Love and Money
Sunday 20 July 2014
We all know that love can be tricky to navigate at the best of times, but throw money into the mix and it gets even more complicated.
If things are getting serious between you and your beloved and living together is on the cards, or if your money relationship with your partner leaves a bit to be desired, here are a few simple ideas to help keep you on the path to happily-ever-after.
1. While it might seem a little unromantic, the most valuable thing you can do with your money as a couple is to set up clear financial ground rules. Only then can you be confident you’re both working towards achieving the same vision. That doesn’t mean you can’t have your own separate goals and financial independence, it just means there’s a common understanding when it comes to the money you share.
2. The next step is to work out the nuts and bolts of your daily money management. Start by estimating your joint monthly household expenses, including rent, groceries and utility bills. Make sure you agree exactly which expenses are joint expenses—you might not be thrilled at the idea of paying for his computer gadgets and he’s unlikely to be impressed if you expect him to chip in for your facials (or vice-versa, no judgement here).
3. Next, decide how much you’ll each pay towards these joint expenses. You might decide 50/50 is the way to go, but you could also consider splitting it according to each partner’s ability to contribute, especially if one of you earns significantly more than the other. American financial guru Suze Orman recommends splitting expenses this way—here’s an example:
Michelle brings home $5,000 a month. She lives with her boyfriend Andrew, who brings home $3,000 a month. They calculate what percentage they should each contribute using the following steps.
1. Add up all shared monthly expenses: $4,000 per month.
2. Add up combined monthly take home pay: $8,000 ($5,000 from Michelle and $3,000 from Andrew).
3. Work out the percentage of shared monthly expenses to combined monthly take-home-pay: $4,000 expenses to $8,000 take home pay = 50 per cent.
4. Use this percentage to determine how much each partner contributes each month: Michelle pays $2,500 (50 per cent of her pay) and Andrew pays $1,500 (50 per cent of his pay).
4. Decide who’ll be responsible for paying the rent and bills every month, as well as where the money for this will come from. For example, would you consider setting up a joint bank account for your household expenses? If you do, you could each contribute an agreed amount from your individual account into the shared pool on a set date each month and then the bill-payer would be responsible for paying all bills from this account instead of their own.
5. Make a commitment to an open and honest money relationship. It’s hard enough when you’re just managing your own finances, but when you have to take into consideration someone else’s goals and habits on a daily basis it isn’t always easy. But if you’re both on the same page about your financial ground rules, you have solid systems in place that you’re both comfortable with, and you’re both committed to sticking to them, then that’s a fantastic start.