One of the most difficult aspects of personal finance is managing finances with a life partner (and then again once you have kids).

Why is this important?

• One of the biggest contributing factor to failed marriages and divorce are financial disagreements or issues. No other aspect of life determines so much of how we think, act, make decisions and live our lives
• Talk to most wealthy people, they’ll agree the most important factor to financial success and wealth is having a financially literate (and prudent) partner, who is aligned to shared financial principles and goals

This post is intended to be a summarised guide on how to approach managing finances with a partner for long-term success and a happy partnership.

Approach

Pre-marriage

• Look for financial compatibility
  • Observe your partner’s financial habits, and how they are different to yours
  • Start talking about finances lightly, e.g. how they view money, do they have retirement goals, etc.
  • Look out for red flags, areas which are incompatible with you (e.g. overspending, too much debt, or any other areas you might have an issue with)
  • Understand their level of financial literacy and if it meets your expectations
  • If you are not able to resolve the major red flags or differences in financial values, you should highly reconsider marriage to this person. Your partner may be super good looking, great personality, funny, charming, etc., but it will all come down crashing in the future if you’re not aligned
• Save up for wedding costs
  • Highly underrated and underestimated. Weddings range from 5 to 6 figures.
  • If you think you might get married in 5 years, and you’re going to spend $100k on the wedding, that means you need to start saving $20k a year NOW
  • Even if your parents end up offering to pay and you graciously accept, you develop the savings habit and have accumulated a nice stash
• Build alignment and confidence in preparation to commit legally
  • Consider going for “financial counselling” prior to marriage, meaning, visiting an independant financial advisor to develop a financial plan together. Part of planning involves creating goals together, understanding each others attitude towards money, risk tolerance, etc.
  • Consider moving in together prior to marriage. This is heavily underrated, especially in asian cultures which many people only move out of their parents home when they get married (some people still don’t even move out after marriage). How do you know both of you can manage “adulting” together? Budgeting, paying bills, cooking, shopping, managing a household and it’s finances, shouldn’t you “test” this out first?
  • Consider a pre-nup (whilst not mandatorily enforceable, it can still be taken into consideration in the court of law by a judge). This is important if you have assets prior to marriage that you need to protect. It’s not to say you keep 100% of everything and leave your partner high and dry (the courts will rule against an unfair pre-nup). But say you have a business you run, you don’t want your partner to have half an ownership and bring it to ruin if you divorce

Post marriage

• Develop your combined financial plan – I’ll have a separate post on how to and what should be in a financial plan
• Consolidate budgeting, tracking, net worth reporting, etc. You’re a team / partnership now. Why shouldn’t you combine finances?
• Managing day-to-day finances / logistics. Once you’ve combined finances, you’ll need to figure out how to manage it on an ongoing basis. No perfect solution way to do it, but here is how my partner and I manage it:
  • Our budgeting / income / plans are all combined under an agreed vision and goals
  • We have multiple accounts to manage our finances. I feel the approach below give a sense of togetherness and joint ownership, but allows each person to have their own personal spending money
    • Joint cash account: A portion of our pay goes into a joint account. This is used for all our joint expenses, e.g. rent, bills, groceries, eating out together, etc.
    • Individual accounts: For our own personal “guilt-free” spending. We have an agreed amount that each of us gets in our own individual account, that we can do for anything we want, no judgments. Coffees, massages, gym, games, makeup, dresses…. whatever.
    • Joint savings account: This is where we put our pooled savings, which may then be channeled appropriately to investments, or paying for school fees, or any large purchases
    • Credit card with supplementary card: All our joint expenses are done here, and paid out of our joint cash account
• Ensure partners are financially empowered to be involved in decisions and execution
  • This is critical to ensure that you have confidence your partner can handle matters if you are not able to (death, TPD, coma, etc.)
  • You need to make sure both individuals are financially literate and has a handle on all financial matters. Having a will is not enough. Make sure your partner knows how to invest, manage daily finances, etc if anything should happen to you
  • I share ALL my passwords with my partner. We use bitwarden to have a shared password vault. That way, anything happens, it can be easy to access each others’ accounts
  • Your partner should have a vested interest and ownership in financials. Start small, like asking your partner to manage the bill payments from the joint account. Then, upgrade your partner’s tasks to perhaps moving money into FD, or buying ETFs, etc.
• Regular financial meetings / discussions with partner
  • This is also really key. Having meaningful discussions, planning your future together, building the vision, is key to your financial success and makes you stronger together. It also ensures you’re both on the same page, so please ensure it is a safe space for your partner to ask questions, learn and be engaged / involved
  • Like any company, you need ongoing management meetings to discuss performance, progress, decisions and actions
  • My partner and I have a meeting at the beginning of every month, to discuss the previous month once I have published the “Report”
  • Our “Report” is a powerpoint / pdf file that I send for pre-read, then we go through it together during our meeting, discuss key topics and close off with decisions / next steps if any
  • Typical content of our monthly “Report”
    • Net worth update
    • Previous month expense breakdown
    • Investment performance
    • Future planning / large expenses
    • Dreams / goals
    • What is working / not working
    • Updates to the plan
    • Outstanding actions / next steps

Challenges

Two challenges that typically arise in managing finances with a partner:

• Your partner’s financial values, habits and perspectives does not align – As I’ve mentioned above, you need to seriously resolve this or reconsider commitment, no matter how romantic and “in love” your are with this person. That spark can die off so easily when financial troubles come in the picture
• Your partner is not interested / engaged, or financially literate – This is because you have been babying your partner, and enabling this behaviour. You are a partnership, and they need to be empowered and have responsibilities. If you are doing all the spreadsheets, paying the bills, buying the ETFs, etc., how is your partner going to learn? Your partner needs to learn by doing:
  • You need to get her more involved and engaged to contribute. He/she needs to have a vested interest in the finances. Part of it is I bet you are in the driver’s seat and he/she is not “an equal partner” in your “fire plan”.
  • Tactical tips:
    • get him/her involved in finances, e.g. Have a joint account, get him/her to start paying bills, rent/mortgage, etc from the joint account
    • get him/her involved in investing/tax time, give an assignment to complete it, so he/she understands basic logistics on how to execute. This becomes important for him/her to independently do tasks
    • get your risk management in order. Get him/her to get a will done, so he/she starts thinking about money and assets
  • When talking about finances and planning, ask him/her some probing questions:
    • what is your vision for a perfect life? What would you do if we had unlimited money?
    • when do you want to retire?
    • what kind of lifestyle is ideal for you to have in retirement?
    • what kind of life do you want to have now, and in 5 years time?
    • how do you envision major purchases (house, children’s education, etc?)
    • how do you perceive money, and what does it mean to you?
    • what kind of trade-offs are you willing to make, if we had to prioritise where we focus our spending?
    • what do you love spending money on? What would you do if you had money money to spend in this area?
• If you love this approach, listen to Ramit Sethi’s podcasts, in which he talks to real couples. He pretty much has almost every couples’ finance circumstances and challenges covered.

Do not underestimate how important it is to work on improving the skill of managing finances with a partner, on top of also working on realising your financial dreams with your partner. It is something that takes constant effort, and like long term index investing, it can at times be “boring and monotonous” and “un-sexy”. But discipline equals freedom, and it will grant you newfound freedom in your partnership and greater financial success.