Finances Relationships

Money in the relationship: how partners should handle income and expenses

Money is one of the major points of conflict in any relationship. Here are some of our go-to winning strategies for a conflict-free, healthy, “money relationship”

Money in the relationship.

When you pause to think about it carefully – really think about it – is it clearcut to the both of you?

Perhaps you’ve established how the ins and outs work – the incoming, the outgoing.

How does saving work?

Have you thought about long term investments together?

When it comes to our household, we’re for sure aligned on the same principles – yes, we want to save for our future; yes, we want to build, and have more, over time; yes, we want to invest –

but when it came down to some details and specifics, there were actually some points that required discussion and agreeing upon.

We thought it would be useful to share our experience on this topic with you.

In today’s world, money in a relationship can be tricky

I don’t think we’re talking about single versus joint earning households – it’s pretty common now that households are more the latter.

But who is earning what can play an impact on the relationship and can play out power struggles within the relationship.

And there are A LOT of details that will come up in life that will require you and your partner to discuss and agree.

It’s best to talk about money and the related topics early, and frequently, with your partner, so that you can avoid negative impacts on your relationship.

Also, money situation changes over time – whether that’s new priorities, or due to increased wage earning (or decreased), and different opportunities, so it’s a good idea to keep revisiting this topic as and when you need to.

That’s what it’s really important to develop a healthy money relationship with you partner, so that the lines of communication are open and you can talk about this freely and openly.

Two incomes, one household

Who earns more – does this matter?

Sometimes gender role expectations can play a factor here. It depends on the couple’s expectation of who is the major “breadwinner” of the house. Today, c.1/3 of joint household earners are households where the woman earns more than the man. Still not 50/50 – and there are actually quite a lot of social expectations built around this.

For both men and women, there can be an expectation for the man to be the major or primary breadwinner for the household. If this is the case, and this expectation isn’t met, how would you both react?

How we did it

To us, we believe that income differences don’t really matter too much, but we can say that because we both earn and have assets, both separately and together. However for partnerships where one is significantly earning more, we can see how this can be a difficult topic.

For me (Elliot), I’ve always had the expectation growing up that I would be earning more than my partner, and have aimed for a career that would put me in that position. I’d be lying if I said that if my partner earned significantly more than me, that it wouldn’t cause a problem initially – perhaps there would be some challenges to the world view. However, I think I’m mature enough and emotionally secure enough to be able to discuss this topic and conclude that partnership is much more than just income.

IF there’s a significant difference in income, man or woman, it unfortunately naturally creates an imbalance. For example, consider the example of making a large purchase, like a new home, where the one partner earns significantly more – that partner would have to in effect subsidize the other’s share of the purchase.

The idea of 50/50 is admirable, and should be the base case scenario for any partnership – but often, it is not. There are plenty of relationships where a lower-earning partner can feel feelings of inadequacy, or where a higher-earning partner may feel taken advantage of.

The important thing here is building on trust and love, and transparency. Communicate and talk out common goals, and don’t be afraid to revisit boundaries. Perhaps that new home could be a joint purchase after all, but the difference in “equity” made up for in different ways besides income. Talk about it – you may find your partner has something interesting to say about it.

Are you both fully transparent?

First, do you know what your partner earns, after tax and deductions? Do you know your partner’s outgoings? How well?

How we did it

Looking back, this was a discussion that happened in our relationship a bit later down the road, when we were comfortable that we were in a long term relationship. Something about revealing your finances to your potential future partner is quite intimate and revealing, and it can take time. It certainly did in our relationship – we revealed the details of our personal finances over several months, if not years.

Today, we both have a very clear idea of what is coming in, and what is going out. Mostly because we don’t really tend to have big fluctuations in our lives – so that when big events do come up, we’re able to talk about it to each other openly and cooperatively.

It’s ok to have separate expenses, and separate lives – but the money should be pretty much understood – as in, no hidden mysteries or disappearances.

How do you handle two incomes? Fully separate, or joint, or a mix? … and the beauty of joint accounts

Next, how you do both handle the incomes – are they entirely separate?

Do you both section off an amount each month to cover the bills?

What about additional expenses on top of this?

How we did it

For us, we agreed long ago to pay into a joint account a set amount each month to cover the usual, recurring, joint expenses: bills, mortgage, and more bills. So a chunk of our accounts will go out the end of each month, on direct debit, so we don’t ever have to think about it. So, a portion of our incoming money will remain in our separate accounts, but an allocation will go into joint accounts. Throughout each month, there will be occasional top ups to the joint account if needed… the beauty of joint accounts, and notification alerts! We get a text whenever we go below a certain threshold.

What about separate assets, eg a separate property, or other assets? How do these get treated?

Is there a significant difference between partners in terms of already accumulated wealth? Pensions, savings, investments?

Does one partner already own property, or assets?

How we did it

We definitely had different assets before we got together! Alex already had alternative property by the time we were in a relationship, and I had developed an investment trading portfolio.

The point is – now we are both aware of what we own and what we have – and we believe in working together towards a common future – so we’re much more aligned about our common goals. Also, we’ve talked about building a common asset base, together – so we think about our assets as joint.

But it can be very difficult, especially when you’re at the early stages of your relationship, to come to common ground on how to treat assets you’ve had before coming to a relationship –

– hence, the existence of pre-nups. Personally speaking, we can understand why these exist, especially given the high rate of divorce, and if the two partners have significantly different asset bases before getting together – so definitely a topic to talk out with your partner. Bottom line is, if the relationship is the focus, nothing should ever really be a deal breaker – but sadly, it can be.

What do you do to save, or invest, or handle large changes (ups or downs)? Do you have a certain expectation about this?

Savings – have you decided on a saving “regimen” – a certain amount per month?

Big ticket expenditures or gains – do you think about these together? Do you project into the future, together?

How we did it

We align on goals first. So, the broader principle. Do we want to retire early, together, and enjoy our years? Ok, then how do we get there? Do we want to have kids? Naturally, the how follows. If you’re aligned with your partner on life goals, then the details about how to get there becomes a joint effort done independently.

Conclusion

Money will continue to be a hot topic in a relationship, and honestly, I don’t think it’s one that is discussed enough. Think about how effective your household could be if you aligned on how to spend, how to save, and what to save for. Imagine investing together with your spouse – you may even get creative and think up ideas together. In fact, we’ll be exploring how to invest together as a couple in an upcoming post coming soon! See you then.

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