Have you bought a new winter jacket again this year? Should we really have three different streaming services? And who really pays the most for the food?
For married couples or cohabitants, different financial conditions or widely differing perceptions of what one should spend their money on can create fertile ground for stress, frustration and conflict. In tough times with interest rate increases and high food prices that put pressure on households, it may also be time to look at which expenses can be reduced and whether the costs are fairly distributed.
SEB’s private economist Américo Fernández gives here his best advice on how to jointly review the finances of the couple.
How do you raise the issue of finances with your partner?
– The most important thing is not to stick your head in the sand. Many times it is enough to have a dialogue like this once.
– You have to start by being transparent and showing what financial conditions you have. I have this income, you have another income, what are our fixed and variable expenses that belong to the household. The first thing you have to agree on is how that money is to be distributed.
“Important that both parties have financial freedom”
While some couples split all expenses in half regardless of whether one has a higher income, others pay a percentage based on what the parties earn. Which way is the most fair?
– You have to agree on that. There is no right or wrong, but regardless of how you choose to do it, it is important that both parties have financial freedom alongside the joint economy.
– If a 50-50 distribution means that one party has 20,000 left in the wallet while the other barely has a couple of thousand, then I don’t think it’s a way forward. Then there is a risk that big differences will be created if you were to separate or that you choose to stay in a relationship because you cannot build up your own freedom.
How do you agree on what to spend money on?
– It’s about having joint spending targets, in addition to the fixed and variable expenses that you can’t really change. It makes it easier if you agree on the expenses when you have to talk saving. How much should we save and how much buffer do we need? Such things are very important to get down on paper.
What do you do if you feel that you are paying more than your partner?
– You usually need to discuss this as early as possible in a relationship. You can simply explain to your partner, “I will feel less stress and will be able to save for these things if we distribute it this way”. Agreeing to test for six months may meet with a little more willingness to actually change something than if you say it has to be this way forever.
“It can pay to compromise”
How do you deal with different views on small purchases and what you treat yourself to in tough times?
– You need to be aware of that, but not limit each other, but rather say that we have slightly different spending behaviors – having respect for that is important.
At the same time, it can pay to compromise, according to Américo Fernández. Of three things that you consume too much of each month, you can, for example, agree to opt out of one or two of them for a period.
– As a couple, with clear goals, you can make it a little easier to make these sacrifices. Now for six months we will both draw on personal financial unnecessaryness and we will deposit that money into a savings account.
Financial traps
What financial traps can exist in a couple relationship?
– In relationships where there are children, we know that it is significantly more common for women to take
greater family responsibility for parental leave, part-time work, nursing and also unpaid work. This not only has short-term, but very long-term financial effects, including for the pension.
If one party takes on a greater share of family responsibility, it is therefore important to set aside savings as compensation, according to Américo Fernández.
– Here there is a big difference if you are married or if you are cohabiting. If the woman in a cohabiting couple takes the greater responsibility for the family, the compensation savings must be made in her name, because if you separate, you only share the joint property. If you are married, it is important to make it separate property.
Facts: Five quick financial tips for couples
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– Don’t avoid the money talk. Pull off the band-aid and talk finances as early as possible in a relationship – before problems have arisen.
– Agree on a financial distribution – not necessarily a 50-50 distribution – that gives personal financial freedom to each person.
– Set joint spending targets – this facilitates the dialogue about the joint savings targets.
– Make a joint effort to find the extra space in tough times. Select one or a couple of personal financial unnecessary things and skip these buying habits for six months to build up extra savings.
– Let “many streams small” be the guiding light. “I don’t think you should expect to find the magic solution that frees up several thousand a month, but it’s about doing many small things that add up to that thousand,” says Américo Fernández.
Source: Américo Fernández, private economist SEB