have said that to me, I would have presented him with a weekly invoice for my parenting services, and they would not have come cheap!
Can I trust him?
The elephant in the room is this, the biggest fear that we have, and one that we don’t like to talk about much, is that your partner will steal all of your money and financially cripple you. For the record, they are thinking the same of you.
So, have it out, have that conversation now. Get it off your chest.
In previous blogs, I’ve talked about how in former relationships, I knew I couldn’t trust them with my money. In hindsight, my gut instinct was spot on, and I’m pleased the relationship ended because I think I dodged a financial bullet.
But the fact remains that, you have to trust the other person at some point. Otherwise, you should save yourself the bother and quit now.
When I met Jonny, we gained each other’s trust very early on, thank goodness. If you have already combined your lives in every other way, this should be a walk in the park. And if it’s not, you need to explore why that is. It is not that big a hassle to combine your money, and from what I’ve observed, couples who do so achieve greater financial success.
All I ask is that you please give it some thought.
Banking as a team.
Creating a combined banking framework as a team and having regular money chats will bring a sense of peace and calm to your fears. I remember thinking in the early days, “what if Jonny drops $1,000 on a purchase and wipes out our shared account? What will I do”? Well, it never happened because from the very beginning we talked about what we were planning to buy:
“I went out for lunch with my workmates today; it cost $20.”
“I filled up the car today; it cost $80.”
“I saw a person in need today; I gave them $10.”
These sentences/conversations were not ‘asking for permission’, but they generated a discussion where we both got the hang of how the other spent money. And we adjusted the amount we kept in our accounts to accommodate this.
Just this last week, there was a simple example of this. Jonny called out, “I’m off to The Warehouse to buy new socks,” and I shouted back, “Hold up, I have a gift voucher you can use”! Win! Free socks!
Honestly, these little simple things add up over time, which means we make better financial decisions as a team.
I’d like to share an observation with you about the perception that women spend more than men. I’ve noticed that women shop more, paying smaller amounts, whereas men don’t shop that often, but they buy large, expensive items. If you add up the amount paid for each person, over a year the amounts are probably similar.
How DO you combine your finances?
We were together for about 2-3 years before combining our money. And when we did, it was with a clean slate, using a completely different bank.
I think we did it this way for ease. And to save on arguments of “my bank is better than yours”.
In the end, despite the build up of society telling us this was a big deal, it really was not. Combining our finances was the logical next step.
We kept our own accounts running while we set up new joint accounts with the new bank. I recall it working very cleanly, and it was easier than reworking what we already had in place independent of each other. When we were comfortable that the new banking structure was working well, we closed our old accounts down.
I can no longer recall our exact structure, but if I were to do it today, it would be something like this:
Account 1: All income comes in, and expenses go out from this account, with a debit card each (there is no need for a credit card, the rewards in NZ are rubbish in my view, especially if you are low spenders like we are). We kept a good cash buffer in this account of somewhere between $1,000 min to $3,000 max, particularly in the early days when unexpected expenses might crop up as we got used to the spending patterns of the other.
Account 2: Emergency fund of 3-6 months of combined monthly expenses linked to Account 1. If a crisis happens, you can immediately move money (after discussing it with each other, of course).
Accounts 3+: We currently have about eight Sinking Funds where we are setting money aside for various things: Pets, Investments, Health, Holidays, Child, Car etc. We make weekly payments into each, and that comes out of Account 1.
These accounts come and go; we add another if we are saving for a specific thing such as a new computer, for example. When we achieve the goal, we close that account.
We both have bank accounts for our separate businesses, and these are in our own names only. Our pay comes from here into our joint account. I know his passwords etc, though, in case he gets hit by a bus.
Most importantly, we budget using PocketSmith. If combining your money is new to you, create a spreadsheet of the last three months of income and expenses for BOTH of you, and this will give you a base to build a budget from.
In case of death. Or divorce.
I also keep records of what we have and where it is so that in the unfortunate event of illness or death, we each know where to look and what to do. Our will also states that what's his is mine and vice versa if one of us were to die. I’ve met a fantastic woman called Paige, and she has created a Kiwi-centric ‘My Peace of Mind’ folder that you can use to note all of this down. Most of us get to live a long and full life with our partners, but one day when one of us pops our clogs, wouldn’t you rather that the one left behind is fully involved in all of the financial ins and outs? This can only be the case if you have combined your money fully. I’ve had conversations with people whose spouse has died, and the mess left behind if you have led financially separate lives just adds salt to the wound. If you have maintained an independent financial life, it’s just that much harder to settle the affairs of your partner. That would be grief upon grief.
I’ve also seen some mucky divorces, and they are made harder if money is not combined, BUT unless you have a relationship agreement in place, in the eyes of the law, you still need to split things down the middle. The winners in this are the lawyers who go into bat for each party to try and work out WHERE the money is and who gets what. Perhaps that’s why they were never combined in the first place; you always had the feeling this marriage might hit the rocks at some point?
Bringing your financial lives together is a little bit of work, I understand that, but the freedom and structure it gives you as a couple makes it so worth your while. It’s a great way to unite yourselves as a team and think as a collective, while still being the unique individuals you are.
Jonny and I started with separate money, but practicality brought us together. We were sick of moving money into a joint account to pay for this or that. We now have daily conversations about money and a shared commitment that whatever we earn is ‘our’ money. He buys his things, I buy mine, but it’s always with the view of how my purchase might impact him and vice versa. We don’t have to ask each other for permission, but we invite the other persons perspective. This is super handy when he is about to buy something, and I point out it’s already in the garage! Most notably, with a lot of kōrero, we can budget together and plan goals together.
I hope this helps out the people ready to take this next step in their relationship, and if you have any questions, I am only too happy to help.
