This is the second of two related articles about financial planning as a couple.
In the first piece, you read about the problems you and your partner could face if you aren’t prepared to plan your financial future and manage your finances together. These ranged from how a lack of joint planning could result in small financial issues becoming major ones, to the problem of financial infidelity.
Now read about the other side of the coin – how joint financial planning can make your relationship stronger, and why there are tangible monetary advantages to planning as a couple.
1. The planning process will create a solid foundation for your financial future
It’s likely one of you will take the lead when it comes to the ongoing maintenance of your household finances – including issues such as banking and investments.
For example, you may have a financial background, or be far more methodical than your partner – both of which are good criteria when it comes to the occasionally complex nature of managing your money.
But the key point is that when you put your financial plans together, and subsequently reviewing them, it’s imperative that you do it together.
Just going through the process of planning a couple can be a big step forward in securing your financial future.
It takes teamwork to make the right decisions around money, and a joint plan instils trust and shared endeavour.
2. Planning together will mean you’ll both understand your respective roles
Different people have different expectations when it comes to allocating the financial responsibilities in a relationship.
You may want to split the bills in half regardless of income, while your partner may think it’s fair for the higher earner to cover a larger proportion of your financial commitments. This type of decision can lead to tension that you should address.
You can only establish an equitable and agreed approach once you have discussed it with your partner.
Each of you should feel equally valued and invested in whatever arrangement the two of you feel is most appropriate for your circumstances.
3. You’ll have shared goals and responsibilities
The sooner you can start planning jointly, the better.
As well as agreeing your long-term plans and aspirations, it can also help with the more granular detail of your financial arrangements, such as budgeting, managing your income and expenditure, and how much you want to save each month.
Talking through these arrangements means that all your objectives will be shared – so you’ll be working towards them as a couple rather than potentially pulling in different directions.
4. Talking through financial issues can lead to a stronger relationship
A study by Royal London found that money is the leading cause of arguments between partners in the UK, with 62% of couples admitting that they have had a big disagreement about their financial arrangements.
Furthermore, Divorce-online confirmed that the second-most common reason for divorce is one or other of a couple concluding that the other was “rubbish with money.”
With plans in place and your responsibilities understood, you can help avoid those outcomes.
You can also put a structure in place so that, if you do disagree on a financial issue, you can talk it through and come to an agreed solution rather than letting in fester.
All relationships are different so it’s up to you to decide between you whether you want regular meetings to discuss your financial position or simply leave it until someone has an issue that you need to discuss.
Money is so integral to our lives that it can only strengthen your relationship if you take care and control the financial side.
5. You’ll have a vested interest in a shared future
Discussions about finance will also prompt conversations about your future together.
Understanding what each of you aim to achieve in your working life, and then what you hope to do once you retire, can help you work together to achieve those goals.
It can also help to reveal any differences of opinion. You may want to enjoy extensive overseas travel when you finish working, whereas your partner may be thinking about a quieter time closer to home.
There’s nothing wrong with wanting different things. Having conversations about them can help you to make compromises and agree on a plan you’re both happy with.
6. There are big tax incentives to help you build your wealth as a couple
Most of the rules and regulations around financial planning – such as maximum allowances, contribution limits, and tax relief – are based around individuals.
So, as a couple you can effectively double your access to these beneficial features.
For example, both of you can contribute £20,000 to a tax-efficient ISA in the 2022/23 tax year.
Likewise you both have a Capital Gains Tax (CGT) annual exempt amount in the 2022/23 tax year of £12,300, which means that – with some careful allocation of your investment assets – you can take profits of £24,600 as a couple, free from CGT.
Likewise, there are tax advantages you can utilise around both building your pension fund, and then using it to provide you with an income in retirement.
Pension tax relief on pension contributions is paid at your marginal rate, so if one of you is a higher- or additional-rate taxpayer, it can be advantageous to maximise their pension contributions.
It all comes down to an awareness of your situation and having a robust plan in place to help you meet your goals.
I would strongly advise that you seek expert financial advice when you’re making your financial plans, to ensure that you get the most out of your money in the most tax-efficient way possible.
Get in touch
If you’d like to talk about how to build a financial plan as a couple, or any other financial issues, then please get in touch.
You can call me on 07769 156 250.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Foster Denovo Limited is authorised and regulated by the Financial Conduct Authority.