Managing your own personal finances can already be quite the challenge – much less when you’re in a relationship and both of you need to juggle your finances together. So whether you’re married, engaged or at the long-term relationship stage, the ‘money talk’ is always a tricky subject.
To help you deal with this dilemma, we’ve picked the brains of some of Malaysia’s most influential financial bloggers on how couples can best manage their finances together.
Should Malaysian couples manage their finances together?
Aaron Tang of Mr Stingy.com says that married couples should always have a shared pool of savings, but should also have their own funds allocated for their personal spending. He also advises for unmarried couples to stay financially independent and manage their finances on their own.
We agree with Aaron’s advice, because imagine this: Congratulations, you're now married. Both of you have a moral and legal commitment that you need to work together to fulfill both your dreams as a married couple. Now things like your mortgage, utility bills, cost of living and raising a child together are no joke. There will be many other financial decisions to be made in the future that you’ll need to compromise on. Together.
Whereas if you’re not legally married yet, it’s best to plan ahead for it now but don’t dive right in until the legal paperwork’s been signed. Yes, it’s very unromantic but if your partner doesn’t want to be practical about finances, who’s to say what tomorrow might bring?
What are the pros and cons of sharing your finances with your partner?
Vince Yee from financialindependent.blogspot.my, believes that couples should share their finances as it would make it easier for them to achieve common financial goals. On the other hand, Bones from bonescythe.blogspot.my explains how he prefers not to have shared finances with his partner as he wants to have full control over his income and investments – whilst extending the same freedom to his partner.
Bones also added that having shared finances depends on the earning power of both parties, but as countless of relationships tend to crack down due to financial issues, it’s better to be safe than sorry.
“Sharing finances with your partner needs a lot of discipline,” quotes Miichael Yeoh. As you share your finances, you’ll obviously be sharing both the good and bad of your partner’s financial situation. Miichael says that the best part about this is that you will able to share your financial burden with your partner – therefore it enables you to repay your debts much faster and consistently.
However, he also points outs that with both your incomes laid bare for the both of you to see, and the combined figure may end up encouraging either of you to spend more than what you could spend on a single person’s income.
Pauline Yong of paulineseconomicsforum.blogspot.my believes that the biggest advantage of sharing finances and pooling resources together is that couples get to work as a ‘team’, especially when there are children involved as it brings them together as a family. The bad side, as she puts it, “Sharing finances also means sharing each other’s debts. If one party has a bad credit record and spending habits, the other party’s credit rating will be affected as well.”
Will sharing your finances affect your financial freedom?
Many are worried about losing their ‘freedom’ when sharing their finances, but as Pauline points out, “Whether you feel you have lost your freedom in spending or not depends on the communication level with your partner. After all, there is no difference in ‘single life’ and ‘married life’ when it comes to setting boundaries in your spending.”
Aaron thinks that when it comes to shared finances, everything should always be decided via a joint decision. While Bones agrees to a certain extent, he also explains that unless one of the partners in the relationship is earning big bucks, there always be certain levels of restriction when it comes to spending and you have to work together to work out a balanced spending limit for the both of you.
Financial boundaries should be set and followed through whether you’re single or in a relationship. Through proper and upfront communication, you and your partner should be able to set realistic boundaries to manage both your personal and joint budgets.
If a partner is constantly overspending, how do you fix the situation?
So how do you address the issue if your partner is overspending? According to Bones, it’s important to address the issue of your partner overspending as soon as possible and not be afraid or feel uncomfortable about talking things out before it affects your relationship.
Pauline has an interesting idea on how to influence your partner to drop his/her overspending habit, by turning it into a ‘game’. Essentially, the rules are to set a spending limit for your partner and any failure is then punishable by a ‘penalty’. The main goal of this exercise of course, is to encourage your partner’s determination to NOT fail or face the ‘penalty’ (we’ll leave that part up to your imagination).
Bones suggests that couples should start tracking down all expenses to monitor what both of you are spending on, so you can weed out all the unnecessary spending. For example, the both of you can track your expenses via weekly bookkeeping sessions or by downloading budget apps like PocketGuard or Mint.
How do you manage debt with your joint finances?
Aaron suggests that couples should split their overall expenses in set ratios to make matters simpler and help settle their debts quickly. He recommends that you consider setting a ratio of <30% of your joint gross salary set aside for mortgage loan, and <50% of joint gross salary for all other debts. That way, both of you can settle your debts much faster and move on to better uses for your money.
But on the contrary to this, Bones prefers that couples settle their personal debts by themselves, and only pool their resources when it comes to the debts that they incur together in order to keep each other from suffering from too much financial stress.
What should you do if either partner’s friends or family asks for financial aid?
Getting requests for financial aid from your friends and family almost always makes you feel like you’re caught between a rock and a hard place, whether you’re single or married. So in the event that you’re married and this actually happens, what should you do?
“If it’s within your personal financial allocation, do as you please. However, if it’s large enough that it needs to come from your shared finances then it needs to be a joint decision between you and your partner,” says Aaron.
The best answer according to Pauline, is that you should say that you will need to consult your partner FIRST, as it will affect both your finances. This answer will not (and should not) offend anyone if delivered carefully and politely, as it shows the level of respect that you have towards your partner.
Ultimately, managing your finances together as a couple will not be hard if you are always honest and transparent with one another. “Managing money together is only one of the many things that you do with your partner, communication is always the key to having a successful relationship,” says Vince Yee.
We can’t help but agree with Vince, as that’s some pretty damn good advice.
Did you enjoy all of the great insights and tips shared by these amazing bloggers? Sound off in the comments and let us know your thoughts or you very own suggestions!
CompareHero.my strives to help Malaysians increase their literacy and make better financial decisions in life by offering all the insights and information via our blog and our free credit card, personal loan and broadband comparison tools.