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Find the key to financial harmony
By Hannah Ricci
Valentine's Day is traditionally the time for marriage proposals and couples taking the plunge to move in together. Amid all the romance, financial planning is probably the last thing on your mind. However, it could be the subject of your first lovers' tiff, according to a survey by Relate. The relationship advice service found that money was the thing couples argue about most, beating other contentious topics such as sex, untidiness and the in-laws.
More than one in five Brits who live with their partner has a financial secret, according to insurance company Engage Mutual, with credit card spending topping the poll as the most common lie between couples. Its research also found that women who earn their own income are far more likely to hide the state of their finances from their partner, with 41% of women in couples keeping financial secrets, compared with just 22% of men.
Money is undoubtedly a tricky topic to broach because everyone has different views, usually stemming from how much of it we have or don't have, or on our upbringing. Because of this, many couples brush money matters under the carpet until there's a big decision to be made, such as taking out a mortgage, having children or retiring. But whether we like it or not, money affects almost everything we do in our daily lives, so the sooner you and your partner discuss your joint money management, the better.
Moneywise talked to three couples about how they manage their money and our financial experts give their verdicts on how well they are doing.
Couple one: The young cohabitees
Katie Alice Fitz Gerald, 26, and her boyfriend Dominic Learey, 27, live together in Kennington, south London. They have been living together for a year and a half, and are in the process of buying a house.
Katie Alice, an art history graduate, does acting work in between a part-time job in an antique jewellery shop, while she figures out what she wants to do in life. This means she has quite a small, irregular income. Dominic, on the other hand, has his career sorted and brings in a regular, sizeable income working as a stockbroker, trading in equities and derivatives.
Despite the difference in income, Katie Alice likes to pay her way. "We generally split things equally, although Dominic will occasionally treat me to meals out," she explains. "We are lucky enough not to have to pay rent at the moment because the property belongs to my parents, who live in France, and we split things like bills and council tax between us."
The couple don't have a joint account or a set way of organising their day-to-day finances. When they go out for an evening with friends, for example, they both spend their own money. "Although I might buy one round and he might buy three," says Katie Alice. "We spend equally in relation to our income."
Katie Alice is paying the deposit on their new home through money she has inherited and saved, and Dominic will be paying the mortgage on his own for two-and-a-half years until his equity matches Katie Alice's investment. "This is my deadline to discover what I want to do and start earning," explains Katie Alice. "Because then I will start contributing to the mortgage."
Expert verdict
"I like the way Katie Alice and Dominic have organised things so far, especially their imaginative way of dealing with mortgage payments to equalise their equity," says Francis Klonowski, from financial planner Klonowksi and Co in Leeds. "This shows they think about money seriously and are prepared to plan forward.
"However, if they have not already done so, they should draw up an annual budget - not so much to control spending, but rather to see what effect a mortgage interest rate increase might have on their ability to pay," he adds. "This will also help show how much disposable income they have - if any - for other purposes such as long-term saving."
The couple's next priority when they take on the mortgage debt, says Mark Nish, director of Chartwell Private Client, is to ensure that they have adequate life cover to repay the mortgage in the event of premature death.
Nish adds: "They should also take out an income-protection plan to cover expenses in the event of illness preventing them from working. Most employers provide some protection benefits, but these are usually very limited and are unlikely to provide Katie Alice and Dominic with the financial security they will need."
Couple two: Married without kids
Jodi and Dave Alden have been married for three-and-a-half years and live together in St Albans, Hertfordshire. Jodi, 28, is originally from Sydney, Australia and works as an account management director for a design agency, and Dave, 32, is from Cleveland, Ohio in the United States and works in acquisitions.
The Aldens have a joint account they pay their salaries into each month. They allocate themselves a budget from this account and transfer funds into their individual accounts for personal spending. "Dave deals with our regular monthly payments like rent, bills and savings, and pays them from our joint account," says Jodi. "I'm happy to let him take control of that."
Jodi and Dave earn similar salaries so they generally split everything down the middle. "If we go out for dinner or drinks with friends Dave usually pays because we don't have a debit card for our joint account," says Jodi. "Then he'll just top up his account from our joint one."
When the couple first got married, they set themselves some three and five-year goals. "We are on course to meet our main goal which is to buy a house - we're planning to do that this year," says Jodi. "We review our finances once a year to check we're on course and our personal budgets every few months to ensure we're both happy with how things are going."
Their regular communication about their finances and their joint goals mean the Aldens generally have similar attitudes towards money. "Dave would probably say that I shop more than him, though," admits Jodi. "But I think it just seems that way as I buy smaller things like clothes quite often, whereas he'll splurge on big purchases, like golf clubs or a computer, every now and then."
Expert verdict
"This is all very well organised, and if they can manage to keep it going, Jodi and Dave will surely avoid all the debt problems that have beset so many people recently," says Francis Klonowksi. "I especially like the idea that they draw their spending money from a joint account after meeting bills and so on," he adds. "And they have also grasped two of the mainstays of financial planning - goal-setting and regular reviews."
However, Mark Nish warns: "Jodi and David do need to bear in mind that the costs associated with property ownership are usually greater than those when renting, and they will need to take into account the possible squeeze on their ability to spend on more personal items.
"Also, when they take out a mortgage they will need to put sufficient protection in place to ensure they could repay it in the event of death, disability or illness."
Klonowksi adds: "Then the next logical stage is to consider longer-term goals like retirement planning and securing their financial independence for the future."
Couple three: Married with kids
Tom and Maria Deakin from Beeston, near Nottingham have been married for 20 years and have two children - Joe, 17, and 15-year-old Beth. Tom, 47, is a secondary school PE teacher and Maria, 44, works part-time at a local leisure centre while training to be a physiotherapist.
The couple have shared a joint account since before they were married. "Maria has always managed our finances because she is generally more organised and financially minded than me," says Tom. "We put our income into the same account and Maria ensures all the bills and other expenses get paid. She sorted out our wills and remortgaging last year - I just sign where I'm told."
The Deakins have set up standing orders into two savings accounts each month: one for things such as holidays and emergencies, and an ISA for the longer term. They also pay into two fixed-rate bonds on an ad-hoc basis to give Joe and Beth nest eggs for the future. The Deakins, however, have quite different attitudes towards money. "I'm more of a spender by nature and Maria's the sensible saver, who likes to think carefully about purchases first," says Tom.
Maria encourages Tom to sit down about once a year to review their family finances. She also talks to the children about managing their money, and Joe has recently got a job in a music shop to bump up his allowance. "We do try to teach them the value of money and encourage them to save up for things they want," says Tom. "I hope they inherit Maria's money sense."
Expert verdict
"It's not unusual for one partner to take the lead in organising the finances, and typically for the reasons in the Deakins' case," says Klonowski. "It's not anything to be concerned about, as long as Tom shows a real interest in what Maria is arranging for them and tries to understand it."
He says their savings discipline is excellent, particularly the contingency fund. "They've also taken the right approach with their children and two things they mention sum this up - 'job' and 'allowance'. It's tempting to simply buy children everything they need or want, but that's really not doing them any favours."
As the next few years are likely to be fairly expensive, especially if Joe and Beth go to university, Klonowksi says longer-term goals like retirement planning may have to be temporarily put on hold. "However, this should not stop Tom and Maria keeping an eye on where they stand with their pension provision," he adds.
They should also consider how their financial position would be affected in the event of death or ill health. "They should first estimate what they would need in these circumstances, see what provision they already have, and then arrange cover for any shortfall," says Klonowski.
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