Being in a long-term relationship means that you share a lot of things. From hopes and dreams to your greatest fears. It also means that you share financial decisions. This can be anything from deciding on which used cars in South Africa will best suit your current (and future) needs, to choosing a house to buy when the time is right.
Sharing finances can sound daunting, especially if you are both independent people, but it can help immensely in the long run. Below are some top tips on how to share finances in a long-term relationship and make your wallets work for both of you.
Yours, mine and ours
In a dual-income relationship, it can be easier to have two separate accounts where you can each maintain your personal assets, as well as a joint account that you both contribute to in order to cover expenses.
This account can be used for paying rent, if you are living together, or repaying a car loan on a vehicle you both use. It is the most efficient way to cover day-to-day expenses while also maintaining your financial independence. It will also take away some of the control issues you might have if one of you is contributing into the other’s account to pay for daily expenses. A joint account does require you both the be honest and transparent about how you use your money.
Avoid cosigning loans
While it might seem like a good idea to co-sign on your partner’s loan if you have the better credit, this can be detrimental, not only to your financial health, but to the health of your relationship too.
As a co-signer, you are responsible for repaying the loan if your partner cannot, regardless of if you are still together should this happen. Although it does show your partner that you have a high level of trust in them, it could cause significant problems later in your relationship. Rather offer advice to your partner on how they can improve their own credit rating in order to get a loan or finance for used cars for sale in South Africa.
Decide on who pays for what
Your budget discussion should start with the question of what your shared expenses are. The mortgage or rent, electricity and water bills are a given, but you will also need to take into account the student loan bills your partner might have, or the car loan debt you have from before you two met.
While this debt is a result of your own personal decisions, you can help your partner out by offering to help repay some of their debt. This will allow them to become debt-free sooner, making them able to contribute more to shared expenses. If your partner prefers to repay their debts on their own, you could offer to pay for the luxuries, such as a night out or a movie, so they do not feel burdened by these extra expenses.
What if you are living together and breakup?
It is a sad fact to consider, but many relationships do end. This can be particularly tricky if you are living together and sharing expenses. You should look into drafting a legally enforceable document that proves joint contribution for sharing finance or home acquisition.
This contract should include pets, both cheap and expensive furniture items, and shared and personal possessions. You will also need to state who will receive ownership of any property or vehicles should you split up, as this can be a difficult subject to broach after the fact. It is important to do this if you are planning on getting married or if you are planning on making a large purchase together, so that you are both financially protected.
Make monthly money meetings
If you are both contributing to a financial aspect of your relationship, whether it is rent for an apartment or a car repayment, it is important that you are both aware of how much money there is, where it’s going and where it’s kept.
You should set up a monthly money meeting where you both discuss what you have been contributing to the joint account, how you have been spending your money outside of this account and how much money is left at the end of the month. These meetings should not be put off, as they can help to curb any extra spending you might be doing without realising it.
Be open and honest
One of the most important things to remember in a long-term relationship, especially when it comes to finances, is to be open and honest with each other. This is vital if you are planning on making a purchase together using finance, as the lender will be able to see all of your credit debt when doing a credit history check. Discuss who will pay for what, whether or not you will have separate and/or joint accounts and remember to have a legal document drawn up should anything happen during your relationship to affect the finances.