Couples right around the UK are under enormous financial stress that is putting a huge strain on relationships. Regularly checking in on financial arrangements is important, but particularly if something changes in the lives of the partners involved. When it comes to managing finances between couples, there’s no universal answer that fits all. Perhaps not surprisingly, financial stress is a significant burden on most couples. By learning to address these challenges, partners can develop more effective partnerships.
Couples will discover effective strategies for managing finances together, highlighting potential savings and emphasizing the importance of communication about money matters.
Regular Financial Reviews
Financial circumstances are not static and can change for a number of reasons, such as a loss of employment, an emergency expense, or more. If you want to keep both partners aligned and motivated, regular financial reviews are key. These reviews need to go beyond the fixed books to include wages and costs of living and changes that will affect long-term financial health.
There’s one little known financial tactic that can pay huge dividends to married couples. In the context of a couple, currently, the lower earner can pass on up to £1,260 of their personal allowance. While married, they can transfer this benefit to their higher-earning spouse. This transfer is worth up to £252 a year, potentially reducing the recipient’s income tax bill to zero. Hence, it provides a long overdue economic stimulus directly into the home.
“A large proportion of us feel unable to actually talk about money with our partners.” – Relate
Cost-Saving Strategies
In addition to making routine budget reviews, there are plenty of other ways couples can save money. Just like the insurance prices on personal cars vary widely depending on the driver, there’s no one-size-fits-all example. For a 35 year old woman named as the main driver on a policy, that means an average of around £809 a year. By including spouses on the policy, that average expense drops to about £544 annually.
The potential for savings extends beyond insurance. Individual couples who decide to consolidate their assets into a single joint account can suffer improved financial outcomes. In doing so, they receive the protection of a much higher limit of £85,000 under the Financial Services Compensation Scheme (FSCS). At the moment, a joint account is covered only up to £170,000, which is the double of the normal coverage of £85,000-a-person.
Determining when to pool resources together or keep them separate is a delicate balancing act. For some couples, the idea of a joint account for everything will be more comforting, while for others, independent accounts are safer.
“You might not feel the need to have separate funds – but relationships can go wrong, from breakups to financial abuse, so it makes sense to have access to your own money should you need it.” – Andy Webb
This lens further underscores the need for people to have their own financial hand in reserve when life unexpected happens.
Benefits of Joint Financial Management
Managing money together can offer a wealth of benefits to partners. One of the biggest advantages though, is the possibility for more control over collective costs. By depositing all money into a shared account, both members are forced to be more aware of where money is allocated.
“You’ll both have control over the money, and you’ll both be able to see what the other person is spending.” – MoneyHelper
Plus, married or unmarried couples can increase their borrowing power when applying for a mortgage jointly. This joint project results in more favorable loan terms and a greater likelihood of achieving homeownership.
One more benefit of joint financial management has to do with insurance policies. Joint life insurance is typically more cost-effective than buying two separate individual policies. This collaborative approach is much fiscally responsible and financially protects both partners. It protects them in the event of a worst-case scenario.
There are significant tax breaks for couples with respect to inheritance. When someone is married or in a civil partnership, their surviving partner can inherit their estate free from inheritance tax. Such benefits only further highlight the need to prioritize long-term financial consideration, even in a short-term relationship.