Time to read : 4 Minutes
Australian couples are feeling the pressure from all angles. A recent survey* revealed that:
56% of Australian families with children are experiencing high levels of distress.
The cost of living crisis and personal debt were identified as primary causes of this distress by 46% of respondents in the Suicide Prevention Australia Community Tracker.
This is a 6% increase from the previous quarter.
Another study by Westpac found that money issues caused arguments for 91% of couples, while around 20% of Australians admitted to arguing with their partner about money.^
This suggests – not surprisingly – that there’s a strong correlation between the rise in financial distress and increasingly broken relationships. With living costs spiralling ever higher, these numbers look set to rise. So that got me thinking…
What are some practical ways to approach conversations about finances with a partner?
I’ve summarised the advice from a few experts:
Wealthadvice.com.au principal Marisa Broome recommends being open about money. "If you're secretive about it, it will fester and become a big problem. Basically, if you've seen someone naked, you should be open about everything in your relationship!"
Another senior financial adviser – Matt Hale from Rising Tide Financial – suggests that: "Understanding each other's financial backgrounds and values is crucial."
Discussing what money meant in your household when you were growing up could be a good way to start the conversation. How you managed your finances when you first started earning is another point worth keeping in mind.
Here are a few other ways to manage money and have conversations about finances:
Open communication: discuss your values and expectations early on. Avoid judging another’s financial habits, but keep in mind this doesn’t mean having to agree with them.
Splitting income and expenses proportionately: it helps to consider your finances from an ‘all-household’ perspective first – more on this later.
Separate and joint accounts: maintain separate accounts for personal expenses and a joint account for shared expenses.
Superannuation splitting: consider super splitting.
Non-financial contributions: recognise and value non-financial contributions.
The impact of children: discuss the financial impact of having children early-on in the relationship.
Professional advice: professional financial advice is a good idea and can help you create a joint financial plan.
Keep communicating: scheduling regular discussions about your household finances can help keep both of you on the same page. When your kids are old enough, consider involving them in some conversations about money.
Now let’s take a closer look at these…
What does splitting income and expenses proportionally look like?
Splitting expenses 50/50 might be easier in the early stages of a relationship. As your relationship progresses there may be significant income disparities – especially if one partner takes time out from earning to take care of children or elderly relatives.
For example: if you earn $80,000 a year and your partner earns $150,000, splitting expenses evenly wouldn’t be fair. Proportional contributions ensure both of you have enough to live on.
How do you factor in non-financial contributions?
Financial contributions are just one aspect of a partnership. Balancing non-financial contributions is important to take into account too.
This includes:
housework
childcare
organising and transporting kids to and from extracurricular activities like swimming lessons, etc.
For example: if your partner works part-time and takes care of most weekday childcare and household responsibilities during the week, while you work in the office – their contribution is valuable, even if it’s not immediately financial.
Speaking of children…
If you don’t already have kids, but you’re (maybe) planning on it, it’s worth discussing how to adapt your current plan for this life-changing event... and it will be life-changing in every way.
If your heart is definitely set on having kids, mapping out the financial impact of children should be done as early on as possible.
Remember to factor in:
childcare costs
any loss of income (and super) during parental leave
varying parental leave benefits from different employers.
What about separate accounts?
Setting up a separate account for a non-working partner ensures their financial independence, maintains some equality between you both, and prevents resentment – which could build up over time.
Having separate accounts could also provide a safety net should the relationship breakdown in the future and the separation becomes messy.
What does ‘super splitting’ mean?
While retirement might seem a long way off, the decisions you make now can have a bigger impact on your future than you may expect.
Super splitting is where one partner transfers a portion of their superannuation to the other (usually the one earning less income). This helps balance your future financial security, especially if your partner takes time off work to have, and/or raise, your kids.
Bottom line
Being financially compatible is as important as any other kind of compatibility in your relationship – and this isn’t just about how much you both earn.
It’s also about how you manage your joint household finances, each person’s non-financial contributions, and how you divvy this up between you.
Understanding how to manage your money together can strengthen your relationship and improve financial stability for both of you.
Go deeper:
Why it’s important to teach kids about money – even in a cashless society
What are the tax implications of inheriting property after a death?
*https://www.lynnandbrown.com.au/cost-of-living-crisis-and-relationship-breakdown/
^https://www.moneymag.com.au/how-to-split-expenses-when-your-partner-earns-more
Financial Disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
