Why it can be a good idea to separate your finances in a relationship
For most couples, the idea of openly discussing money is enough to set off a wave of panic. Not only does it seem completely unromantic, but a lot of the time we don’t even want to admit certain things to ourselves, let alone our intimate partners. While in the early days it might not be all that necessary (although the subject of who picks up the bill is one you might want to address), if your relationship becomes serious and especially if you consider cohabiting, then there’s no way around it: you really should try to talk about money.
When you decide early on how you’ll handle your finances as a couple, you’ll be able to address any future challenges in a healthy and productive way. Money troubles are amongst the UK’s top reasons for divorce: research shows that 21% of couples blame their money problems on their partner. The first thing to do is determine if you want to keep your finances completely separate, join them together, or merge some areas while keeping others separate. The starting point is having an open and honest conversation that not only sets out your individual financial positions but also your goals and expectations.
Before you leap into the money chat, however, make sure that you understand that you will most likely have to compromise, and hear your partner’s point of view. As with other aspects of your relationship, it’s all about finding a balance that makes you both happy. Making decisions about how to handle money is one of the most important steps you can take – but be prepared that your partner might not see things the same way as you. Come into the chat with an open mind and a willingness to hear them out!
When it comes to managing your money as a couple, you have several options: keeping everything separate, and paying your own equal share of whatever household bills / shared expenses you may have, sharing some costs and responsibilities but keeping others separate, sharing and managing everything jointly, or paying in proportion to one’s earnings (eg. main earner pays in more for rent/bills etc.) While every decision is extremely personal to each couple, today we will talk about how to keep your finances separate.
Shared experiences, separate accounts
Keeping a level of financial independence is more important to some individuals than it is to others. If you choose to keep your accounts completely separate, you need to make sure your partner understands your reasoning and why it matters to you. They might feel sensitive and feel that you don’t trust them or aren’t ready to fully commit. Or perhaps they feel the same — after all, for a lot of people, their personal finances are a part of their lives that they don’t want to share with even their most intimate partner. If you want to spend, save, and invest however you choose — without consulting your partner, while trusting them to do the same — that’s completely okay. Again, the most important thing here is to communicate your needs and expectations.
Once you’ve had a conversation and (hopefully!) agreed to move forward with your plan, you have to work out how you will address your outgoings: for example, you can keep track of who owes whom what via apps like Splitwise. If you live together, you might choose to split bills equally, or in proportion to one’s income. Again, this is something that should be discussed and agreed upon.
Enjoy less spending friction
When you have separate accounts, you have the freedom to do as you please with your money (within whatever boundaries you set with your partner). It’s common for one person in the relationship to be more of a spender than a saver, which can make the more frugal person in the couple feel frustrated and even resentful. On the other hand, the higher spender might feel ashamed, embarrassed or monitored - which, again, can bring about feelings of resentment and tension. Keeping separate accounts help keep these issues at bay.
Avoid Credit Score Surprises
When you choose to have a joint account with a partner, you enter a sort of “association” — essentially, the the credit references agencies begin to see you as one unit.
If you both have great credit scores, or if you already have other joint credit like a mortgage, then linking your accounts probably won’t matter. However, if one of you has had problems with their credit score, it will inevitably affect the other. Plus, any joint credit agreement will state that you are jointly and severally liable for the debt. This means if you split up, you are both equally responsible for repaying that debt. If the other party fails to keep up their half of the repayments, you could be chased for the entire amount, which will be reflected on your credit score.
Remember: you can always change your mind!
At the end of the day, whether you choose to have separate accounts or not is strictly up to you and your partner. The important thing is that you know of the drawbacks and positives of choosing to do so, and understanding that it doesn’t have to be that way forever — if you one day choose to have a joint accounts, that’s absolutely okay, too. It’s simply important to do what makes sense for you at the given time in your life.