Managing Joint Finances
One of the privileges of being a financial adviser is being
able to gain an insight into how people manage their financial
affairs. It is a topic that most people don’t usually discuss
with others, even their close friends and family. There is great
variation in how people approach money management, especially in
terms of the way money is managed in a relationship.
The start of a relationship can mean a degree of loss of
financial independence that is difficult for some people to
adjust to. This seems to be particularly true for couples in a
de facto relationship, or in a second relationship, particularly
if there were financial difficulties in the first relationship.
As a result, some couples choose not to have joint accounts and
instead contribute half each to the payment of bills, with a
monthly tally up to ensure that all expenses have been split
equally. In some cases, couples operate in this way for many
years, despite the arrival of children and even grandchildren!
While financial independence is maintained to a degree,
financial management becomes complicated, time consuming and
inefficient.
At the other end of the spectrum, some families choose to
operate their affairs on an extended family basis, sometimes
involving three generations. Financial resources are pooled,
perhaps through a family trust, with the idea that those
generating an income will take care of those who are not. This
system can apply where there are cultural considerations or
where one generation has considerable wealth. While this can be
a very efficient and effective way of managing money, it is at
the cost of loss of financial independence.
The question of who takes responsibility for managing
financial affairs and setting goals and priorities is one that
has a number of different outcomes. In some relationships, one
partner takes the sole or prime responsibility for managing
money, occasionally to the extent that the other partner has
little information on the overall financial situation. Lack of
information sharing is often a sign of a dysfunctional
relationship or problems with debt management and should be seen
as a warning sign. Managing money jointly is desirable but can
lead to conflict where partners have different values and
attitudes towards money. It can also lead to a default situation
where in effect neither partner is ensuring money is managed
effectively or where each partner is essentially competing with
the other for the use of money for their own priorities. I have
seen this for example in young couples where each partner has a
different view on the relative priorities of a new car, a house,
overseas travel and starting a family.
Here are some useful tips for managing joint finances:
• Each partner in a relationship should have access to an
agreed amount of money for which he or she is not
accountable to the other, so as to have a degree of
financial independence
• Simple money management systems are usually more
effective than complicated systems
• Goals and priorities should be agreed jointly and
should take into account the different attitudes and values
of each partner
• Specific responsibilities for sharing money management
tasks should be clearly defined so that joint responsibility
doesn’t become nobody’s responsibility
• There should be full disclosure of all financial
information to each partner, regardless of who has taken
responsibility
As with any aspect of a relationship, managing money is
something that requires an understanding of each other’s needs
and good communication.
