WE NEED TO TALK ABOUT MONEY
ROSIE MURRAY-WEST ASKS THE EXPERTS FOR THEIR TIPS ON HOW TO ACHIEVE FINANCIAL HARMONY
ARGUMENTS about money are a fact of life in many homes. Financial disagreements are regularly cited as the number one cause of marital rows and are second only to infidelity as the most common cause of divorce.
In less permanent relationships, too, money is a stressor. More than a third of professionals who share flats state that arguments over finances are the biggest cause of conflict, with 13 per cent of flatshares breaking up thanks to bickering over bills, according to a survey by payments group Paym.
Whoever you are sharing your finances with, it’s best to set some ground rules to prevent disagreements spiralling out of control. The problem is, many of us find it difficult to talk about money, and we all carry psychological baggage from our own childhoods that mean our financial comfort zones are very different from our partner’s or housemate’s.
‘Money isn’t the easiest topic when in a relationship, but it’s essential to get a clear understanding and picture of one another’s financial needs and money management style,’ says Hayley Millhouse, managing director of low-cost financial advice platform, OpenMoney. She says that it is important to be open and honest with those you share your money with, whatever stage of life you are at. ‘It’s important to make sure you are on the same wavelength.’
SETTING UP HOUSE
Your discussions about money within your household will depend on the nature of the relationships within it. If it is simply a flatshare, you are unlikely to be shackled to your housemate for more than a few years, but if you’re getting married, having children or taking on a longterm commitment such as a house purchase, the discussions are all the more important.
But whether it is a long-term partner or just someone with whom you share a kitchen and a bathroom, their attitude towards money could end up costing you dear.
For example, your credit rating will be affected if you take on household bills and then can’t pay them because your flatmates can’t reimburse you, which in turn could hinder you from getting a mortgage, a loan or even a mobile phone contract.
However, if your flatmate has a poor credit rating of their own, this should not affect your own credit rating. If you are concerned, you can check your own rating for free at creditkarma.co.uk, experian.co.uk or equifax.co.uk. If there is an error linking you to a flatmate with a poor credit score you can write and ask for your accounts to be ‘unlinked’, even while you are living at the same address.
It is worth remembering that, for household bills, any person named on the account is liable for paying them. So before you put your name to any joint bill, make sure you talk about how your housemates will pay you back, whether it is by transferring a regular amount by standing order every month or using a service such as splitthebills.co.uk, which means the company will chase your flatmates if they don’t pay their share.
NEW RELATIONSHIPS
Although your respective attitudes to money are unlikely to broached on a first date, financial compatibility is an important predictor of relationship success. ‘Communication is key, especially at
the start of a relationship,’ says Scott Gallacher, financial adviser at Rowley Turton in Leicester.
Emma-Lou Montgomery, associate director at investment group Fidelity, agrees, saying that starting small will pay dividends in the long run. ‘Getting into the habit of speaking about money early on in a relationship, even if it’s just about day-to-day money management, will help prepare you for having more serious conversations about your longer-term finances later on in your relationship,’ she says.
Understanding your partner’s upbringing can help you to understand their ‘money story’, with those who have grown up with a lack of money likely to have a very different attitude than those who did not. Existing jobs can create money differences, too, with the selfemployed having different spending patterns to the salaried.
Ellie Kime, 26, from London, is a self-employed copywriter and ‘enthusiasm expert’ who runs The Enthusiast. She met her boyfriend Rich while still at school, but they have very different money personalities. ‘Ostensibly, we should have very similar views on money, but we don’t,’ she says.
While the couple initially had disagreements about what to spend and what to save, Ellie says she’s learned to be more ‘intentional’ about her own spending, and their attitudes to finances are becoming more aligned. ‘I wish I’d thought about my own money experiences sooner and talked about it more. It would have helped us get to this point quicker,’ she says.
Finding out your prospective partner has debts can be offputting, but by putting your cards on the table early on, plans can be put in place to pay the money back.
Emma-Lou at Fidelity says that differing attitudes towards money need not be a dealbreaker in a relationship. ‘Don’t worry if you seem wildly at odds when it comes to your take on all things financial. Having different approaches can be a really good thing, just as long as you reach some common ground. Combining each other’s habits and attitudes to financial issues can lead to healthier spending and saving routines,’ she says.
WHEN YOU MAKE A COMMITMENT
The way you both handle money becomes especially important when you make a greater commitment to each other, such as moving in together, buying a house or having children. Emma-Lou says that a conversation about your future financial goals is vital, so you can ensure you are ‘on the same page’.
It is at this point that you should also consider whether to have a single or a joint account – or both.
Adam Rutter, financial adviser at Wesleyan, suggests that one way of making this work is to ‘have a joint account and both pay in a set amount for all essential spending, making sure there is a surplus for unplanned bills. This cuts down on any pressure for paying bills and also on the relationship.’
Mary Macrory, a life coach for working women, suggests treating your relationship like a business when it comes to finances. ‘Sort out responsibilities at the outset so that lines are not blurred. This also avoids conflict. Work as a team,’ she says.
AS TIME GOES BY
Even if your money styles mesh together, Scott from Rowley Turton warns that he’s seen many cases where salaries and responsibilities have moved on in a relationship, but resentment has been caused by financial liabilities from each party remaining the same. ‘I’ve seen cases where the dad’s income has started to decline while the mum’s has continued to rise but there’s been no readjustment in the roles and responsibilities, so the father is still paying for everything without being able to afford it, which can cause resentment.’
Ricky Chan, a financial adviser at IFS in London, says that it is important to remember that the financial balance in a family changes over time. ‘Clear communication, and being able to make sacrifices for the good of the family, as well as helping each other to progress towards your individual and joint objectives are incredibly important.
‘The most successful relationships are those who treat all money earned as joint and set their own egos aside. They simply ‘pay’ each other the same discretionary income from their joint household income, for personal use. The joint money is used to help them pursue their joint goals,’ he adds.
Marcus Paine, financial adviser and managing director of Modern Money, says that many of the couples he sees have differing ideas about risk, which can cause conflict, particularly when it comes to savings and investment.
‘These are quite philosophical questions about who you are and what you believe,’ he says. ‘Ask yourselves, would you rather have £100,000 now or £40,000 a year for ten years and why,’ he says. ‘These questions will help you understand each other’s money stories.’
KEEPING COMMUNICATING
Whether it is with a flatmate, a new partner or a spouse, experts are united when it comes to the most important way to ensure financial harmony: communication.
Whether it’s a ‘money date night’, or an evening a month with your flatmates, a spreadsheet and a pizza, keeping the channels of communication open might just help you move towards financial harmony without friction...