Summary: All long-term couples that live together have to merge their spending, saving and assets in some way. This is driven by practicality, fairness, children, and a commitment to a shared future. There's also the backdrop of Australian law governing the ending of relationships which allows for all assets to be split equitably (according to the Family Court) regardless of whose name they're in or direct financial contributions.
However, there is considerable variation in the ways in which this merging of finances is done. To progress toward financial freedom you need to actively find the ways that work most effectively in your relationship and circumstances. There is no single, best method. But the default, lazy or ill-considered ways of managing shared finances are major wealth leaks - with excessive or low-satisfaction spending, and poor saving and investment - and can also cause resentment and a lack of trust. This then adversely impacts the relationship and future quality of life of the partners and any children.
However, there is considerable variation in the ways in which this merging of finances is done. To progress toward financial freedom you need to actively find the ways that work most effectively in your relationship and circumstances. There is no single, best method. But the default, lazy or ill-considered ways of managing shared finances are major wealth leaks - with excessive or low-satisfaction spending, and poor saving and investment - and can also cause resentment and a lack of trust. This then adversely impacts the relationship and future quality of life of the partners and any children.
Unresolved money issues in relationships show up as a lack of trust, honesty, transparency and communication about money. Specific symptoms may include:
- Hiding some spending or at least what the spending is on (e.g. by using cash)
- Hiding personal debt (e.g. via credit cards)
- Hiding accounts, assets or temporary secret stashes
- Hiding income like government payments, tax refunds, rebates, bonuses, gifts, etc.
- Preserving wealth in inefficient ways (jewelry, expensive personal goods)
- Transferring wealth outside the relationship because you fear it will be spent (e.g. to parents)
- Regular disagreements about spending and financial decisions
- Resentment about shared finances, inequity and control
- The use of binding financial agreements ("pre-nups") and resentment about wills, trusts or other legal arrangements
If any of the above apply - or other obviously undesirable symptoms - then there are unresolved money-related issues in the relationship such as not having shared long-term financial goals (e.g. like obtaining some level of financial freedom) or significant differences in approaches to managing money and obtaining satisfaction.
The aim is to eliminate all adverse symptoms by addressing the root cause of the issues. Your best option to address the root cause may vary as circumstances change. For example, the most effective strategy by far is finding a well-matched partner with respect to life priorities and philosophies before settling down, making major financial decisions or having kids. For those already in relationships, their best option will centre on transparency, honest communication and investing the effort to come to a genuine agreement on shared long-term goals.
Gain: ~$2,000 to $10,000 per year in joint wealth gains from reducing discretionary spending and debt and building savings more effectively.
Our Situation: Lisa and I use a NAB Classic joint transaction account for all shared expenses (direct debited where possible) which we keep topped up from our personal savings accounts. As we pay 100% for all personal expenses from our personal savings accounts, we are more judicious in our discretionary spending but also have complete freedom. It helps that we have similar earning potential.
Lisa tracks her spending out of preference, not necessity. I don't bother at all. There has never been a household budget. Like most partners who've achieved financial freedom, we rely on good habits and trust not budgets. We don't need to be on the same page regarding everything; once the surplus is large the whole idea is to have freedom to spend on the things that are important to you.
Our savings are all technically in individual accounts but have grown quickly and belong equally to both of us. Spending, accounts and assets are never hidden. Sizeable savings and passive income in individual accounts allow us to make our own preferred trade-offs in choosing how much paid work to do versus staying home with our child or pursuing unpaid interests.
Details:
1. A few recommended ideas and principles
Any honest blog about achieving financial freedom can't ignore the massive effect on outcomes of relationships - primarily with your partner, but also with extended family, friends and acquaintances like work colleagues.
The principal aim of this post is to highlight the importance of this topic to how successful you and your family can be in achieving financial freedom. However, I won't be writing a comprehensive guide myself but will instead collate recommended articles. Each person needs to read widely, think about the ideas of relevance to their situation, and then formulate your own plan of action as needed.
Consequently, most of this post will simply collate useful links.
However, I will list up top some ideas and valid principles I think have universal relevance:
- The key is to share (as much as possible) long-term financial goals (a certain level of financial freedom in a specified timeframe) as well as reach agreement on one's approaches to obtaining satisfaction and happiness from week-to-week (for some people this doesn't require much money, for others it may but this may not matter if there's a balance).
- Long-term relationships depend on love, generosity and committment to shared outcomes - so don't keep score or let power be determined by money. But in short-term or early-stage relationships it makes sense to keep finances separate.
- Some couples are perfectly matched, will last forever, have no issues with trust or honesty, and are often very generous by nature. They may consider it unnecessary to talk about money or prioritise saving and investment. But neglecting to set long-term financial goals and seriously pursue them will affect their long-term potential to maximise their quality of life.
- If legally it doesn't really matter whether money or assets are held individually or jointly, then use whichever makes most sense for enabling freedom and responsibility, eliminating resentment or dishonesty, reducing low-satisfaction spending, minimising tax, and building savings.
- Your individual happiness depends much more on the quality of your relationships rather than absolute maximisation of wealth. Once you've reached the level of financial stability you should be particularly careful to ensure you aren't unnecessarily harming relationships in order to maximise wealth.
- It's unusual for both members of a couple to be equally frugal or equally interested in spending the time and effort to maximise savings and investments. Usually, one partner will take the lead on building wealth while the other may take the lead on spending it purposefully - such as improving the satisfaction of one's home, planning travel adventures or just eating out. Both are important.
- Becoming a long-term couple with shared finances does not mean that you need to give up all individual freedom. A joint account can be used for shared expenses but individual accounts can be used for personal expenses and even savings. As long as shared long-term goals exist, then this arrangement can rely on just trust and transparency.
2. Advice from financial freedom bloggers about avoiding or resolving money issues in relationships
Frugal Woods
> Behind the Scenes of a Happy Frugal Marriage
> How Do You Convince Your Husband Or Wife To Be Frugal?
> Reader Suggestions On: How To Convince Your Husband Or Wife To Be Frugal
Mr Money Mustache
> Is Mr. Money Mustache Ruining Your Marriage?
> Is Mr. Money Mustache Ruining Your Marriage? (Part 2)
- Hiding some spending or at least what the spending is on (e.g. by using cash)
- Hiding personal debt (e.g. via credit cards)
- Hiding accounts, assets or temporary secret stashes
- Hiding income like government payments, tax refunds, rebates, bonuses, gifts, etc.
- Preserving wealth in inefficient ways (jewelry, expensive personal goods)
- Transferring wealth outside the relationship because you fear it will be spent (e.g. to parents)
- Regular disagreements about spending and financial decisions
- Resentment about shared finances, inequity and control
- The use of binding financial agreements ("pre-nups") and resentment about wills, trusts or other legal arrangements
If any of the above apply - or other obviously undesirable symptoms - then there are unresolved money-related issues in the relationship such as not having shared long-term financial goals (e.g. like obtaining some level of financial freedom) or significant differences in approaches to managing money and obtaining satisfaction.
The aim is to eliminate all adverse symptoms by addressing the root cause of the issues. Your best option to address the root cause may vary as circumstances change. For example, the most effective strategy by far is finding a well-matched partner with respect to life priorities and philosophies before settling down, making major financial decisions or having kids. For those already in relationships, their best option will centre on transparency, honest communication and investing the effort to come to a genuine agreement on shared long-term goals.
Gain: ~$2,000 to $10,000 per year in joint wealth gains from reducing discretionary spending and debt and building savings more effectively.
Our Situation: Lisa and I use a NAB Classic joint transaction account for all shared expenses (direct debited where possible) which we keep topped up from our personal savings accounts. As we pay 100% for all personal expenses from our personal savings accounts, we are more judicious in our discretionary spending but also have complete freedom. It helps that we have similar earning potential.
Lisa tracks her spending out of preference, not necessity. I don't bother at all. There has never been a household budget. Like most partners who've achieved financial freedom, we rely on good habits and trust not budgets. We don't need to be on the same page regarding everything; once the surplus is large the whole idea is to have freedom to spend on the things that are important to you.
Our savings are all technically in individual accounts but have grown quickly and belong equally to both of us. Spending, accounts and assets are never hidden. Sizeable savings and passive income in individual accounts allow us to make our own preferred trade-offs in choosing how much paid work to do versus staying home with our child or pursuing unpaid interests.
Details:
1. A few recommended ideas and principles
Any honest blog about achieving financial freedom can't ignore the massive effect on outcomes of relationships - primarily with your partner, but also with extended family, friends and acquaintances like work colleagues.
The principal aim of this post is to highlight the importance of this topic to how successful you and your family can be in achieving financial freedom. However, I won't be writing a comprehensive guide myself but will instead collate recommended articles. Each person needs to read widely, think about the ideas of relevance to their situation, and then formulate your own plan of action as needed.
Consequently, most of this post will simply collate useful links.
However, I will list up top some ideas and valid principles I think have universal relevance:
- The key is to share (as much as possible) long-term financial goals (a certain level of financial freedom in a specified timeframe) as well as reach agreement on one's approaches to obtaining satisfaction and happiness from week-to-week (for some people this doesn't require much money, for others it may but this may not matter if there's a balance).
- Long-term relationships depend on love, generosity and committment to shared outcomes - so don't keep score or let power be determined by money. But in short-term or early-stage relationships it makes sense to keep finances separate.
- Some couples are perfectly matched, will last forever, have no issues with trust or honesty, and are often very generous by nature. They may consider it unnecessary to talk about money or prioritise saving and investment. But neglecting to set long-term financial goals and seriously pursue them will affect their long-term potential to maximise their quality of life.
- If legally it doesn't really matter whether money or assets are held individually or jointly, then use whichever makes most sense for enabling freedom and responsibility, eliminating resentment or dishonesty, reducing low-satisfaction spending, minimising tax, and building savings.
- Your individual happiness depends much more on the quality of your relationships rather than absolute maximisation of wealth. Once you've reached the level of financial stability you should be particularly careful to ensure you aren't unnecessarily harming relationships in order to maximise wealth.
- It's unusual for both members of a couple to be equally frugal or equally interested in spending the time and effort to maximise savings and investments. Usually, one partner will take the lead on building wealth while the other may take the lead on spending it purposefully - such as improving the satisfaction of one's home, planning travel adventures or just eating out. Both are important.
- Becoming a long-term couple with shared finances does not mean that you need to give up all individual freedom. A joint account can be used for shared expenses but individual accounts can be used for personal expenses and even savings. As long as shared long-term goals exist, then this arrangement can rely on just trust and transparency.
2. Advice from financial freedom bloggers about avoiding or resolving money issues in relationships
Frugal Woods
> Behind the Scenes of a Happy Frugal Marriage
> How Do You Convince Your Husband Or Wife To Be Frugal?
> Reader Suggestions On: How To Convince Your Husband Or Wife To Be Frugal
Mr Money Mustache
> Is Mr. Money Mustache Ruining Your Marriage?
> Is Mr. Money Mustache Ruining Your Marriage? (Part 2)
3. General articles on money issues in relationships
The Guardian
> Financial infidelity: how to prevent money secrets from hurting a marriage
Forbes
> Why Couples Shouldn't Merge All Their Finances
Financial Planning Association of Australia
> Are you committing (financial) infidelity?
Self
> The Financial Secret That Could Ruin Your Relationship
news.com.au
> Financial coupling: How do you split your money?
The Simple Dollar
> Ten Red Flags of Financial Infidelity and What to Do About It
The Guardian
> Financial infidelity: how to prevent money secrets from hurting a marriage
Forbes
> Why Couples Shouldn't Merge All Their Finances
Financial Planning Association of Australia
> Are you committing (financial) infidelity?
Self
> The Financial Secret That Could Ruin Your Relationship
news.com.au
> Financial coupling: How do you split your money?
The Simple Dollar
> Ten Red Flags of Financial Infidelity and What to Do About It
Further Info:
ASIC MoneySmart
> Relationships & money
> Joint accounts
Family Relationships Online
> Property division when de facto relationships break down
Landers & Rogers
> De facto relationships and asset protection: what's mine is... yours?
Finder.com.au
> Compare Joint Bank Accounts to Help Meet Your Individual and Family Goals
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