Taking the plunge and combining your finances with a partner can be an exciting stage in life. However, sharing finances can also create some challenges if you don’t do your homework first and put some sensible plans and structures in place.
That said there are times when combining finances can definitely be useful. For example, if your partner is operating a business with variable monthly returns, or is a freelancer or contractor, then combining finances can be a sensible strategy as it can help smooth out the household’s income peaks and troughs.
However before you decide to share your finances, have a frank discussion with your partner about financial goals and budgeting, as well as factors such as your salaries, assets, debts and credit ratings.
Michelle Hutchison, spokeswoman for RateCity, said it can be worthwhile taking a trial run with a smaller investment before you and your partner dive in deep and take out a mortgage together, invest in shares and so on.
“A good example of a tip-toe approach to shared finances might be to open a joint transaction account. Money from this account can be used to cover weekly expenses such as rent, food, taxes, utilities, childcare and insurance,” she said.
Nowadays, opening a cash account is incredibly easy, says Hutchison, thanks to the internet and a proliferation of comparison tools, such as RateCity, which allows you to compare and apply from hundreds of different accounts.
“Most cash accounts, such as online savings accounts and term deposits, are relatively flexible with their options and can offer great interest returns. The key is to shop around for the best cash account that suits you and your partner’s circumstances,” she said.
Furthermore, combining incomes can present potential tax benefits so ask a tax professional for further advice.
Of course, many couples do a brilliant job at managing their combined wealth and overall, combining finances doesn’t have to be a source for argument in a relationship, said Hutchison.
“Once you crunch the numbers with your partner, linking finances will seem less like a leap of faith and more a route to greater economic wealth.”