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  4. Which is better: Joint or separate finances?

It's one of the most commonly cited reasons for couples breaking up and something that has been known to cause years of angst in many a relationship. 

Tension over money sometimes can start as soon as the honeymoon is over and can slowly develop into fully fledged resentment which eats away at a relationship.

Like self-diagnosing an illness on the Internet, it's difficult to get a straight answer and the internet is abundant with conflicting research reports on this topic – some say that couples who have joint accounts are happiest. Other research reports just the opposite – that keeping a level of financial independence is good for the emotional health of each individual in a relationship, and therefore good for the relationship itself. 

Many working professional women in particular are attracted to the idea of keeping their hard-earned money entirely separate from their partner – but its not always the best or only option.

There are many important considerations when deciding what's best for you and your relationship.  Here are some of the pros and cons to each option, which may help you decide.  

Pros to joint finances

Easier to build wealth – the power of two incomes when working towards common goals is huge.  For example, it's much faster to pay down non-deductible debt (such as your home loan) and increase your capacity to invest in more tax-effective ways.

Fosters financial teamwork – when you are working towards goals as two individuals in silos you don't have the same need to work through and resolve differences. The potential for conflict with joint finances can be higher, but so too is the opportunity to grow together and work out your differences.

Reinforces trust – pooling income reinforces trust in each other as it is a significant sign that you are committed to making things work, even during the hard times.

Cons to joint finances

Creates the potential for financial indiscretions – some people will avoid direct confrontation and conflict about differences in spending habits by not being open – AKA lying by omission.  For example, stashing purchases in the boot of the car until your partner goes out, then sneaking them in and saying later, when said item is noticed, “Oh this old thing?!” may not promote honesty and trust in a relationship.

Harder to walk away – obviously if you want to end the relationship then the process of financial separation becomes more complex when finances are shared.

Kills the fun of having a secret financial garden – there is a certain thrill to not having to explain your spending decisions and to be able to indulge yourself without consulting anybody. When all the money is in one pot and the financial book is completely open, your secret financial garden dies. 

Shines a spotlight on your financial differences, which can cause conflict – when finances are joint there is a level of accountability to each other that doesn't exist with separate finances.  If one of you is a spender and the other is a budgeter, this is a possible source of conflict.  How you deal with this is a true test of your communication and relationship skills.

Pros to separate finances

Avoids arguments – it definitely can make life simpler as separate finances can mean fewer arguments.  Of course, this is only where both people feel there is fairness in when and how joint expenses are split. 
 

Gives each person a healthy sense of independence – good relationships need for both people to feel emotionally healthy which may include knowing that they have some part of them which is theirs alone. Having separate finances can mean that each person is present through choice, not because they've become financially dependent on their partner. 

If you're not sure about the relationship  – that is, if you're not ready to commit to the relationship yet it can be best to keep finances separate as it makes everything so much simpler if you decide at some point that he or she is not the one.  

Cons to separate finances

Less commitment – why is commitment important?  It gives a relationship a new level of security which affords both partners the opportunity to relax and focus on the joys rather than the insecurities of love. 

Forgo your ability to harness the power of pooling money to achieve goals – keeping your finances separate sometimes means that you miss out on the opportunity to work on common goals as a true team by harnessing the power of pooled funds. 

Still not sure? A strategy that can work well is to have shared accounts for all those shared aspects of life such as the mortgage, mortgage offset account, joint investment strategies and/or holiday savings, and also individual accounts into which you each get an agreed amount per pay, for you to do with as you wish. This means the spenders can spend and the savers can save without having to justify themselves. 

Ultimately, you have to decide what is right for you and your relationship.  I find that what helps most couples is to start by sitting down and discussing their dreams and goals – write these down and enjoy the process.  Get to know each other better and once you've identified common goals and areas of difference you have a great foundation and starting point for financial planning.  

If you would like some help with your finances please speak to us online now or call us on 1300 558 887.

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