Should you manage your finances jointly?

If you’re married or living with someone, it might seem logical to combine your finances,

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Social media was awash with declarations of love last weekend, but even the most romantic couples can find managing money matters together puts a real strain on their relationship.

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If you’re married or living with someone, it might seem logical to combine your finances, but it’s vital you’re fully aware of the pros and cons of doing so first.

If you have shared expenses, such as mortgage or rent payments, council tax bills and utility costs, it can make sense to have a joint account into which you both contribute, whilst keeping individual accounts for your personal expenses.

However, make sure you each check your credit score before doing setting up a joint account, as if one of you has a poor score, perhaps because you’ve missed debt repayments in the past, this could affect your partner’s score if you open an account together. You can check your scores using one of the three main credit reference agencies, which are Experian, Equifax or TransUnion.

If you do set up a joint account, you’ll need to have some clear ground rules in place if you want to avoid arguments. For example, make sure you’re both in agreement about exactly which costs the account will cover, and which it won’t. It may suit you, for example, to have a spending limit in place, so that if one of you wants to pay for something above this threshold, you must consult each other first.  If you’d prefer to keep your accounts completely separate, you’ll still need to discuss who is expected to cover which bills.

Borrowing

Steer clear of taking out any joint loans if possible, as if your relationship doesn’t work out and your partner stops making repayments, you’ll still be liable to cover costs. Similarly, if you have a credit card account where you’re the main cardholder and they are an additional authorised user and they run up big debts on the card, you’ll have to pay off what’s owed if they won’t.

If you’re buying a property with a partner and you’re not married, it’s worth thinking about what might happen if the relationship were to end.
For example, you might want to think about setting up a ‘declaration of trust’, which outlines how much each of you has paid towards the property and how you’ll proceed if one of you wants out.

You’ll also need to think about whether you want to own the property as ‘tenants in common’, where you effectively own separate shares of the property, or as ‘joint tenants as ‘joint tenants’ which means you’ll have equal rights to the whole property. If you are ‘tenants in common’, you can state who you want to inherit your share if you die, whereas if you are ‘joint tenants’ your partner who you bought the property with will automatically inherit your share.

If you’re married and divorce, the situation is different as it will be down to the courts to decide what should happens to the property based on your individual circumstances. You might want to consider a prenuptial agreement which outlines what should happen to the property and other assets if the relationship ends. Bear in mind though that although these are usually recognised by UK courts, they can be vetoed if the court decides the agreement is unfair to any children you have.

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