Managing money as a couple
If you’ve only got a minute:
- Money can be a source of conflict for couples so it makes sense to have a common understanding of how you want to manage finances as a couple.
- Everyone views money differently – try to show empathy and judge less.
- Set up a financial plan early to achieve short and long-term goals like retirement, after setting aside emergency funds.
There are many ways to manage your money with your significant other. Some prefer to keep their finances separate while others may choose to combine their finances, or it may be a combination of both.
Regardless, having the “money talk” with your significant other is never easy especially when your relationship is just starting to get serious. Conflicts over money issues rank high among couples, so it makes sense to start talking about finances early.
Here are 7 tips to help guide your “money talk” with your partner!
1. Understand that everyone views money differently
Due to differences in upbringing, everyone has a different view on money, so it is important to have empathy when starting the ‘money talk’ with your partner. Your partner may also be in a different financial situation from you so don’t be too quick to point fingers if let’s say, he/she has maxed out the credit cards. Instead, you can set milestones such as clearing all credit card debts and celebrate the small wins along the way. This is also a good time to align financial goals and find a common ground to proceed as a “team”.
2. Avoid financial infidelity
You should also discourage and avoid financial infidelity. This could come in the form of lying about debts due to not wanting to leave a bad impression on your partner or under-declaring your income. Such dishonesty can undermine the level of trust between a couple and can potentially lead to a breakdown in the relationship. No matter what, your partner and you are a “team”, and it would be good to manage your finances honestly and transparently.
3. Agree on how you’ll split the household bills
As your lives intertwine, there would be more items to pay for such as household bills for your groceries, petrol and mortgage, amongst other things.
Here are some common ways couples split their bills:
- 50-50 split
- Divided based on proportion of income
- By item (i.e. one takes the mortgage, the other pays for groceries)
With many joint expenses to pay, this is when a joint account could come in useful and while you are at it, you could get one that maximises the benefits for both of you. For instance, your partner and you could get your individual Multiplier accounts and credit your income into the joint account. This maximises your benefits as the Multiplier account will recognise the combined income and calculate interest based on this amount. You could get even higher interest rates when you buy groceries using a credit card, take a home loan, buy life insurance or invest through POSB/DBS.
4. Be accountable to each other
In most cases, there is no need for couples to be accountable to each other for all purchases as this could give rise to undue pressure. However, depending on the couple’s financial situation, it is advisable to set a threshold amount and give a heads up whenever a big ticket item purchase goes beyond the pre-determined amount. Most importantly, you should discuss finances together regularly with your partner to ensure that both of you are on track to achieving the financial goals that you have jointly agreed on.
5. Plan for the worst
Given the uncertainty in life, it is also important to plan for the worst especially if your partner or you belong to the sandwich generation. Ensure that you are adequately insured such that the family can carry on with their lifestyle even if you are no longer around. This means having insurance cover for hospitalisation, critical illness and death which cover the loss of future income so that your partner would not have to suffer financially in the event of an untimely demise.
At the same time, it is important to have emergency funds to help tide over any medical crisis that could occur or if one party loses his or her job. The rule of thumb is to set aside at least three to six months of emergency savings to keep your lifestyle and investment plans on track. For those who are self-employed, it would be good to have at least 12 months of emergency cash.
6. Retirement planning
For young couples, retirement may seem distant. Still, it is prudent to start discussing your retirement expectations early and review them regularly as it would provide you with a longer runway to accumulate wealth. Furthermore, young couples have a longer investment horizon to reap the benefits of compounding and ride out market volatility, so they can afford not to be too conservative when investing.
By deciding on your desired retirement lifestyle, you can match them with multiple income flows from a diversified portfolio of savings and investment tools such as stocks, unit trusts, exchange-traded funds, bonds and real estate. You can also consider using government schemes like the Central Provident Fund (CPF) and the Supplementary Retirement Scheme (SRS) to help grow your nest egg while enjoying tax reliefs. For example, CPF Lifelong Income For the Elderly (CPF LIFE) is a national longevity insurance annuity scheme that provides you with monthly payouts from the age of 65 till death so you will not have to worry about outliving your savings.
7. Share openly about caring for your parents
Your partner and you might also have different views on financial support for your parents due to the difference in upbringing. Your parents might also expect you to provide for them during their retirement or have made their own plans. However, with rising costs, the reality is likely to fall somewhere in-between.
It is important to openly communicate with your partner about the expectations that your parents have of you and what you are committed to. Conflicts can arise as one set of parents could demand more from their child than the other and hence, mutual understanding and compromise should be reached by the couple on how they would want to take care of their parents together.
Single income couples
For families with a sole breadwinner, it is even more important to maintain an adequate emergency fund to withstand unexpected financial shocks. Single income couples should consider the number of dependants when working out the amount of emergency cash to be set aside.
Another tip is to top up your spouse’s CPF account especially if he/she has low CPF balances. They get to earn attractive interest rates and you get to enjoy tax reliefs as well!
Although estate planning is important for everyone, there is a greater urgency for single income couples to ensure that a will, a Lasting Power of Attorney (LPA) and CPF nominations have been set up. This will enable proper and smooth distribution of the breadwinner’s assets and avoid disrupting the family’s lifestyle and financial well-being.
A will takes effect after death, while an LPA helps you appoint people you trust to act on your behalf should you lose mental capacity. A CPF nomination helps to specify who will receive your CPF savings which cannot be distributed via your will.
Ready to start?
Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
Alternatively, check out NAV Planner to analyse your real-time financial health. The best part is, it’s fuss-free – we automatically work out your money flows and provide money tips.
Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.