Sunday, 29 May 2016

How we manage our finances as a couple

I met my wife in our first year at university in Melbourne in 2007. As a student couple overseas, we spent a lot more time with each other on and off campus since we were in the same course and didn't have any family there. We made our own and common friends, which allowed for social interactions as individuals and a couple. However, we were basically living together unofficially.

After graduating in 2009, we moved in with each other and lived together officially. From there, we transitioned into a working couple and started building our careers in Melbourne and Sydney. The benefit of being together for a long enough time through different phases of our lives means we had more practice and experience with managing our finances as a couple. This came from learning from the many mistakes we made and having the opportunities to improve on our management style.

Before marriage

As a student couple, we kept our finances separate and this worked because we were fortunate enough to only have to worry about expense management and income from part-time jobs. We graduated with no student loans and were able to find full-time jobs within six months.

I read this post from Bridget Eastgaard at Money After Graduation on What Should Your Net Worth Be By Age. She made this point that I agree with - The net worth number you end up with by age 30 is going to be almost wholly dependent on how much financial privilege you enjoyed in your 20's.

The biggest determinant Bridget mentioned was how much money your parents donated to your cause. Our parents were able to fund our higher education and together with the partial scholarships we received as international students, we were able to graduate with no student loans.

The second biggest determinant Bridget mentioned was how much money you earn. Our bachelor degrees were in accounting and finance and our starting full-time jobs were in the banking and accounting industries. The pay is above average when compared to the other industries.

When coupled with the fact that we had more experience than the average couple in managing our finances after graduating, this gave us a headstart in building up our savings and net worth. We have to acknowledge the financial privilege we have enjoyed and be honest with our money story. I'm just relieved we didn't waste and squander this opportunity afforded to us and we keep working hard on this journey to financial independence.

Anyway, back to the topic, we continued to keep our finances separate even after moving in together. We had separate bank accounts for our savings, separate investment accounts for our stocks and no joint accounts. Expenses such as rent, utilities, groceries, entertainment and travel were tracked in a monthly spreadsheet that were split evenly between the both of us. We were also individually responsible for paying our credit card and other bills.

The reason was simple. As long as we were not married, we should not be sharing our finances no matter how much of a future we saw for both of us or how long we have been together. Although our savings, investments and net worth were growing positively with each month, the rate was slow because we didn't implement a couple personal finance strategy.

It was tempting to start joining our finances and using our dual income to achieve a higher savings, investments and net worth growth rate. But we figured we were still young and it was more important to have a clean and simple personal finance relationship with each other.
After Marriage

We moved back to Singapore from Australia in 2014 and got married in the same year. My wife was 26 and I was 28. Marriage to a couple that has been living together for several years like us is not as significant as to a couple that is only going to live together after getting married.

However, being married means we now have a legal basis to implement a couple personal finance strategy. This may be a technicality to many people but it was an important milestone for us. Over the years, we started to realised that I had a keener interest in personal finance than my wife. After we got married, we still didn't open a joint account but I started to manage both of our savings, investment and retirement accounts.

It was more efficient because I was able to allocate both of our funds accordingly to increase the growth rate without being limited by what's hers and what's mine. It was also more effective because I was able to access a greater pool of funds for investment. Of course, this is only possible after we have both agreed on a common savings, investment and retirement strategy i.e. I was provided with the mandate to do the above.

I like dealing with personal finance at a micro and macro level but she only likes looking at it on a macro level. This is why I enjoy researching on high interest bank accounts, cash rebate credit cards, bonds, shares, ETFs etc. However, my wife only checks in at the end of each month on the performance of these accounts.

This way of managing our finances as a couple works for us because we took the time to understand our personal finance personalities. We also developed ourselves individually first before working together as a couple towards our goal of financial freedom. Most importantly, we spent a lot of time and effort building a foundation of trust before taking this approach. The next decade would be the most financial demanding and I am interested to see how this works out for us.

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