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Are you and your partner have financial incompatibility? A marriage between a saver and a spender comes with its problems, but nothing true love can’t overcome – right?
According to the Australian Institute of Family Studies (AIFS), household finances are among the main reasons couples argue.
Real-world example of financial incompatibility
When Anna met Tony they planned a life together. They rented an apartment and Anna cashed in her $35,000 investment portfolio to fund their wedding and honeymoon.
Savings-focused Anna was now keen to save for a house. Conversely, Tony loved spending and was content to continue renting.
Despite their differences, they opened a joint savings account, and using MoneySmart’s compound interest calculator, Anna worked out the following:
| Initial deposit | $1,000 |
| Fortnightly contribution | $500 |
| Interest rate | 2.65% |
| Total after 5 years | $70,563 |
They decided that Anna would pay the utilities bills and Tony would pay the rent. Anna engaged a financial adviser who created a budget to keep them on track. Additionally, the adviser suggested couples’ health insurance and combined car insurance policies to save extra dollars.
Anna stuck to their budget, saving each fortnight while meeting her obligations. Tony, prioritising differently, continued his spending lifestyle.
Five years later, they had only Anna’s savings and an eviction notice for unpaid rent. They were arguing constantly but when Tony suggested they should have used Anna’s original investment as a deposit instead of paying for the wedding, it was all over.
Anna was shocked to discover the money she’d saved was jointly Tony’s and that she was partly responsible for the outstanding rent as the lease was in both names.
It’s a frequent scenario causing Binding Financial Agreements (pre-nups) to become common in Australia. The Family Court of Australia reports that pre-nups can be made at any time providing both parties are signatories.
Would a pre-nup have helped Anna?
As soon as the marital cracks appeared, Anna could have initiated a pre-nup to protect herself, as long as Tony agreed.
Money Management Tips
To avoid financial disagreements, MoneySmart suggests that couples discuss four important points.
- Current situation: Review each other’s income/expenses and assets/liabilities. Understanding where you both stand financially provides a clear picture of the situation and ensures transparency in your financial dealings.
- Goals: Will you buy a house, start a family? Agree in advance on long-term financial goals, then discuss budgeting strategies to pay off existing debt and begin saving. Aligning your financial priorities early on helps you stay focused on achieving shared dreams while managing day-to-day expenses.
- Spending/saving: Understanding one another’s financial attitude makes it easier to find common ground. Be prepared to compromise, whether that means adjusting spending habits or saving strategies to accommodate both partners’ preferences. Financial harmony often comes from finding balance and respecting each other’s values.
- Financial control: Will one handle the household finances or will you do it jointly? Both must be happy with the decision and keep communication open. Regular discussions about the management of finances help maintain a sense of partnership and mutual accountability.
After the divorce, Anna worked with her adviser to start afresh. She took out income protection insurance in case she was unable to work, made a Will, and instructed her super fund to set up a binding nomination, naming her niece as her beneficiary.
Incompatibility is not limited to young couples. The ‘silver-splitter’ phenomenon of older divorces is increasing, with Australia Bureau of Statistics figures demonstrating that in 2018, the median divorce age was 45.9 years for males and 43.2 years for females, both slightly up from 2017. Financial challenges can affect couples at any age, and it’s important to plan for the future, no matter your stage in life.
You’re never too young, or too old, to protect yourself. And these days, as we’re all living longer, a little forward planning can only be a good thing. It might not sound romantic, but involving your financial adviser early in a relationship could save a lot of heartache later on. By being proactive and making financial decisions together, you can lay the foundation for a healthier and more secure financial future.
Read this blog from The Everygirl on incompatibility.
