A couple’s decision to embark on a shared financial journey is an important milestone in a relationship – but it can bring practical and emotional challenges.
“Love is composed of a single soul inhabiting two bodies.” Aristotle
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Committing to a relationship means committing to some degree of shared financial decisions. Sharing can signify a deepening of commitment and trust and can be an opportunity to combine forces to achieve your goals more quickly. But can also introduce complexity and raise questions of fairness and independence, as well as lifting the risk of disputes over money management.
Navigating this path requires clear communication, mutual understanding, and a flexible, supportive approach.
This guide aims to provide a checklist for couples sharing or considering sharing finances, providing insights that can help prepare a roadmap for a successful financial future together.
Keep communication lines open
Discussions about finances within couples are often about more than just money: it’s about building trust and understanding each other’s financial perspectives.
Open communication matters because every couple has unique dynamics that have been shaped by their backgrounds, cultural values, and income disparities. These factors can significantly impact their financial journey together.
The first step to building a shared financial future is having a conversation about these similarities and differences, seeking to understand each other and find common ground.
Effective financial conversations should go beyond day-to-day spending and look as well at long-term financial goals and investment strategies, as well as considering circumstances as they change.
There are some important (and often difficult) conversations that should be had early.
If your partner is in debt, it is important to know what you may be inheriting1. One in six of us struggle with credit card debt in Australia2, which means it’s a common conversation that needs to be had.
Any past defaults or bankruptcies could impact you if you join accounts or seek to buy a home together in future.
Another important conversation to have is about financial goals – do you both have the same vision for the future? Do you both want to buy a home? Are you comfortable with investing in shares? There is no right or wrong answer but understanding each other’s position can save you from heartache down the track.
Discuss single or joint finances
Sometimes, one of the big questions in a relationship is whether or not to combine your finances.
Some couples prefer fully shared finances. This can be a marker of unity and help with transparency in the relationship. However, sharing finances also means navigating joint decisions on spending and saving, which requires strong communication and mutual understanding.
Shared finances can take many different forms – a joint transaction or savings account, joint investment accounts, or joint loans are just a few.
Joint finances can simplify the management of shared expenses and foster a sense of financial partnership. They offer a practical solution for handling joint expenses like mortgage payments, household bills, and groceries. Transparency is another benefit, as both partners have visibility of shared finances.
But joint accounts also mean shared responsibility for any debts incurred. With joint accounts, one partner’s credit score could affect the other, especially in joint financial applications.
Some see combining finances as a loss of independence.
Maintaining separate accounts offers individual control over how to spend money and allows couples to maintain independence.
But separate accounts may require more effort in coordinating and managing shared financial responsibilities. It can also mean each partner needs to be proactive in communicating their individual financial situation, especially when it comes to planning for shared goals or handling joint expenses.
Sharing can go further than bank accounts and loans. A shared credit card means both are responsible for making repayments, and both must agree to cancel the card. The alternative is primary and secondary credit cards, where only one is responsible for debts and can cancel without the other’s permission3.
Importantly, ‘joint’ or ‘separate’ is not the only choice4 – couples may also consider alternative arrangements that suit their unique needs, perhaps by making proportional contributions based on income, or using a hybrid approach and maintaining both joint and individual accounts.
Understand debt
Debt becomes more complicated in a relationship. Even if you don’t hold joint assets or debts, if your partner defaults it can still affect your finances5.
But debt is not always bad news. Sometimes, debt can help you and your partner in the future. So, it’s important to understand not only whether your partner has any debt, but also what kind of debt it is.
Debts like university HELP debt are an example of ‘good debt’ because a university education is something that is more likely than not to help you in future. A mortgage on a place to live or an investment property can also be a good thing – having a place to live is essential and the prospect of a rental return can also be a good way to save for the future.
‘Bad debt’ is something unlikely to benefit you in the future. Credit card debts and gambling debts are examples of debts that must be repaid but will not provide any future benefits.
Understanding both the amount and also the quality of your partner’s debt is an important discussion.
Set financial goals and priorities
Some people know what they want – and how to get there. Others can be less certain.
Regardless of which camp you and your partner fall into, setting some specific financial goals is an important step that gives you something to work towards6.
Financial goals can be thought of in time horizons – up to three years, three to five years, five years and longer.
Short term goals might include setting a spending budget that helps ensure you have money saved at the end of the month or starting a savings plan. Saving for a holiday or buying a car might also fit in this timeframe.
Medium term goals include things like saving for a home deposit or getting into the financial position to start a family.
For the longer term, goals may include educating children, upgrading the family home or investing for retirement.
Goals can change over time, so this is an ongoing conversation. But by starting with a shared view of your financial goals, you can start to work together to achieve them.
Seek professional advice
As you deepen your financial commitment to each other, professional advice can assist.
Here are some areas where it might pay to seek expert help:
Insurance: Evaluating your needs for different types of insurance, such as life insurance, income protection, and health insurance can become more complicated in a relationship. Insurance options are complex, and professionals can provide insights and help ensure you are not overpaying or paying for insurance you don’t need.
Estate planning: The intricacies of drafting a will and powers of attorney that meets legal requirements often requires legal advice. Wills are important documents that can ensure your assets go where you want them to after your death. But the laws around wills can vary from state to state and speaking to a lawyer may be helpful.
Financial agreements: Some couples choose to enter binding financial agreements to set out how assets will be split if the relationship ends. Binding Financial Agreements can be entered into at any time during a relationship – or even after the relationship ends – but are only valid if both parties have received legal advice.
Conclusion
Romantic relationships are central to many people’s lives and days like Valentine’s Day can serve as reminders of the deeper commitments we make to each other.
One of those commitments is about our finances – choosing to be together involves at least some level of intertwining of financial paths.
That’s why open and honest communication is essential.
A financial adviser can help
Financial advisers can assess your individual needs and desires, and help you develop a personalised plan for how those aspirations combine – allowing you to work together to achieve your shared dreams.
For more information, contact your financial adviser
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1 https://www.bt.com.au/personal/your-finances/manage-personal-finance/having-the-money-talk-with-your-partner.html
2 ASIC, as quoted on https://www.bt.com.au/personal/your-finances/manage-personal-finance/having-the-money-talk-with-your-partner.html
3 https://moneysmart.gov.au/family-and-relationships/relationships-and-money
4 https://www.bt.com.au/personal/your-finances/manage-personal-finance/getting-married.html
5 https://www.bt.com.au/personal/your-finances/manage-personal-finance/sexually-transmitted-debt.html
6 https://www.bt.com.au/personal/investments/learn/before-you-get-started/setting-investment-goals.html
Disclaimer
This document has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac) and information is current as at February 2024. The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. You should obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it. This document may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, Westpac accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material. 00667A-0124