Financial Harmony for Couples

How New Partners can Plan and Manage Family Finances

Aug 17, 2009 Wei Yin Wong

Newly married couples should communicate clearly about money, plan a household budget together, use income splitting and avoid having too many bank accounts.

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.

Found this article useful? Read also Money Management for Young Couples, Saving and Investing for Children in Australia and Smart Household Money Management.

References:

Davies, Justine. How to Afford a Husband. Sydney: ABC Books, 2009.

Blue, Tim. The Seven Ages of Money. Australia: Choice Books, 2003.

The copyright of the article Financial Harmony for Couples in Family Finances is owned by Wei Yin Wong. Permission to republish Financial Harmony for Couples in print or online must be granted by the author in writing.

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