Menu
Money issues can lead to relationship issues but working together on your finances and goals regularly may mean you and your partner are better aligned for the long-term.
When I was in my early 20s, I was working hard, playing hard and travelling. Not much has changed to be honest. Back then, I saved my money to travel. I was single and carefree.
By my mid-20s, I’d found my career and was working hard, saving money and not worried about the future.
In my early 30s, I met a guy. As you do. We dated a while: it was all going well and we moved in together. He wasn’t an ambitious person, content to do the work he loved and enjoy his lifestyle. I was happily pursuing my career and planning our future.
Our goals were not aligned. He didn’t want children and I did. He didn’t want to own a home and I did. Shortly after I encouraged us to buy a place together, sadly our relationship ended. Fortunately, he acknowledged it was my investment that secured our home and he went on his way, with me now the sole owner.
Not all relationships end and not all end with disharmony. We don’t go into a relationship thinking it will end, but plenty of them do. In 2023, 48,700 divorces were granted in Australia.
Whether you stay together or go your separate ways (median age at divorce for men is 45.9 and women is 43), there are plenty of things couples can do at the beginning of their relationship to ensure a healthy and stable future together. And if it does go awry and end unhappily, you’ll have put in place a solid foundation to protect yourselves.
Communicate openly
Plenty of people don’t like to talk about money. However, transparency is key to avoiding misunderstandings later on. Discuss not only your financial goals, your spending habits and your existing debts, but also what you value and your attitude towards money. What did you learn as a kid about money? These patterns stay with us and are generally unconscious. By bringing them to the surface, you and your partner can better understand why you behave the way you do when it comes to money and you can tailor your spending plans and goals accordingly.
Prepare a joint budget
Create a budget that encompasses both your individual and shared expenses. You can manage your finances effectively and ensure both of you are on the same page. I like to use the moneysmart budget planner with my clients.
Have an emergency fund
A rule of thumb is to save around 3 months’ salary. Having this backstop will help to not get into debt unnecessarily if something comes up, whether it’s needing a new dishwasher or something more disastrous like a skiing accident that keeps you off work for a period of time.
Manage your debts
If either of you come to the relationship with debt, like a maxed-out credit card or a car loan, create a plan to manage and pay it off as quickly as you can. There’s no point saving for the future (earning 4% in the bank), if you’ve got a credit card with an 18% interest rate! That’s not the kind of math I like!
Save and invest
Once you know what you’re saving for (goals!), consider whether they are short, medium or long term. Short term savings should be accessible, like a high interest bank account. Explore investment options for the medium and long term that align with your risk tolerance (this reflects how comfortable you are with the possibility of losing money in exchange for the potential to achieve higher returns) and financial goals.
Think about retirement today. You might not know exactly what it looks like or how much you’ll need, but a little bit extra to super today can not only save you tax, but set you up for a solid retirement. I love the power of compound interest.
Insurance
Personal insurance is the foundation of a robust financial plan. If you’ve got your health, contents and car insured, then why not your most important asset? That’s you! Your ability to earn an income. For a 25 year old on a $50,000 pa salary, your lifetime earnings capacity is around $3.7M. Having adequate coverage can protect you from unexpected financial burdens.
Financial independence
While it’s important to have joint financial goals and the joint savings and investments that are tied to them, it’s important to maintain financial independence. This can include having separate accounts for personal expenses. Having both joint and individual accounts provides transparency and simplicity for shared expenses while maintaining financial independence for personal spending.
Get a pre-nup! (Binding Financial Agreement)
You can set this up at any time but having one will definitely protect both parties’ interests. Talking about this early on in your relationship, regardless of your financial situation, is a crucial conversation.
Family planning
Being aligned with your family plans helps in creating a cohesive financial strategy. How much time will you want off from work? How will you manage your budget if one of you is not working for a period? Will you still contribute to superannuation? What are the initial and ongoing costs of raising children? (Answer: a lot!!) Knowing how you’ll address these aspects when they arrive and planning for them will save you from financial stress.
Getting financial advice from the start can be highly beneficial. A professional financial adviser can help you with:
- Goal setting and planning. A financial adviser can help you turn your aspirations into a concrete, workable and comprehensive plan to achieve them.
- Conflict resolution. If you’re not openly communicating about money, a financial adviser can help mediate discussions about money ensuring both partners are heard and their concerns addressed.
- Debt management. A financial adviser can help create the strategy to pay off your debts efficiently and effectively. Your overall financial health can improve and you’ll be less stressed.
- Education. Knowledge is power and a financial adviser can educate you on financial matters, ensuring you’re both equally informed and empowered to make smart financial decisions.
- Risk management. Advisers can help you understand and manage financial risks, including your insurance needs and investment risks, protecting your financial future.
No matter where you start your journey, getting on the same page as your partner early, seeking professional advice and having a comprehensive financial plan will assist you to create the life you desire.
References:
Australian divorce rates have spiked in the last two months. This is why we shouldn’t be surprised
Divorces in Australia | Australian Institute of Family Studies
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information.
