How do young adults manage money?
How do you handle finances in a relationship?
Every new relationship is full of hope and love. Unfortunately, these two are not enough to sustain a relationship. True, talking about money can be uncomfortable, especially for partners in a new relationship. But if both partners are in for the long haul, they do need to communicate clearly with each other about money management.
The following suggestions may be useful for new, young couples to manage financial problems.
Financial planning for newly married couples
Very often, partners in a relationship do not share the same attitude towards spending, saving, budgeting and investing. And arguments revolving around financial issues can break a relationship quite easily. That’s why it’s important for a couple to discuss attitudes towards money early in the relationship than later.
Make the effort to know each other’s spending habits and financial goals before moving in together. Plan a budget and review it together regularly. Learn about each other’s salary package, job benefits, assets and insurance. Then try to compromise and agree on major financial issues.
Truly Know Each Other’s Financial Situation
Money management for couples also involves a clear understanding of each other’s financial situation. List out what each partner owns (assets) and owes (liabilities). Assets include properties, boats, savings, term deposits, shares and stocks. Liabilities include credit card bills, personal loans, car loans and investment loans. Knowing a couple’s financial situation is a good start to help them plan their future financially.
Avoid Sharing Finances too Soon
If the relationship is relatively new, it’s better to get to know each other better first before sharing joint accounts or buying properties together. Even when a couple has chosen to live together, they should buy assets separately until the relationship becomes more established. Rushing into sharing finances can cause a lot of heartache and financial trouble if the couple splits up eventually.
Manage Financial Problems by Talking About it Early
In a committed relationship, if there is a potential money disaster taking place, talking about it as soon as possible is a wise move. Don’t keep financial burdens a secret. Talk to the other half of the relationship and try to work out a realistic and achievable financial solution together.
The couple can also seek help and advice from their parents, grandparents and trusted friends. Don’t let pride stand in the way. If need be, they can also get free financial counseling services to help them. In Australia, these are available in every state. Visit the Australian Financial Counseling and Credit Reform Association (AFCCRA) website for more information.
Having good money management skills is essential to keep a relationship going. A new or young couple can deal with financial difficulties and issues by having open discussions about their attitudes towards money, really know each other’s financial situations, avoid sharing finances too soon and talk about any money problems early.
Found this article useful? Read also Financial Harmony for Couples, Money Management for Parents and Money-saving Strategies for Families.
Financial Harmony for Couples
Should couples have joint bank accounts?
How couples manages their finances?
Marital bliss should include financial harmony. After all, if nothing is clearly spelt out with regards to family finances, there are bound to be misunderstandings and conflicts about how money should be spent, resulting in financial stress that has been known to end relationships. Here are some suggestions for new couples to plan and manage money.
Partners Communicate Clearly About Money Matters
There are two individuals in a relationship and both are brought up in different ways and have different groups of friends before they meet. Their respective families and friends have a profound impact on their attitude towards money and how to manage it.
That’s why for couples to achieve financial harmony, they need to communicate clearly about money matters. A person can’t expect his or her partner to share the same views about savings, investments and getting loans for various purposes. All these need to be discussed thoroughly and both partners must be happy with whatever decision made eventually.
Plan a Household Budget together
A household budget should involve everyone in the family. In the case of a young family, this will involve only mum and dad. Both partners should work out what the monthly expenses are. Decide what should be essential expenses and what should be optional spending. Agree on how much should be spent on what. There is very little point in having a household budget if the couple cannot agree on what should be on it.
Use Income Splitting to Minimize Tax
One of the advantages of marriage or partnership is that it can allow income splitting, a practice in which savings and investments are made in the name of the partner in the lowest income tax bracket. By doing so, income and earnings from investments will be taxed at the lowest possible tax rate. This is especially useful in a relationship where one partner is earning significantly less than the other or not working at all.
Avoid Having too Many Bank Accounts
Two people may have brought all their separate bank accounts into a marriage. While there is nothing wrong with each partner having his or her own bank accounts, too many accounts can attract unnecessary fees and make it hard for the couple to keep track of their money.
That’s why it may be a good idea to close some of those private accounts and have a joint account for household expenses. Agree on what the money is for – rent or mortgage, utility bills, school fees, car loans, insurance, etc – and stick to that. Also, set a limit on how much can be withdrawn from the joint account without the other person knowing. Again, clear communication and compromise are important to achieve financial harmony.
Just as two different people are expected to have different tastes in food, clothes and music, two people in a marriage should be expected to have different views on money matters. That’s why clear communication and compromise are essential when it comes to ensuring financial harmony for newly married couples. They should also plan a family budget together, use income splitting to reduce income tax and avoid having too many bank accounts.
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