Financial Nudity

Getting Financially Naked with your partner will help to avoid Financial Infidelity. The Three Ways for Retired Couples to Manage their Money.

Whether you’ve been together for several decades or you are a new couple just beginning to merge your lives, money management can be a tough topic to handle. It’s often tougher in retirement, where neither member of a couple has a salary. And many retired couples have only come together in later life.

Money arguments are the 3rd most common disagreements that can lead to couples splitting, but when couples openly discuss money, those arguments can be mostly avoided.

While there are many “experts” out there who will tell you how to manage money, there’s really no right or wrong way. However, there are three main options:

  • 100% separation
  • 100% combined
  • The “yours, mine, and ours” method

But, in every scenario, you’ll need to be “financially naked” (I can’t take the credit for this cringe worthy phrase, but it works!) with your partner.

Every person comes with their own money history. It’s important to avoid projecting your own money history onto your partner. Your relationship with money is your own but it’s important to recognise that your other half may have a different relationship with money.

Method 1 | 100% Separation

This method tends to be successful if you prefer to feel financially independent, if you have been married or if you had had a long term relationship previously.

In this situation, all of your cash, investments and pensions are completely separate but couples share some expenses – a bit like being roommates! As a couple you need to decide what expenses will be shared and how those expenses will be divided. It could be 50/50, or you could decide that it’s more equitable to split expenses differently. People sometimes split the expenses based on their incomes.

This approach can reduce friction between you and your partner about money. It can mean that you don’t have to justify what you spend your money on.

This method doesn’t come without complications though. It may be challenging to determine how to equitably divide expenses. You’ll also need to play out possible scenarios, like how to handle one partner financially assisting if the income of the other partner changes. These scenarios may become even more important to plan for as you get older and move into retirement when the main source of income changes from salary to pensions and investments. With this method it can also be more difficult to agree upon your joint financial goals and how you’ll reach them together – particularly when considering legacies.

Method 2 | 100% Combined

This method tends to be successful when you have similar spending habits and attitudes around money or can easily compromise, and where you have high levels of trust in each other.

In this situation, all of your income, assets, and expenses are combined. Once money flows in, it’s considered “household” money. There’s no discussion about how expenses are divided when you go out to dinner or go on holiday.

There’s research that concludes that couples who combine their assets are more satisfied with their relationships. This approach is one where budgeting is extremely helpful. It may also be helpful for there to be a threshold of spending that a partner can make unilaterally, and purchases above that threshold need to be discussed and agreed upon by both parties.

With open communication and practice, this method can work really well for both parties.

Method 3 | Hybrid or “Yours, Mine, and Ours”

This approach is a hybrid, and works well for couples who have personal as well as joint goals. It gives both partners a certain amount of independence. You can purchase gifts for your partner (or other people) without them seeing exactly where you shopped and what you spent. If you have drastically different financial habits, this system can also reduce arguments over money.

In this scenario, each partner has individual accounts and there is at least one joint account for household and other joint expenses. As a couple you’ll want to decide what expenses are shared that need to be covered. Mortgage/rent, utilities, groceries, insurance, home improvements, and joint spending for children and grandchildren are among other things can make up this list.

You’ll also want to decide how money flows in and out of the household account. Will all income go to the joint account and then be distributed out to individual accounts or will your income go to individual accounts and then flow into the joint account in agreed-upon amounts? You’ll also need to address how an emergency fund fits into your system.

Just like the 100% separate system, handling your finances this way can be more complicated; for example, you’ll need to decide how much each partner contributes to the joint account. You will still need to openly discuss your expenditure and what might happen if, for example, one partner loses their income. It will be essential to have a budget for your joint account, even if you don’t have a strict budget in your individual account.

What about the Future?

These methods are examples of how to handle your current financial situation. However, they are also a great prompt to help you think through “future finances”. Will things need to change if there is an imbalance in the value of your pensions, savings and investments in the future?

Your system can change through the different phases of retirement (Go:Go, Slow Go and No Go). Anecdotally, it seems that the deeper into retirement a couple goes, the more your finances become combined.

Money conversations can be hard. Being financially naked with your partner is likely to strengthen your relationship and can help to avoid “financial infidelity”. This will need to be an ongoing conversation – you may need to get used to being financially naked. You may even need a financial “date night”!

A good financial planner can help you with these conversations, and help you to come up with a system that works for you both, by giving you structure so that you can wade through the questions that need to be answered to come up with the method that will work best for you.

Having a plan and a foundation of strong communication about money is one of the best ways to help nurture a happy and fulfilling relationship. A bit of financial nudity with your financial planner may be just what you need.

Philip Wise | philip@sussexretirement.co.uk

Managing Director and Chartered Financial Planner


This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

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