When sharing a future means sharing a budget.
Nothing ruins the mood and makes us whip off our rose-coloured glasses faster than talk of bank statements and tax deductions.
And yet, once the issue of commitment comes up, the prospect of entwined and interdependent financial lives becomes an issue that needs to be taken seriously.
According to the Australian Bureau of Statisticsi, around one third of the nation’s marriages end in divorce. Money issues and their connected disagreements are commonly cited as a major contributing factor in relationship and marriage breakdowns.
Disagreement over finances is a stronger predictor of divorce than other commonly cited causes of marital disagreementsii.
So why are joint finances such a volatile topic for couples?
Research by Dr. Terri Orbuchiii, encompassing a ground-breaking 25-year study of marriage and divorce, found that different spending styles, dishonesty around expenditure, and control issues were the three trigger points for couples experiencing money-related arguments.
Create a shared vision. If your spouse’s primary goal is getting ready for a huge vacation and yours is to increase your savings, there is a clear potential for disagreements. Make sure you talk about your priorities, and the necessary sacrifices, so you can both make progress towards a goal together. Get together regularly to check in and make sure your goals are still the same. People and priorities can change over time and it’s best to have it all out in the open.
Understand your different saving and spending styles. To pave the way toward a harmonious future, have a calm conversation about your money styles. Is one of you more of a spender and the other more of a saver? Does one of you view money hyper-rationally while the other invests a great deal of emotion into financial decisions? There may be underlying psychological issues at play, perhaps around issues of safety or connected to money problems in childhood, that could sabotage your joint potential for prosperity of they are not addressed.
Agree where the sharing stops. Do you plan to merge your accounts? Do you want to keep some things separate? Whether you intend to keep your accounts separate, merge absolutely everything, or pursue a hybrid solution, it’s important to communicate and agree on the right level of integration.
Spill the beans on your existing debts. Be open about any pre-existing debts, like HECS debt, mortgages, car loans, credit card debt or any other financial obligations. It’s important to talk about the impact these financial burdens may have on your budgeting or long-term plans. Also consider sharing credit scores or credit reports, as these may influence your ability to access a competitive mortgage rate.
For information on investment opportunities and strategies for achieving your financial goals, please contact your Morgan Stanley Financial Planner.
i‘Marriages and Divorces, Australia’, 2016. Australian Bureau of Statistics. 28 November, 2017.
iiRelationships Australia’s 2011 Relationship Indicator’s survey.
iii‘Finding Love Again: 6 Simple Steps to a New and Happy Relationship.’ Terri Orbuch. Sourcebooks, Inc. 2012.