Managing couple’s finances is just as crucial to a relationship as love. Moreover, talking about money is taboo and often a bone of contention. However, communication on finances and the resulting decisions have an impact on the stability of each partner. This article explains how open financial communication can strengthen a couple’s bond and help you achieve your financial goals. We also provide practical tips and tricks for managing your finances as a couple.
You may sometimes encounter difficulties in managing your finances as a couple. Identifying and avoiding these pitfalls can help maintain a healthy, harmonious financial relationship. Here are some of the most common pitfalls to avoid:
Here are some practical ideas and tips for managing your finances as a couple.
Open and honest communication between partners encourages the sharing of values and financial goals. What’s more, it allows us to quickly identify and resolve your financial problems.
Here are a few tips for good communication:
By creating a joint budget, you’ll have an overview of your finances and be able to avoid unpleasant surprises. But, also, to have a better chance of achieving your financial goals.
There are 3 main ways of managing a couple’s finances: sharing equally (50-50), pooling (income and expenses) and pro-rata sharing of income (gross or net).
Here’s more information on each of these approaches, along with the main advantages and disadvantages.
Here are the main elements of the 50-50 approach:
Here are the main elements of the pooling strategy:
Here are the main elements of the pro-rata income sharing strategy:
The financial management method you choose may also vary according to your ability to save or your personal situation (e.g. parental leave after the arrival of a child). It also depends on your marital status (common-law vs. married).
The choice between separate bank accounts, joint accounts or both depends on your preferences and your financial situation as a couple. Dividing up financial responsibilities, such as paying bills or saving, can help balance your respective contributions.
By making decisions together about major expenses, such as vacations or buying a car, you build trust and cooperation in your relationship as a couple. Saving regularly for short-, medium- and long-term goals enables you to make your shared dreams come true.
Building up an emergency fund (in a high-interest savings account or TFSA) is essential to help you deal with unexpected expenses and avoid stressful financial situations. Once this is in place, you can start investing together to help you achieve your long-term financial goals. For example, financial planning for your retirement or your children’s education (through an RESP).
As a couple, you need to manage your debts together and prioritize debt repayment as quickly as possible. To do this, you can use strategies to pay off your debts, such as the avalanche method or the snowball method. To avoid financial tensions, you need to communicate openly about your individual and joint debts.
By planning your taxes properly as a couple, you can benefit from attractive tax advantages. You can read more about this in the “Taxes” section of our personal finance guide, or consult a financial professional. In this way, you can optimize your tax situation according to your status as a couple, and save money in the long term.
By dividing up your financial responsibilities fairly within your couple, you’ll strengthen the feeling of partnership and participation. This will ultimately lead to a better understanding of financial responsibilities and better financial management in your relationship.
Acknowledging and respecting your different values and points of view regarding money enables you to find compromises and solutions that suit each of you. When you work together, you strengthen communication and trust in your relationship as a couple.
Although covered in a previous section, the way you choose to manage your finances is essential to the effective management of your couple’s finances. Often, a combination of personal accounts for each partner and a joint account is required.
Don’t limit yourself to traditional bank accounts. Indeed, virtual banks such as EQ Bank and Wealthsimple also offer joint accounts.
For example, EQ Bank offers a joint account that combines a chequing account with a high-interest savings account. The interest rate on the Joint Account can be as high as 4% per annum.
Whether you have children or not, ensuring your financial security as a couple is important. Several types of insurance exist.
For example, disability insurance protects your income in the event of inability to work due to illness or injury. It guarantees that you can maintain your standard of living in spite of everything.
Life insurance provides financial protection for your family in the event of premature death. It can help you cover expenses, repay debts and maintain financial stability.
Discussing these elements together helps you understand your needs and insure accordingly. So you have the right coverage to protect your financial future. Don’t hesitate to consult a financial advisor or insurance broker.
In short, money is often more taboo than sex. Yet managing finances as a couple is essential to avoid pitfalls. Open and honest financial communication strengthens a couple’s bond and helps you achieve your financial goals. This article has explored a wide variety of tips and tricks for managing your finances as a couple.
The 3 main methods for dividing expenses in a couple are equal sharing (50-50), pooling (income and expenses) and sharing in proportion to income. Each has its advantages and disadvantages, but it’s up to you to find the one that best suits your relationship.
There are many ways to manage your finances as a couple, both for your budget and for your savings. Above all, open and honest communication helps you share your values, concerns and financial goals as a couple. Then you can create a joint budget, plan important expenses together and finally save and invest with a common strategy.
It’s up to you, as a couple, to decide on financial responsibilities and the sharing of expenses. Choose the expense allocation method that best suits your values and your couple’s financial goals.
There are many reasons why a couple might want to share common expenses equally (50-50). This approach is often used by young couples, childless couples or couples without significant joint expenses. Although this is a well-known strategy, it does present a few challenges. For example, the couple must agree on what constitutes a joint expense. What’s more, the 50-50 split is not always equitable, as in the case of a couple with a significant income disparity.
Savings are here:
