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Wednesday, July 30, 2014

A Change in Finances

Posted by Dave on July 2, 2014

My wife and I currently have almost completely separate finances. We each have our own share of bills that we pay every month, and our own share of savings that we’re “expected” to contribute, but beyond that, we don’t really have any other financial expectations about each other.

We’ve been together for about 8 years now, and this is how our financial situation has worked, and will probably work for the foreseeable future. We don’t really have any shared expenses – I think if we had kids or a dog, or something shared beyond actual bills, it would be more useful to have something like shared accounts or pooled finances.

Retirement will necessarily force a change our finances, moving from our almost completely separate financial lives, to almost fully integrated in about 10 years when we’ll start tapping into our savings and investments. This shift will change things significantly.

At this point, I’m not all that sure how our accounts will look when we retire, but there will be a bit of a change in the way that our finances are run. Right now, we have an “allowance” for ourselves, which I tend to spend on beer and golf (paying to walk around and get frustrated), and my wife spends on wine and semi-disposable “girl clothes”.

From discussions with friends, my wife and I will be about 20 or so years behind mixing our finances together. I’m not too sure how much of a shift this will actually cause, as the combined finances will mainly be used to pay bills, which will happen automatically. It will be how we equitably deal with the remaining funds that will be the major shift in our financial life. I’ll have to get used to “our” money being used for what I would think is a frivolous purchase, while my wife will probably roll her eyes at me paying to wander around and sweat for an afternoon.

This kind of thing is what we’ll have to discuss quite a bit before our salaries stop and start drawing on our combined savings. A “wait and see” approach seems like it wouldn’t be a good idea – we might have different ideas on how our end retirement would work, which would cause some issues in our early retirement years.

How significantly do you think your financial relationship would change with your partner on retirement?

Comments

5 Responses to “A Change in Finances”
  1. Meena says:

    I am really worried about this, but not in the same way you are. We will generally continue to keep separate finances in retirement, and have all along. The reason for this is why I am worried. We are both savers but our investing strategies are completely different. My husband is totally uncomfortable investing in the stock market and I am totally uncomfortable with not being in the stock market. So for us both to have about the same amount of retirement income he will require at least 2 to 3 times as much invested money as me. I’m worried that this will cause friction in the future. There’s a chance I will be able to retire a lot sooner than him because of his conservative investing. Should I have to work longer or pay more than 50% of the bills in the future because he won’t take my advice now? I’m worried that by the time he realizes this it will be too late to realize the best investment gains that come from a long term strategy. So for now we keep doing our own thing. I might offer to do some projections for him and see if that helps. The only thing that might even us out is that he will get a pension if he works until 57 or so, and I will not likely have anything other than CPP. So I’d like to know – how do other couples who keep their money jointly agree on investment strategies? Does one person just take control of it all?

  2. Marty says:

    We are lucky, we both have defined benefit pensions from HOOPP. We also have had to maintain a second home in Toronto while I have been working there. When I retire, we get rid of the second condo (a rental), and I no longer have to pay to travel there from Ottawa. So my expenses go down way more than my income. We run our money separately, she is much more into stocks than I am, I am more cautious, but the fact that our living expenses decrease more than our income makes retirement a no-brainer.

  3. deva says:

    We’ve been married 40 years and started sharing everything right from the start so ours won’t change at all. And I can’t quite figure out why you’re separate now, but won’t be after the income stops (which will put significant stress on your “new” relationship – because it will be new.) We have a successful small business that provides us with excellent income. We both work at it and although we could retire yesterday we really like the business and the income. Would one of us have been willing to invest so many years (with a very positive outcome) if we had started out as separate financially? I think not. You’re either a partnership from the first day or you’re roommates. Don’t wait until your income stops to get to know each other financially.

  4. Joel 1%'er says:

    @Deva, I really like your comment about being roommates. I’m 31 and have been married for 3 years and it shocks me when my married friends tell me they have separate finances. One of my favorite things about my wife is that we share everything and that we are truly in it together. She knows that I like to handle the money and she is comfortable with that. I, in turn, provide her with a monthly report card of each of our accounts and what is going on? She also has full access (which I also think is important)… My most important financial goal in life is to NOT GET DIVORCED! It also happens to be one of my most important personal goals. Hiding money, poor communication about money, “who consumes more?”, or different intentions with money etc. can all lead you down a dark path that I am not prepared to even start. Sure you can do it separately… In my opinion, it is just a harder and more dangerous path that really has no upside.

  5. We have a similar set up where our money is separate and whatever we each buy for the common household budget which includes things for the baby, gets invoiced to each other at the end of the month for half. So if he spends $100 on something and I spend $50 on something, I give him the budget of what I spent for us jointly and he subtracts from it, HIS spending of $100 for us jointly and the difference is I write the cheque to him or vice versa.

    This works out really well because we don’t feel resentful or on the hook to each other to justify purchases.

    For retirement, we each know we have to save at least $1M each. I am planning on more than that but the minimum is $1M each plus a house/home fully paid for.

    For the baby, any money we get from the government for him gets put into his education savings fund.

    When we go to retire we will keep doing the same separate budget and invoice thing.

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