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Couples – Talk to your partner about money management

We should all know that communication is one of the keys to maintaining a relationship with your partner. Often one of the difficult areas to communicate effectively is about money. It is not difficult to understand why this is the case. Everyone’s perspectives and priorities are different.

When you are in a long-term relationship, compromises are often needed. None more so than about money. What you spend will most likely impact on your partner, either directly or indirectly. Fundamental differences are often a significant cause of friction.

To avoid or reduce the potential conflict you need to talk to your partner. Before you do so, have a clear understanding of what money means to you and the purposes of money in your life. You can then share your thoughts with each other.

Work together to set joint financial goals. Remember that these goals will ultimately impact on your lifestyle. If you want to spend all your money now, remember this may mean living your retirement as paupers, with no one to blame for your predicament except yourselves.

Couples often look with envy as to how well off their siblings are. The sibling who makes the most money, is only occasionally the best off financially. The difference invariably is in their money management skills.

To get ahead, formal or informal budgets should be set. Attention needs to be paid to clearing debt, and saving for retirement. Adjust living expenses so as not to accumulate hard core debt, that can so easily get out of hand with expensive holidays, vehicles, boats etc.

Surveys carried out on New Zealanders by the Commission for Financial Literacy and Retirement Income show that just over half of people spend less than what they earn. Less than sixty percent of those with credit cards pay them off each month. This must please the banks as it provides them with a great source of high income interest.

Around two thirds of people say that they have access to the equivalent of three months’ income as an emergency fund. This figure does not feel right, given the historically very high levels of mortgages that a lot of household must regularly service. However, it is surprising the number of people who contact us wanting to invest, even though they have mortgages that could be so easily lump sum reduced.

We find it unfortunate when we see someone who has lost a partner, and they claim they had no idea of the financial situation before the partner either died, or simply left the relationship. There is little that can be done when there is only debt and a family to raise.

Fortunately, there is plenty that can be done early, simply by taking advice over savings, debt reduction, and insurances. The Boy Scouts have a great motto: Be prepared. We would go further and say communicate with your partner and be prepared as a team.

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.