With PKB’s help, you are probably adept at managing your business finances from 9-5. But how are things going in your personal life? For Valentine’s Day, we’ve created our tips on how you can successfully manage your money within a relationship, so that love — and money — can both last a lifetime.
Dangerzone 1: Who pays for dinner?
Early on in the relationship, you’ll reach the first danger-zone. As soon as the bill gets put down on the table, the countdown begins: who should pay for the first date?
Our advice: You could start with a 50/50 split. Any additional incurred costs (such as new clothing, toiletries, childcare costs, and travelling at 45p per mile) could then be factored in and a total cost for each person calculated at a percentage of what they both earn in net salary… But you’d both end the night single, and grumpy. So, we suggest you simply alternate: each take it turns to plan and pay for dates. That way, you can choose events and venues that fit within your personal budget.
Dangerzone 2: Moving in together
In the heady, early days of your relationship, it’s unlikely that you’ll use your Pillow Talk to discuss your Credit Histories. But do discuss them at some point before you share your finances. If you fall in love with a partner who is wonderful in every way except for a terrible Credit Rating, it can affect your own Credit Rating. The good news is you can move in together and even get married without your Credit Records being joined. But as soon as you open a joint financial product (from a current account, to a savings account), you create a legal “financial association” that stays on your record until you close the account, and then apply to get it removed.
Our advice: If one of you has a less than stellar Credit Rating, it’s worth getting a full Report and following the advice to improve things. Until you’ve cleaned it up, keep your finances separate. If you’d like a way to share money without joining your Credit Scores, then you can add your partner to your Credit Card as an “Authorised User” without creating a financial association. This could be an easy way to split household costs, like groceries, if you both pay it off every month. (But remember, if you’re the card holder, it’s your responsibility to clear the Authorised User’s spends.)
Dangerzone 3: Earning Different Amounts
Many couples go through periods of earning very different amounts — one of you might get a promotion, the other might return to college to retrain. Maternity leave, redundancy and sickness can also affect your ability to pull in the pennies. After a while, this imbalance can cause resentment and unhappiness in the relationship, with the high-earner feeling pressured to support the other, or the low-earner struggling to cover their share of bills.
Our advice: Remember that your relationship will (hopefully!) last a long time, and finances are just one part of what you contribute to your partnership. Create a budget, and work out how much you need for your shared costs, including food, entertaining, children’s expenses, Christmas, holidays and your cars. Each of you then pays money to cover the total monthly amount, as a percentage of what you each earn — for example, 60%. Any money left can then be spent on savings, investments, and as private “fun” money you can spend without asking permission. This way, you are both contributing equally to the shared pot. As your salaries change, you can tweak your figures.
Dangerzone 4: Saving vs Splurging
In a perfect world, Savers would marry other Savers and live together in secure harmony, while Splurgers would all hang out together having terrifying, uncertain fun. But it rarely works that way. If you’re a Saver living with a Splurger, you’ve had many moments of resentment and anger at their carefree attitude to money (and they’ve rolled their eyes at your “need to control everything”).
Our advice: Create an Investment Portfolio that balances your need for security with your partner’s need for risk. That way, you can each make your money suit your personality, and build up a healthy nest egg together. At PKB, we can advise you on investments that offer a safe return that will suit your risk-adverse personality, and on others that offer higher gains, but less security, that your high-adrenaline partner might prefer. Just talk to us for personalised advice.
Dangerzone 5: Parenthood
Children bring many gifts to the world — including, sadly, a million new things for their parents to row about. Make sure money isn’t one of them. From how much pocket money is expected, to Christmas gifts, childcare costs and education, there are many points where you could have totally different expectations. These issues often become even more contentious when couples who’re already parents seek to “blend” their families.
Our advice: Discuss your own childhoods to get a sense of how you’d each like to provide for your children. We often carry baggage from our own past that we express through money — like wanting our children to grow up with everything, because our own parents struggled financially when we were young. Talking this through can be a great way to understand each other’ reasoning. Then set joint budgets together, for gifts, education, and holidays, and manage these online so you can monitor and adjust them if necessary. Later on, you can teach your children good money management by helping them to open their own bank account, and by using an App like GoHenry that allows your children to earn pocket money by completing chores.
We hope this helps you sail through a lifetime of harmony (and prosperity!) with your partner. If you need an Accountancy Firm that understands your finances and how to make them work for you, contact PKB.