Living Together and Joint Finances

In this blog FLiP Director James Pirrie discusses whether joint finances are a good idea for couples who are living together. James also discusses common trends including pre-nuptial agreements. 

Household finances are like plumbing

{With apologies to plumbers who actually know things about plumbing that I will NEVER understand},

• You can pull all your income into one tank, syphoning off from it resource to meet all the myriad spends that life throws at us, and, with the hope that there is a bit of money left at the end to put into some form of joint savings;
• Or you can each run your own ‘header tank’, receiving your respective incomes then either splitting each bill as it arrives or pumping a rough estimate of what will be needed into a new tank to cover off the joint household expenditure. Many then aim to have a bit of a surplus after your own spends to put into savings
• And yes there are even some of those old-style cast-iron plumbing systems which have one person doing all the earning and putting money into a household account for the stay at home partner.

These discussions tend to come most centrally into focus for me when I am working as a family mediator or as a family lawyer working with couples negotiating a prenup or a cohabitation agreement:

• I tend to find the clients newly together tend towards the separate header tank model, each funding each bill as it falls in.
• Those who have been at it a bit longer are exhausted by the admin that this generates and so usually adopt the 3-tank model, still keeping basic separation but with a joint account for joint spends.
• This then leaves the couples who run their finances in a more integrated way through one tank.

And now – in the latest edition of the wonderful UK Marriage News, we have reports of the research that backs all of this up.  [You can subscribe by contacting info@2-in-2-1.co.uk ].  The authors report on a study at the University of Georgia which sees the arrangements made around bank accounts as an indicator of:

• The quality of communications within the relationship;
• The levels of trust and cohesiveness;
• And the extent to which there has been good dialogue around common values and goals.

It is why I find it so frustrating that so often couples start talking about their pre-nuptial agreement with so little time to go. Really I want to give them the opportunity to sit down with a specialist and have some of those tough conversations about values and goals allowing plenty of time to then address the pre nuptial agreement.  Time and again, research shows (see earlier editions of UK Marriage News) it is the silent worry over different financial attitudes that operates like rust in an otherwise healthy relationship.

It is also why writing a whole of life pre-nup, which fixes for the whole of the marriage an approach to a couple’s finances but does so at a time when a couple may not be entirely on board with the practicalities of a long term commitment, can be difficult.

But it is exactly that trust that ensures that we have the plumbing that will get us through the good times and the bad. It is those conversations held early and in good time that generate the financial plan that ensures that we have the financial plumbing and the discipline to how we use it to ensure we get through the tough times as well as the good. They help us to manage the extraordinary changes ahead of us in family life, including support for any children and the happy retirement we plan years ahead.