Joining Finances: it doesn't have to be a minefield
Written by Adam Kemp on May 17, 2016.
So you’ve decided to move in together (get engaged/get married). Congrats! It’s a big step that you’ve decided to take and it will lead to a lot of great times and a life filled with love and happiness. But wait, (s)he not only wants to share a toothbrush holder and a closet. In addition to this new living arrangement, you’ve been asked to join your piggy banks together. It’s been said that money is one of the biggest items that couples argue about, so what are you to do?
To some, this is a complete non-issue, but to others, the thought of merging finances can cause considerable worry and angst. Sure you love (or really like) him or her, but you’ve worked hard to build your modest nest egg, and might not necessarily be willing to just give another human free range on the fruits of your labour. What if he spends all of his extra cash on sports betting, has an insatiable need to fund his gaming obsession, or loves a big night out with the boys? What if she has an addiction to shopping for designer purses, loves getting her hair and nails done or can’t get enough of buying knick-knacks from the markets? Would you be fine simply pooling your funds together and que sera, come what may? Or could it be possible that even though you’ve committed your heart to this person, you might become agitated or even resentful if they happen to spend more on themselves for non-essential expenses than you might from your joint pool of resources?
In my travels, I’ve met clients of all sorts of opinions when faced with this conundrum. If you belong to the first group, I applaud you. It’s an admirable trait. Oppositely, you could belong to the group that feels what’s yours is yours and what theirs is theirs, and keeping separate accounts will keep everything fair. It’s more likely than not, however, that one of you may earn more than the other at different points in your lives. Is it fair that you both work as many hours, but one has more funds to spend on discretionary purchases? In similar fashion, do you split essential expenses half and half? What if one of you takes paternal or maternal leave at some point and doesn’t earn any income, then what?
As you can plainly see, it’s a complicated subject to broach. Not only can it be complex, but it can be interwoven with emotions. One partner may simply be more practical than the other, or one may be more sensitive and after a deep discussion, you may be rethinking the whole proposition. Fear not, there is something you can do.
This strategy takes some organisation and definitely takes even more cooperation, but if designed and implemented properly, it can alleviate some of the above issues. What I’m suggesting is to join your finances into one account to cover the necessary living expenses, but then to create a ‘fun money’ account for each of you. With this, both pay cheques are paid into the joint account. From here, your expenses such as rent/mortgage, utilities, household items, groceries and similar are paid. After the bare necessities are taken care of, you can then decide to pay your fun money accounts. What you will have to agree upon to make it all work is a number of parameters to operate your fun money accounts:
• How often are the fun money accounts paid? Is it an agreed regular contribution per month, or something like a lump sum to get you going and then agree top up both accounts with a predetermined amount when one or both accounts fall below a certain balance?
• How much will each of the contributions be?
• What necessarily constitutes as a fun money purchase? Is it something easily definable that benefits only one of the pair, such as designer clothing for him or tennis lessons for her? What about dining out with friends when one partner isn’t present? Or how about trips to the salon? You do both get your haircut, but does one go to a exclusive salon while the other frequents the local hair dresser?
It will take some effort to set up the accounts and determine the best set of parameters to make your agreement successful but it is a strategy that may work wonders for your relationship. As long as you are fair, honest and negotiate where new expenses fall as they come up, you may find that your only disagreements now come from the allocation of closet space!