In times of financial crisis – such as the Covid-19 pandemic – many couples have been forced to join financial forces to make ends meet. A couple is only as economically strong as their financially weaker link, and sometimes it takes a global crisis to bring to light the benefits of joint financial planning.
Whether you’re married or in a long-term relationship, here’s why joint financial planning works:
You’re a team
If you’re in a partnership, you’re part of a team. For your team to succeed, it helps if you are both working towards the same set of goals, and employing your joint resources for the benefit of the team, not the individual. Setting your team on the path to success requires both partners to be emotionally, psychologically, spiritually, physically and financially committed to the relationship. Couples who manage their finances are accustomed to teamwork, common goal setting, sharing and compromise.
Spreading the risk
If you’re part of a double-income team that shares financial resources and responsibilities, you have effectively spread the risk of job loss, retrenchment or loss of income. This automatically reduces some of the financial stress that inevitably comes with one partner’s earnings being adversely affected. Knowing that you have the emotional and financial support of your partner is a significant benefit of joint planning.
Sharing the burden
Making difficult financial decisions alone in times of crisis is tough, isolating and scary. If you’ve always shared financial resources and responsibilities in your relationship, you will be used to turning to your partner for advice, input and guidance when making important financial decisions. If you and your partner lead separate financial lives, the coronavirus crisis may well be the prompt you need to bring your finances together and to open the channels of communication.
Access to bank accounts
Couples who are used to joint financial management will be in a position to access each other’s bank accounts and other facilities in the event of an emergency. Not being able to access your partner’s bank accounts in a medical emergency can leave you financially vulnerable and unable to continue paying bills or running the household in their absence.
Making provision for each other
Couples who plan together are more likely to have put mechanisms in place to provide for each other and their dependents in the event of death. Through joint financial planning, couples can put the appropriate level of life cover on each other’s lives to ensure that their partner and dependents are adequately provided for, and ensure that the correct beneficiaries have been named on their policies. Through the drafting of their respective wills, couples can structure their estates, appoint heirs, ensure liquidity in their estates, and protect the assets bequeathed to the loved ones. The comfort of knowing that you have each provided adequately for each other in the event of tragedy cannot be understated.
Insight into legacy documents
If you’ve done your estate planning together as a couple, you will know where each other’s wills are kept, who the nominated executors are, whether or not your partner has a living will or advance healthcare directive, if they are an organ donor, and what their wishes are in respect of leaving a legacy. These documents and the information they contain can prove invaluable in times of emergency and can save your loved ones a huge amount of stress and trauma.
Taking the pressure off
Job hunting can be soul-destroying, especially as your emergency reserves and self-esteem dwindle. Having a partner who can come alongside you through this process can be lifechanging. If your partner earns an income and has financial resources of their own, this can take an enormous amount of pressure off you at a particularly stressful time of life.
Pooling your resources
A significant benefit of joint planning is being able to pool your resources in times of financial crisis. If you’ve been managing your finances together, you’ve likely each taken steps to secure emergency funding and have some discretionary investments in place. If you’ve shared the responsibility of saving and investing for the future, you will find it easy to pool these resources in times of financial crisis.
Ignorance is not bliss
If you do not have insight into each other’s financial affairs, a medical emergency or tragedy can blindside you financially. Not knowing your partner’s financial position, whether they are adequately insured, how much debt they have, or whether they have made financial provision for you should they die is not an ideal situation to be in. Joint financial planning ensures that each partner has full insight into the team’s financial affairs and will be in a position of knowledge and control if tragedy strikes.
Compromising your future
Not being on the same financial page can lead to anger and resentment, especially where partners have divergent views on money management. If one partner is committed to saving, investing and careful budgeting while the other is a spendthrift with poor money habits, relationship tension is inevitable. One partner working hard to secure a financial future while the other is pulling in the opposite direction to compromise your financial future simply cannot work. For the team to be financially successful, both parties need to be working towards a set of common goals.
Create equality and respect for each other’s roles
Sharing financial responsibility also creates respect and appreciation for each other’s roles within the relationship. Regardless of who earns what, joint planning works if each partner has clear responsibilities in respect of budgeting, cashflow management, saving and investing, tracking expenditure, paying bills, liaising with creditors, and prioritising spending.
Can plan more effectively if you have a joint budget
It’s difficult to plan when you don’t have insight into your partner’s income, expenditure or financial resources. In times of financial crisis, clear insight into the team’s financial affairs is required so that you can pool resources, share responsibility, commit to a joint budget, track your expenditure and execute a plan to get the partnership through tough times.
A good example to your children
Your ability to share responsibility and resources, make individual compromises, and strategise together for the greater good of the team will set an excellent example to your children. Teamwork is easier when demonstrated rather than instructed. While you are in lockdown with your children, use the time to model the benefits of effective partnership.