- Cecilia Barría
- BBC World News
Image source, Getty Images
Before starting a life as a couple, experts recommend not only talking about income, but also about the debts that each brings to the relationship.
Money management is such a controversial topic in some couples, that it can even become the trigger for the end of the relationship.
While there are laws that regulate the sharing of resources when couples separate or divorce, there are no rules on how to organize family resources when two people decide to live as a couple or marry.
The first thing that experts recommend is to speak directly about the subject. That implies not only asking about the other person’s income, but also about their debts.
Ultimately, the other person’s debt load will end up influencing the family finances.
Talking about finances is a conversation that cannot be left in the air, considering that many of the expenses will be shared.
How much should each one contribute?
Deciding how much each will contribute to finance life together is a challenge.
Many advocate the idea of “50/50” or “half and half”, but the problem arises when the income is very different.
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Many advocate the “50/50” or “half and a half” idea, but the problem arises when incomes are very disparate.
According to the American financial advisor Maggie Germano, founder and executive director of the consulting company that bears her name, the most logical thing is that the individual contribution is related to the level of resources that each one contributes.
“A different formula works for each couple, but it is recommended that the contribution to common expenses be proportional to income that each one has “, he comments in dialogue with BBC Mundo.
From that perspective, dividing everything in half could hurt the lower income earner.
Putting the proportional contribution formula into practice is not so complex, but you have to organize the accounts to calculate the percentage that each one should contribute to the common fund.
That percentage can be calculated for each expense, or even easier, distribute which accounts each one will pay, following the principle of proportionality.
For example, one takes care of the rent and the supermarket, while the other takes charge of other expenses that are equivalent to the proportion of the contribution that corresponds to him.
The Surplus Challenge
With all financial commitments paid, some couples have surpluses to save or invest.
In those cases, should it be an individual or shared savings or investment? This is a stony ground.
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“It is recommended that the contribution to common expenses is proportional to the income that each one has,” says Maggie Germano.
Whoever has more income and contributes more to the couple’s “business partnership” can argue that the remainder is theirs.
But, from another perspective, a couple may decide that “the contract” to live together involves sharing everything.
The challenge is to agree. And it should be done before realizing life as a couple.
Experts recommend saying clearly what you think and do not hide relevant financial information.
Bank accounts
One of the big issues that crosses the decision about what to do with bank accounts is the concept of autonomy.
How much level of independence I want to maintain and how much I am willing to lose in a relationship are some of the most basic questions, the answer to which is not easy at all.
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One of the big issues regarding bank accounts is the concept of autonomy.
“If couples should keep the money separate or not depends on the circumstances,” says Joanna Pepin, professor in the sociology department of the University of Buffalo, in the United States, in dialogue with BBC Mundo.
“If finances are shared, the person with the lowest income may have access to greater financial resources, but the person with the highest income may have a greater control over money. “
Advantages of having the same account
- It simplifies the payment of all the accounts, without the hassle of having to calculate how much it corresponds to each one.
- Promote transparency.
- You are less likely to encounter “bad surprises” in relation to the expenses incurred by the other.
- Surpluses can be automatically saved in an emergency fund, used for savings or investment in assets.
- It is seen by some couples as a show of confidence.
- If one dies, the couple will continue to have access to the funds immediately.
Disadvantages of having the same bank account
- People lose their independence in terms of controlling their income and expenses.
- One of the members can empty the bank account or make a unilateral decision without prior consultation, affecting the finances of both.
- If one of the members of the relationship has a “spender” profile and the other has a “saver” profile, sharing the same bank account can become a constant nightmare.
- “Having to ask permission or give explanations” every time you make a major expense can lead you to feel like you’re in a cage.
- When the relationship goes bad, there are people who use the financial resources of the couple to extort money from the other.
- If one of the two misuses the funds, the other is exposed to legal consequences.
- If one of the members of the couple has a “controlling” profile, he can follow all the movements of the other person, such as what he bought, where he bought or what time he bought.
The mixed formula
The formula that many financial advisers recommend is to have a joint bank account where each contributes enough money to pay for all common expenses.
And in parallel, each one maintains your own bank account, protecting your financial independence.
Image source, Getty Images
“It is more common today than a couple of decades ago for couples to keep money in different bank accounts,” argues academic Joanna Pepin.
In case there is a fight or separation is imminent, people are not exposed to vindictive reactions from the other party.
This formula works to solve practical financial issues like paying household bills, but at the same time gives everyone a degree of economic independence.
“It is more common today than a couple of decades ago for couples to keep money in different bank accounts,” argues Pepin.
“When finances are kept separate, or partly separate, people may be better able to leave bad relationships because they have control over at least some of the money for personal expenses.”
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.