Money and love: How to handle finances as a couple

Moneybags journalist Jessica Wood asks why money gets in the way of love, and finds out how couples can handle their finances to ensure that it doesn’t become a problem.

When couples consider starting their lives together, either through marriage, or moving in together, how they are going to handle their finances is probably the last thing on their mind. However, managing your finances as a couple can be a cause of tension, as decisions regarding finances and who should pay for what were not made prior to living together.

Head of FNB Consumer education Eunice Sibiya says: “While couples usually have to adjust to the daily habits of living with their partner, the importance of understanding each other’s financial habits, values and management of money is often overlooked.”

When money becomes a problem
According to Michelle DuBois, legal marketing specialist at Liberty Retail: “Long term relationships extend far beyond flowers and romance. A relationship will only survive when both partners are able to discuss their finances and have an honest and open relationship about money. It’s the lack of communication that sinks the ‘perfect’ relationship, not a lack of money.”

Sibiya points out that if couples have not had proper discussions about their finances, it can end up costing them. “Couples who are dating generally have not had sit-down conversations about managing finances together. But the reality is that informal management of your money in a relationship can take a chunk out of your pocket.”

One common mistake that couples make is assuming that both parties have the same priorities when it comes to money. This is where communication plays a vital role. If you don’t agree on where and how money should be spent and saved, it can cause problems in your relationship.

There are some important questions that you need to ask relating to larger financial commitments that you enter into as a couple. This includes how you are going to share living and household expenses, and ensuring that you are both happy with the decision that you make.

For example: If you are renting a property as a couple, will the lease be in both of your names, or one of your names? Will you split the rent, or will one of you pay the rent while the other pays water and electricity? When buying a house, the same questions apply.

You may not want to think about it but you have to consider what will happen if you ever break-up. Who will get the property? Or will you sell the property and split the proceeds? How will you split items that you have bought for the property together? Will the one who paid for it take it with them?

Another cause of tension in some relationships is income. Reshma Ansary, a financial planner at Discovery, notes that while some men may claim to be happy with their wife or partner earning more money than them, more often than not this can be a problem, with the man believing that he should be the main breadwinner. In a situation like this, you need to discuss how you can overcome this issue and reach a decision that you are both happy with.

Tips for managing finances in a relationship

1. Open communication:
Even though it may be tough at times, it is important that you are both open and honest about your financial situation, and how you believe the finances in your relationship should be managed.
“Take disposable income (the amount of money you have for spending and saving after income tax), current average minimum monthly repayments on debt, total of debit orders, and monthly contributions to savings, into account. Also discuss wants versus necessities and items that you are not willing to compromise on – this will assist when you draw up budget and look for areas of saving,” says Sibiya.

2. Make a budget:
DuBois stresses the importance of setting out a joint household budget, as well as a personal budget. This will include deciding who will be responsible for which household expenses, as well as how much you will put aside to savings and retirement. According to Liberty Retail, “Both of you should be using your tax deductible allowance for contributions to a retirement annuity, as the taxman allows this deduction per person.”

Included in your budget should be going out expenses. As a couple you need to decide how much you can afford to spend on entertainment and other additional expenses during the month to ensure that neither of you over spend.
Ansary says that couples should always be aware of who is going to pay for what when setting up a budget. “It is important that they know what the other earns. If they are going to be living together, they need to know what their overheads are and what they have for themselves. Their bond for example, are they going to go half-half or is one of them going to cover it. It needs to be clear, ‘I can’t afford this’, especially if they are not married.”

3. Decide who will be responsible for household expenses
Ansary states: “[You] should be aware who is going to pay for what. So if you are going to be renting, who’s paying the rent, are you paying half-half, who’s paying the water and lights, who’s paying the rates and taxes, those kind of things [need to be discussed].”

One of the ways to manage the payment of household bills is to set up a household account, where you each deposit money on a monthly basis to cover household expenses. Sibiya points out: “When you set rules for the account, think beyond the obvious to events such as weddings of mutual friends – can you buy the wedding gift from the account? It is crucial to keep each other accountable for not adhering to the rules.”

4. Long term planning
Although you may not want to think out it, there is a possibility that your relationship won’t last. This needs to be taken into consideration during your long term planning. Couples need to address the possibly uncomfortable topic of how things will be divided in the event of a break-up.

According to Ansary, financial planning starts when couples set up their marriage agreement. She says: “It’s all about planning. It’s always nice to have a plan, to have something to work towards. It’s always nice to sit with a financial planner and say, these are our goals” .

When couples get married, they do not always consider their long term financial needs and goals, such as buying a house or having children, adds Ansary. For example, a young couple may get married and buy a house, but Ansary notes that it may be more prudent for them to rent and put money aside to build up a deposit to buy a house in a few years’ time when they are more certain about their situation including finances, work and children.

5. Have separate bank accounts
DuBois notes that “legally there is no such thing as a joint bank account.” Generally when couples have a joint account, it is opened in the name of one partner, and the other has signing power and can use the account. However, she stresses that it is vital that each person also has their own bank account, as this ensures them of their own financial independence and allows them to build up a credit record.

One of the advantages of having separate accounts is if one of you gets into bad debt, it does not reflect badly on both of you. It also assists in reducing complications and arguments about who money belongs to in the event that you break-up.

Ansary adds: “I say to my clients, you come into the world alone, you’re going to die alone, you have to see yourselves as two separate entities. When you get married, it’s a big commitment of living together and this is part of it, this needs to be discussed. You need to see a financial adviser to help you [arrange your finances]. And the starting point would be your attorney, how are you going to get married, and if you have children, that’s where it starts. I always suggest anti-nuptial [agreement] without accrual, [this means] what’s yours is yours, and there [are] no grey areas.”

6. Track your finances together
Managing finances in a relationship is a team effort. According to Wilfred Moyo, investment and economic strategist at Metropolitan, “when you share finances, you can keep each other motivated to reach your goals together. Achieving goals together strengthens the bond in your relationship.”

7. Managing debt
When entering into a relationship, Sibiya and Ansary agree that debt should be kept separate, with each of you being responsible for your own debt.

Sibiya reveals that it can be complicated when items (especially larger items such as furniture) are bought together. “If you shop together, make a repayment agreement on the spot. The party who owes the other can either EFT his or her monthly contribution or your partner can take over one of your current expenses to the value of the monthly repayment for a certain period, in order to repay you.”

DuBois adds that debt becomes a vital issue when couples marry in community of property, as both partners will now be responsible for any debt incurred during the marriage. “Also find out if either of you signed surety, which may have been forgotten about, but which could one day wreak havoc with your personal finances.”

8. Past behaviour indicates future behaviour
Sibiya states: “It has been said that the best predictor of future behaviour is past behaviour and because your partner is unlikely to drastically change their spending and saving habits, you have to be comfortable with the amount of expenses and payments that they make every month.”

9. Life after death
It is not a pleasant thought, but planning for a future without your loved one is something that everyone should do. According to DuBois, couples should have “a book of life”, which contains all the vital paperwork and details that will be needed in the event of one of your death. This book should include:

• A copy of your ID book
• A copy of medical aid details
• Passport details
• Tax details
• Financial adviser details
• Policy documents
• Banking details

Ansary notes that there was a case where a couple bought a house and had been living together for six years, when the man died. There was no will or documentation stating that the house should go to the woman, and the deceased’s mother refused to give the woman the house, saying that half of it belonged to her son. The courts got involved, and the house was sold and the proceeds from the house were split between the woman and the deceased’s mother.
Ansary believes that this case highlights the importance of having all financial matters and future events planned for, to ensure that your partner is taken care of in the