News and Media

Relationships and money

Are you moving in with someone, opening a joint account, or starting a joint loan or investment? It pays to go into love and money matters with your eyes open.

Here are some tips on managing finances with your partner.

• Talk to your partner about money
• Take action together
• Know the facts about sharing money
• Take care of yourself

Talk to your partner about money

Talking to your partner about money is important, whether you have similar or different spending and saving styles.

Here are four crucial issues to discuss:

• Relationship goals: Work out your relationship goals with your partner. Their background and experiences will influence how they think about money. Once you understand how your partner approaches financial matters, it will make it easier to create a money plan that suits you both.
• Current financial situation: Take stock of all your earnings, savings, assets (any shares or property you own) and debts (even credit card debts). Next, look at what goals you share: do you want to get married, buy a home or have a baby? Once you know, a joint budget will help you achieve these goals.
• Attitudes to spending and saving: Are you a spender or saver? What about your partner? Try to find common ground: work out what you can both afford.
• The financial controller: Who will handle the finances? Will one person look after household expenses and the other the mortgage? Make sure you're both happy with the decision.

Take action together

If you're serious about sharing your finances, consider doing this:

Use both your names

• Put both your names on services like electricity and gas. If both your names are on the bill, then it's your shared responsibility.
• Make sure joint assets like your home are purchased in both your names, and that joint debts are in both names, not just one.
• Be careful of putting your name on a loan that will only benefit your partner. See loans involving family & friends and joint accounts for more details.

Share costs: it could be cheaper

• If you have private health insurance, it could be cheaper to share a couples plan than pay for your own plans individually.
• If you are married, you can ask your employer to pay super contributions to your spouse or de facto partner. For example, you could ask for 5% of your super to go to your partner's account and keep the remaining 4% in your own super account. This could reduce your tax, as you can claim a deduction for the super you direct to your partner.

Plan for a shared future

• Make a will and keep it up to date. See funerals, wills and power of attorney.
• Get your partner and older children to work with you on a household budget. This will help you see how much money you can save or invest in your shared goals.

Know the facts about sharing money

Don't be blinded by love - be aware of how much money is coming in and going out in your relationship. Here are some things to watch out for:

• A joint loan doesn't always mean you're only liable for half the debt. If your partner defaults, you may be liable for the whole amount, plus fees, interest and charges - even if your relationship ends.
• If a utility service such as electricity or gas is only in your name, then it's your sole responsibility to pay the bills.
• Think carefully before you guarantee a loan for your partner or family members. If things don't go to plan and the borrower can't repay the money, you will have to pay for any loan you've guaranteed, plus fees, interest and charges. For example, if the guarantee is secured against your home you could risk losing it.

Many people find themselves having to pay for their partner or ex-partner's debts, even though they had nothing to do with the original purchase apart from signing some papers.

If you want some financial independence, think about getting your own bank transaction account and credit card.

Prenups

For people entering their second marriage or partnership, and who might already have children, you could consider organising a binding financial agreement (BFA), also known as a prenup. BFAs can help if you're worried about who should get what if the relationship ends. They are only binding if you have both signed the agreement and received legal and financial advice before signing.

Take care of yourself

If you earn less income than your partner, you may feel you don't have a right to make decisions about where the money goes. Talk to your partner about how you feel. You should work as a partnership, including when it comes to money.

Get organised

• Make a list of all your accounts, loans, investments and insurance.
• Keep all your financial information, including receipts and records for tax, in one place so you both know where they are.

Get informed

Get professional advice before:

• Guaranteeing a loan
• Signing your name to a loan which will only benefit your partner
• Becoming a partner in a business

Get help

If you need help with debt or money problems, think about seeing a financial counsellor. And contact Centrelink's free Financial Information Service (FIS) that can tell you if you are entitled to any benefits, especially if your circumstances have changed.

Some people find themselves being pressured by partners, family or friends to hand over control of their money or property. This is financial abuse. See how to get help if you are dealing with family pressures for your money.

If you have broader relationship conflicts related to money, a relationship counsellor may be able to help. Read more about managing relationships on the Australian Government Family Relationships website, or visit the community-based support service Relationships Australia. There is also useful information about your legal rights for dividing property on the Victorian Legal Aid website.

Reproduced in full with permission: Money Smart, Relationships and Money, 13 February 2012.