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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.