Is this something you are doing now in your home… my money, your money?
I was in the kitchen at work the other week and the conversation at the lunch table was about how many of them keep their money separate from their partner’s, and they both just chip in for shared expenses. I was really surprised that this was the way some people were handling their finances. I had so many questions. How does this work long term? What if one person wants something for the house and the other doesn’t – who pays for it? What if a water pipe bursts and one person can’t pay their share of the bill? What if there are children involved? But lunchtime was over so I got no answers.
If you and your partner currently keep your finances separate and it works for you, by all means, continue to do so. But, if you’re in a committed relationship, trust one another and are working towards the same goals, then it may work better if you combine your finances. Let me preface this by saying that neither Em nor I have a financial background, but we do have a few tips that you might like to consider when it comes to budgeting and managing your finances together.
Tip 1 – Goals
Sit down together and write down a list of goals you’d like to achieve. Are you both saving for a car, a deposit on a house, renovations, or a holiday? Write them down and set a budget to each goal.
Tip 2 – Expenses
Next, write down all your expenses. It might be easier to break them down into categories:
- House (items like mortgage/rent/utility bills/food)
- Medical (doctors/medication/chiropractor/glasses etc)
- Vehicle (registration/tyres/servicing/petrol)
- Children (schooling/uniforms/extra activities)
- Hobbies (sports/shopping/subscriptions)
- Miscellaneous (birthdays/lunches/coffee)
Be completely honest here and don’t cast blame if some unexpected expenses crop up. Remember, you’re both working together towards the same goals, so negotiate on the expenses together.
Once you have completed the expenses list, you can see where the money is being spent and can therefore make better decisions on how to manage it.
Tip 3 – Income
Everybody’s income is different, and in a relationship it’s important not to get hung up on who earns more. You are both making a financial contribution. To make your money work together, you might consider opening a joint bank account and having both incomes deposited into it. This account can then be used to pay for all of your joint expenses.
However, if you like the freedom of still having money to spend as you like, then retain your own personal bank accounts in addition to opening the joint account as above. You can then have an agreed amount deposited into each of these personal accounts so you both have the same “spending” money, whilst jointly contributing to your shared expenses.
Tip 4 – Off-set Account
An off-set account is a savings/transaction account linked to your mortgage. If you have a mortgage with an off-set account, then it is definitely worth considering pooling your money. An offset account is fantastic if used in the right way, as it is designed to lower the amount of interest you pay on your loan so that you pay more off the principle instead. So, if you are not holding the majority of your money in this account then it will not be working as efficiently as it could.
It is said that to be really effective in reducing your mortgage, then at least $5,000 should be sitting in an off-set account. But don’t stress if you don’t have this amount. As long as you have most of your money going into the off-set account, then the same principle will work for you. It will reduce the amount of interest you’ll pay and get the loan paid off quicker.
I hope this has helped you to look at your finances differently and maybe start a discussion to make my money/your money work better for you both.
Don’t forget to check out our other money posts:
The information provided in this post is general in nature only and does not constitute personal financial advice. Before acting on any information in this post you should consider the appropriateness of the information to your own financial situation and needs. Please refer to our website’s full terms and conditions.
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