Couples should treat their relationship “like a business” when it comes to financial planning, according to the experts.
Financial advisor Paul Merriman went viral this week when he responded to a question about how couples with different incomes should split the rent.
“He makes €55,000 a year, she makes €35,000 a year,” he told The Pat Kenny Show. “They move into together and the rent is €1,500 – and he expects her to pay half.”
Mr Merriman said the rent contribution should be relative to income – but it’s not as simple as gross income.
“You have to take income tax into consideration because someone making €55k a year is going to be in a higher bracket for income tax than someone making €35k a year,” he said.
It’s not an entirely romantic conversation to have with your partner – but it’s essential if you want the relationship to survive, according to Mr Merriman.
“Even on the second date, you need to be setting your stall out or otherwise it will snowball,” he said.
'Just have a grownup conversation'
“Money is always awkward, but that’s why we started AskPaul," Mr Merriman said.
Every couple will have a specific preference when it comes to spending – but every couple just need to “have a grownup conversation about money”.
“I'm not going to take the romance out of relationships, but it needs to be a business,” he said. “What's the profit and loss, what's going into the household, what’s going out.”
“Adults have to be like directors of the company and find out how much it runs the household.”
He said all couples, married or not, should have a joint account for household spending and separate current accounts for personal spending.
“That's for the couple to decide how it works,” he said. “And obviously not to do it in a way that your spouse is completely broke in their own current account after household bills.”
In consultations with Mr Merriman, a lot of couples often “squirm” and even hide parts of their financial health – but this is not how to sustain a financial relationship.
“What are your financial goals – is it to retire early, is it to travel the world, is it to pay for kids’ private education?” he said. “What are the goals of the household?”
“The conversation needs to snowball quickly.”
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