5 practical reasons why it’s important to include your partner in financial planning conversations

November 8 to 12 is Talk Money Week in the UK. An initiative by the Money and Pensions Service (MaPS), the event encourages people who are normally reticent about talking about their finances to open up.

When it comes to talking about money, the most important person to talk to is your partner.

You both have a stake in your joint financial affairs so being open and honest, sharing information and mutually planning your financial future is crucial.

Research shows that people who talk about money make better financial decisions and have stronger relationships. So, if you’re married or in a long-term relationship, financial planning should very much be a joint effort.

Here are five practical reasons why it’s important to include your partner in financial planning conversations.

1. It’s a partnership

Even if there’s a big disparity in your respective incomes, it’s useful to always consider yourself and your spouse or partner as equal when it comes to your financial affairs and planning.

The main reason for this is because, when you’re making financial decisions, you’re most likely making them together.

From buying your first home, through other significant financial events to retirement, all the key financial decisions you’re making affect both of you.

2. Being open and honest about your finances can help your wellbeing

As part of being equal financial partners, it’s important to be open about your respective finances.

MaPS research for Talk Money Week 2020 found that 45% of those in relationships have a financial product like an ISA or a loan that their partner doesn’t know about. The most common secrets were hidden credit cards and undisclosed loans.

Always make an effort to be honest with your partner about your past spending or similar financial issues you’ve faced – either prior to your relationship or more recently.

If either of you has financial issues, just the process of admitting and sharing them, while initially potentially embarrassing in the short-term, will make you feel better in long run.

Having a financial issue that preys on your mind can be debilitating and stressful, so getting it out in the open is always a positive step forward. In addition, hiding financial issues that later become a problem can lead to trust issues and damage to your relationship.

3. Joint decisions are usually better decisions

In many partnerships, one person will take the lead when it comes to day-to-day finances. That will include issues such as ensuring bills get paid, managing bank accounts, and monitoring domestic spending.

This can often come down to which of you is more financially aware – or even just who is better at maths!

When it comes to overall strategy and more impactful decisions, it’s preferable to ensure you both participate in the decision making, even if it’s down to one of you to deal with the resulting paperwork and administration.

For a start, “two heads are better than one” can often apply when it comes to difficult financial arrangements.

Even if you separate out your arrangements – maybe having separate bank accounts – you should make sure both of you are regularly communicating about how you manage your finances throughout your relationship.

4. Working as financial partners can save you money

One particularly useful aspect of working alongside your partner when managing your money is that it allows you to make the most of tax incentives and allowances that you’re both entitled to.

Your annual ISA allowance

Each tax year you have an individual ISA allowance. ISAs allow you to save money and take the proceeds free from Income Tax or Capital Gains Tax (CGT).

In the 2021/22 tax year, the ISA allowance is £20,000. That means you can tax-efficiently save and invest up to £40,000 between you.

Capital Gains Tax

The current CGT “exempt amount” is £12,300 in the 2021/22 tax year.

This means that, by putting investment holdings in joint names you can take up to £24,600 worth of gains on shares and other non-ISA investments without having to pay CGT.

Pension contributions

The usual limit on tax-efficient pension contributions is either £40,000 gross, or 100% of your earnings – whichever is lower. As you receive tax relief at your marginal rate of tax, it usually makes sense to maximise contributions for whichever of you is the higher earner.

However, someone not working can still contribute £2,880 into a pension each year and the government will top this up with basic-rate tax relief to £3,600.

This can make a pension a very tax-efficient savings vehicle, especially as the Personal Allowance – £12,570 in 2021/22 tax year – means that, subject to your financial situation, you won’t pay Income Tax up to that amount.

5. You’ll have a stronger partnership with joint ambitions

By having a mutual understanding of your joint income and expenditure, you can then collaborate with your partner to look to achieve your wider life goals.

Joint planning means you’re both invested in the future and pulling in the same direction, however you choose to manage your financial arrangements.

Aligning your individual spending habits makes it easier to agree on what you want in the future, and how you’re going to achieve it.

No matter what you ultimately decide to do, it needs to work for you and your partner. Discussing your goals and planning together is often the best strategy.

Working together, and putting a plan together that suits you both, will help you to reach your joint goals together.

Get in touch

If you’d like help and professional guidance when it comes to planning your financial future, please get in touch.

You can email us at enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.