The best financial decision I ever made
When Katie and I started going out, and for a long time afterwards, we lived apart. At first that just made sense (you don’t move in with someone three days after meeting them) and later it was a necessity, while I was working in London and she was finishing her doctorate in Oxford. Overall, long distance and living apart is rubbish, but it did mean that we managed to avoid all the thorny financial decisions that being in a relationship normally brings for much longer than you’d expect.
And I’m glad we did, because it meant we were in a much better place, relationally and emotionally, to solve them when we eventually did move in together and had to figure out how to join (or not) our finances and deal with the shared expenses.
Broadly, there seemed to be three options:
- Individual accounts only – my salary goes into my account, her salary goes into her account and each of us is responsible for some subset of the bills, we reconcile and rebalance the difference at the end of each month
- Individual accounts with a joint account – my salary goes into my account, her salary goes into her account and we each contribute a fixed amount to a joint account to cover shared bills
- A joint account with individual accounts – our salaries go into the joint account and all expenditure and savings come out of that account, then a fixed monthly allowance goes into each of our individual accounts from the joint
I’ve tried method 1 in previous relationships, and it worked to manage the money… But it also introduced some pretty significant problems of its own. For one, the entire arrangement can be quite adversarial, a problem which is exacerbated by the cash flow management issues that come up if one person earns much more than the other. Since Katie worked for the NHS and I worked in tech this sort of differential was likely, and if I’ve learned one thing from previous relationships it is that building adversarial interactions in is a bad idea. So that was Method 1 out.
I’ve also used Method 2 in previous relationships, and it is very similar to Method 3, but there is a different emphasis. In Method 2 you remain fundamentally separate financial entities. Like building in adversarial interactions though, it seemed to both of us that building in an uncloseable distance in our relationship could be counter-productive.
Which left us with Method 3, and we were both nervous. Because we had to discuss the potential issues even before they became issues, like how we would feel if one of us earned a lot more than the other or how much of our mutually cherised independence this meant we would be sacrificing.
And when we were trying to figure out how much our allowances should be and how much should stay in the joint account it forced us immediately to talk about what was personal spend and what was joint. Are spectacles joint or individual? What about travel to London for work? What about travel to London if you aren’t working, but most of your social network is still based in London? What about clothes for work?
But talking about all of this up front is way easier than dealing with it retroactively, ala Method 1. What’s more, the system is very robust – as Katie has gone on maternity leave and our joint income has changed dramatically, things have gone very well. We have worked together on our finances, we still have our own money to spend without guilt on what we like, and dealing with the financial changes has brought us closer together when they could so easily have driven us apart. If you’d asked me in advance, I wouldn’t have guessed just how broadly or significantly helpful Method 3 has been, but looking back on it, it has easily been the best financial decision I (we) have ever made.