This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Deciding how to manage wealth as a couple can be challenging. Perhaps you both have different ideas about what money is for, how much you should spend and how everything should be organised. Yet finding ways to work together on a financial plan can bring extra success, contentment and peace of mind. Below, our team at Elmfield Financial Planning shows why it is so important to plan finances as a couple – together with ideas on how to do it effectively.
Why plan your finances together?
For those in committed, long-term relationships, over time you will naturally make financial choices that “build a life” together. Perhaps you buy a house to raise a family in, or you save towards a child’s future education (e.g. university). However, if you are not both open and honest about your hopes for the future – having conversations about how you think you should get there – then you risk pulling in two different directions, undermining your goals.
Clear communication, however, gives you a chance to combine your separate incomes towards your objectives (potentially getting you there faster). When you keep secrets – such as unpaid credit card debt – these inevitably come up sooner or later (e.g. when applying for a mortgage), undermining trust when they do. Having transparency about your financial histories and money worries, however, helps create a feeling that you are both on the “same team” and are there to help each other towards what you want to achieve.
The tax benefits of joint financial planning
The UK offers a range of tax-saving benefits for many couples who take a joint approach to financial planning. For instance, the Marriage Allowance lets someone transfer £1,260 of their Personal Allowance to a husband, wife or civil partner – potentially saving up to £252 within a given tax year. This can be a great way to save on tax if one of you earns below the Personal Allowance (usually £12,570), or pays no income tax (e.g. because you are a stay-home parent).
There are also other benefits like transferring assets to take advantage of unused allowances. In 2022-23, for example, an individual can earn up to £2,000 in dividends in a GIA (general investment account) before tax applies. If you transfer any extra dividend-paying assets to your spouse, moreover, then they can use their own dividend allowance for the financial year – letting your household save, overall, on tax.
Budgeting as a couple
Being on the same page with your combined income and expenses is, of course, very helpful when putting a household budget together. Unfortunately, 40% of individuals choose to keep debts and other financial problems secret from their loved ones. A similar percentage do not discuss their money worries at all (e.g. due to fear of judgement). As much as possible, we would encourage committed couples to discuss how they can combine finances effectively.
Having a firm “cap” on how much you can both spend on luxuries – meals out, entertainment and electronic devices, for instance – can help ensure you consistently set aside a specific amount, each month, for savings and investments. This can also help you pay down costly debts together – freeing up more income to use towards your financial goals.
Planning long-term as a couple
Budgeting is mostly about the short term. However, what about your long term future? Do you both imagine retiring in your 50s together, for example? If so, then a financial plan will help to make those dreams a reality.
Here, you can craft a strategy for your pensions. Perhaps one of you is further along the road of building up a State Pension compared to the other person. If so, then how could you help each other move towards that target of “35 qualifying years” needed on your National Insurance records (to get the new, new State Pension)? This is particularly important if one of you works full-time whilst the other dedicates some/all of their time towards raising children.
For those with dependents such as young children, a joint financial plan will be especially key. After all, if one – or both – of you suddenly died or could no longer work (e.g. due to serious illness or injury), then what would happen to your loved one? Here, a financial protection plan can help provide security and peace of mind.
For example, perhaps you both take out individual life insurance policies which last until your child turns 18. Here, if both of you die, then your son or daughter can receive two separate lump sums. Or, maybe it is only necessary to take out “joint life” cover – which only pays out a single lump sum in the event. In any case, it could waste a lot of money if two people took out their own policies without realising what the other person had done! Clear communication can help to prevent mistakes like this. Moreover, it could be that one (or both) of you has some financial protection available via their employment – such as “death in service” benefits. Sitting down and looking at these together can help identify what policies you already have, and what else you might need to achieve your goals.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
