Amanda Morrall looks at the conundrum of joint finances and comes to the conclusion that it's better to be safe than sorry unless you're a rock solid team. Your experience?

By Amanda Morrall

How you handle your finances as a couple is a very personal decision.  Having learnt the hard way that both marriage and divorce can have a harsh financial impact, my personal opinion is that keeping separate banks accounts is a good idea. That’s despite my feeling that pooling your money and working towards common financial goals is good for your bank account and team building.

Ultimately, the decision is going to be a private one. If I have any advice, and technically I can’t give it, it would be for individuals and couples to think this decision through very carefully, to communicate on the subject of money as openly and honestly as possible and to be realistic about scenarios that might make you uncomfortable.

For example, what would be the consequences of separate or joint finances in the event of one party dying prematurely, or the relationship fizzing, or one party becoming unable to work. I think it’s also critically important to know what your partner’s fundamental views about money are as this would influence how they regard debt and also a lot of other important financial decisions.They may be different from your own but in having this information you can at least learn how to manage your differences.

Ultimately that comes down to effective communication, the foundation of a healthy relationship in my humble opinion. In the early stages of a relationship, it may not seem important but for those relationships that evolve it certainly will -- particularly with finances being one of the biggest marital stressors and leading cause of divorce. 

I used to mock pre-marital counselling but I now see the merits of it. If those sessions included a component of financial communication and planning, I’d be urging young couples to get themselves enrolled before getting engaged. Understanding a prospective spouse’s habits, their debts, their goals and the depth of their knowledge about money could be a marriage saver.

Wellington financial advisor Liz Koh, author of Your Money Personality, defines four basic types of money personalities; hoarders, achievers, entrepreneurs and thrill seekers. Her classification system hinges on willingness to take risk. Sorted.org.nz also features a money personality profiler on its Website.  It has 16 types. I was interested to discover I am a sensible drifter. I had a laugh, as did my colleagues, but actually the description was fairly apt. Here’s my summary:

“You are not all that fascinated by commerce. To suit your idealism you need investments that you care about and are consistent with your personal inner values. You work harder when you believe your work is important to human kind.”

It’s a bit more detailed than that, but most of it I would agree with.

I would suggest that most people know themselves well enough to know their tendencies and values about money. Money profiling might be frivolous, however if it serves to get couples who are considering co-mingling their finances talking more opening about the subject, then it’s an exercise worth doing as a precursor to more serious discussions about the pros and cons of separate versus joint accounts and money management.

Sorted.org.nz has some excellent resources beyond the money personality profiler to help in this regard. As part of their new makeover, I discovered a few gems into their A-Z section.

Under the planning a relationship section, a list of "Things to consider.''

There's also a useful section for those dealing with separation.

Things to consider

You should know how your financial situation would be affected if the unexpected happens. Here are some things you need to think about:

• Do you have a joint emergency fund? If not, do you have another way to access cash quickly?
• Do you and your partner have a superannuation scheme? What happens to the scheme should you or your partner die?
• If you're making a financial plan for retirement together, will your plans be sufficient if you both live well into your 80s or 90s?
• What happens if you are separated – by death or otherwise – before you reach retirement age?
• Have you considered life insurance or income protection insurance in case you or your partner can’t work?
• If you share a mortgage, will payments be covered by mortgage or life insurance if you or your partner dies?
• Are there debts that either of you are liable for?