"Should my partner and I merge our finances?" This question often pops up around the dinner table and in financial forums. While the decision may seem straightforward to some, it's anything but.

This week, we’re going deep into the pros and cons, the hows and whys of shared finances. Do you go for equality or equity? Should you split everything down the middle or proportion it based on income? How do you strike a balance between autonomy and shared financial goals?

The insights here work not just for couples, but for anyone combining finances with others – be it friends, family, or roommates. And we're not just throwing opinions in the wind. The full episode sources real stories from our community, giving us the inside scoop on how they mix love and money.

Merging finances isn't just a financial decision; it's a relationship decision. And as you'll find out, the secret to a successful partnership might just lie in understanding each other's approaches on how to think about money .

Merging finances could be the key to long-term quality of relationship

Did you know that the way you and your partner handle your finances can actually predict the quality of your relationship over time? Yes, it's not just about love and shared interests. Turns out, money matters – in more ways than one.

An experiment on love and money

A recent study played matchmaker with money and relationships. Participants were divided into three camps. There were those who merged finances, those who maintained separate accounts, and the third? Well, they just carried on as usual with no specific financial strategy.

Over two years, something intriguing happened. Engaged or newlywed couples sharing a bank account tended to be more resilient to the typical wear and tear of relationships.

The joint account effect

So, what's the magic in merged finances? According to the study, three reasons stand out:

1. Builds trust and transparency

Imagine all your purchases, savings, and investments out in the open. No hidden expenses, no sudden shocks. This transparency can help both partners trust each other and understand each other’s priorities. They can align their financial goals and reduce the chances of conflict over money.

2. Team spirit

When you merge your finances, it's no longer "my money" or "your money." It's "our money." This shift can foster a strong sense of unity and partnership. It's like being teammates in a relay race; you're more invested in each other's success to win.

3. Joint decision-making

With joint accounts, every purchase becomes a team decision. This means you're more likely to discuss and justify expenditures. It could help you and your partner live with more thoughtful spending and improved financial wellbeing.

Recognising and leaving financial abuse

Now, in healthy relationships, merging finances can sometimes strengthen bonds and simplify financial management. However, it's crucial to approach this with open communication and clear agreements. With that said, it’s not suitable in situations where financial abuse is present.

Financial abuse may sound intense, but it's a real and serious issue. It’s a pattern of behaviour where one partner can control, exploit, or sabotage the other's finances.

So, what does financial abuse look like?

It's not always obvious. Financial abuse can be as subtle as one partner not contributing to household expenses. Or it can be as overt as controlling income and making one person bear the burden of joint debt. Financial abuse can even extend to restricting a partner from working, or not providing for dependents.

These actions aren't just unfair; they're manipulative and damaging.

If you suspect financial abuse, or you know someone who might be in such a situation, there's help available. Organisations like 1800RESPECT provide invaluable advice in recognising and addressing this problem.

When should you talk about splitting finances with your partner?

There’s the big question: When do you start talking about money in a relationship?

You might think money is a topic best avoided on a first date, but as Ana suggests, there's no “wrong” time to start this conversation. Sometimes, for the right person, it might just be the most romantic thing you can do.

Discussing money becomes even more important when you’re moving in together or getting married. These milestones naturally bring money matters to the forefront.

Why? Because shared experiences mean shared expenses. And let’s be honest: shared expenses can drive a wedge if not managed with care and empathy.

Money talks should evolve with your relationship

Ana shares her story of how a relationship can evolve financially. Initially, she and her partner kept their finances separate, even after the birth of their first child.

It was only after purchasing a home that they began merging their finances for shared expenses. Yet, Ana and her partner kept certain things separate, like savings and investment accounts. This evolution of financial sharing is common as relationships grow and change over time.

Maintain open communication

Money can cause conflicts in relationships. So, it demands open, ongoing, and nonjudgmental conversations.

You’re not just talking to any stranger about money matters like debt, savings, and income. The goal here is to find a balance that feels right for both partners, maintaining independence while feeling united.

Taking a leaf from the book The Barefoot Investor , consider setting up money dates. Yes, you heard that right – it’s like a check-up for your financial health.

These dates can be as structured or as casual as you like. You can start with exploring family histories with money, individual spending habits, and what “enough” money means to each of you.

Common ways to split finances with your partner

1. Equal split

Let's start with a familiar scenario: two partners, one earning double the other's income. A 50-50 split seems fair, right? On paper, maybe. However, equality doesn't always equate to fairness.

This is where the concept of equity comes in.

Picture a fence, with three people of different heights trying to peer over. All given the same height stool, the tallest sees easily, whereas the shortest doesn't. That's equality. But what if the stools were adjusted to their needs? That’s equity.

This analogy rings true in finance. A 50-50 split might not burden A, but B could feel the pinch. It's equal, but not equitable. Equity gives each person a fair chance to contribute and still succeed financially.

2. Percentage-based split

Here’s an alternative: splitting expenses based on income percentages. If A earns $8,000 and B $4,000, A might cover 66.6% of expenses, B 33.3%. It's not equal, but it balances the scales. Both save an equitable 75% of their income, making this approach a fairer game.
This method respects both parties' financial situations and avoids undue stress on the lower earner. Not all jobs are equally rewarded financially. This fact often affects women, especially when children or parental leave come into play.

3. Combined accounts and expenses

Another approach is combining everything – incomes, debts, and expenses. This method seems straightforward in marriage or parenthood. You pool your resources and tackle life together. It's like saying: "What's mine is yours, and what's yours is mine.”
But, is this financial union always a bed of roses?
Not quite. Imagine a couple where one's a saver, the other a spender. Or picture differing financial goals – one dreams of lavish vacations, the other, a hefty retirement fund. Here, the combined approach might stir up more stress than synergy.

4. Separate account while assigning specific expenses or goals

Now, let's flip the coin. How about keeping finances as separate as your toothbrushes? You split responsibilities – one handles the rent, the other groceries and utilities. Sounds fair, right?

But what if your incomes are different? Say, one partner earns significantly more. The balance tilts. The higher earner might take on more expenses, but does this arrangement always feel equitable? The answer isn't always black and white.

5. Hybrid solution of any options above

Then, there's the hybrid approach. It's like a potluck dinner where everyone brings a dish to share and also has something just for themselves. Here, couples may have a joint account for shared expenses or big goals like buying a house. They can also maintain separate accounts for personal hobbies or investments.
This method can offer a mix of independence and partnership, though it requires more effort to figure out what works best.

Regardless of the method, the crux of financial harmony in relationships is communication. It's crucial to keep talking about what's working, what's not, and how you both feel about it. And remember, as your relationship evolves, so might your financial strategy – and that’s perfectly okay.

The key is to keep the conversation going, where both partners feel heard, respected, and financially secure.

Take action this week

In this episode, we explored several ways couples and even singles can approach managing finances with others. Now, it’s time to put those insights into action.

For those in the dating scene…

If it matters to you, it's never too early to gently weave in conversations about money. It could be a chat about future goals or a direct discussion about how money beliefs can affect your finances . The idea is to make money talk a regular part of your relationship, laying a foundation of transparency and trust.

If you’re living with your partner…

Schedule regular check-ins to discuss what's working and what needs tweaking in your financial strategy. And remember, your financial strategy isn't set in stone. It's a living, breathing plan that should evolve as your life does.

If discussing money feels like wading through treacle, why not suggest listening to our podcast together? Or, playfully challenge each other with a finance book. It's a subtle way of saying: "Let's figure this out together.”

While you listen to the full episode, don't forget to rate us, write a review, or share this with a friend if it gave you a eureka moment. For those new to investing, our first 10 episodes can lay down a solid foundation for your long-term investing.

And remember, the journey to getting rich slowly continues after this chat. There's always more to learn, more to share, and more to apply to our lives. So, join our Facebook group, Instagram page, and Pearler Exchange to ask questions and share what’s on your mind.

Happy investing!

Tash & Ana