Managing money as a couple - BOD024

0:00Pete:Your mum is massively better off with me dead than alive, financially so. Or financially so. That's why we live in a bungalow, so she can't put little bits of fishing wire at the top of the stairs. I honestly think we'd rather talk about sex and death than money. Not with you, we wouldn't. No. Fair point. I do not want to talk about sex with you. Hey, Dad, guess what? No, no, no, no, no. Hi, and welcome to the Bank of Dad podcast. I'm Kate, and this is my dad, Pete. Hello. And we're here to teach you the money lessons we were never taught at school. There's no judgment, no jargon, just real talk about how to handle your money.

0:34Pete:Getting ever so good at that. That used to take me like seven or ten. It did. It's the first time every time now, isn't it, pretty much? Yeah. Muscle memory is great. The thing is, though, it's always after that, when I'm waiting for you to do hello, I go for a split second, I'm like, what's next? But then it just comes out my mouth. It very much is muscle memory. I'm like, oh, there's no judgment. That's what there is. What's on this week? What's on? well what are we talking about um so that's Cornish I thought you were going to say like what's on with me well we could do that there ain't much development that's why I was like what's on yeah no not a lot of developments on the house since last time no I'm just I hate this stage actually it's worse than all the previous stages because she's like I just want things to move forward I have nothing to do like I keep logging into my solicitor's portal and I'm like it says you have no tasks so please give me a task I want something to do I want to move it forward yeah I just feel very not helpless is a dramatic word but i just feel yeah i mean like underused yes can i can i move it forward yeah i can do yeah anyway so sorry that's what i thought you meant what's on this week's about w-o-s-s-o-n of course what's on we've recently done two q a episodes and i can't remember if it was in part one or part two but jess asked a question a very sensible question well done jess yes well done well done you you are sensible i don't know it's it's a it's very topical for me which is why it's quite funny it was quite funny writing this um she asked about managing money as a couple because she was about to move in with her partner sure big subject and we answered it and then upon sort of planning the next few episodes i think we've got more to talk about yeah for sure so this is for you jess and also a bit me yeah quite a lot you let's face it But I hope it's helpful.

2:18So that's what we're going to talk about.

2:20Pete:Yeah. So. Before we do. Before we do, it's time for Wanky Word of the Week. It's time for Wanky Word of the Week. Yep. That goes around my head in my dreams. I know. I really like it. It's a banger. Hashtag tune. Right. So what is this week's Wanky Word of the Week? You came up with this one. Yeah. Sometimes it's hard to think of one, isn't it? Yeah. because you also don't want to kind of like spoil the episode no but this kind of does yeah a little bit so on that note this week's wanky word of the week isn't a finance term shock it is mutual accountability yes definitely spoiler alert well you know it's a nice sort of flowery way of saying that if you're going to build a life together you should be accountable to one another so accountability is having somebody kind of keep you on track i mean it's hard to define the word accountability without using the word holding you accountable yeah exactly that's true it's a circular word yeah um but you know it's like it's if you want i think you should um encourage accountability you should make yourself accountable to other people yeah loads of areas of life if you're looking to improve you're looking to i don't know quit smoking lose weight um big mirror looking at myself is that you know go to the gym you'd go with your mate yeah exactly and so it's a kind of a mechanism for helping you stay on track and i think particularly with finances as a couple um mutual accountability is a lot of what we're going to talk about today is being on the same page holding each other to account for moving forward on that journey together yeah um and sticking to the plan basically keeping you aligned keeping you on track yeah exactly right so important sort of concept yeah so let's get straight into it the first being imagining we're living together well the assumption is we're living together because we're forming a life together yeah i can't imagine you would be joining your finances and not living together no not really really um i'm sure someone in the comments will come up with a really niche yeah maybe experience and then that's really interesting probably not the norm but probably not the norm So, assuming you're living together, the first kind of section is on the topic of bills.

4:41Pete:It's an obvious place to start. Yeah. So, in the sort of how do we split bills section, should it be 50-50? It's funny, we were talking before we recorded, it's like a lot of these are should questions, which we know we try and avoid, but it kind of makes sense in this case. Exactly, and also I ask them because that's how people would ask them. Yeah, that's right. so on the sort of basic premise that there is no should and you can sort of set these things up exactly how you want to set them up it's not a bad starting point 50-50 but I think there's some things which might obviously mitigate against that particularly if there is a huge disparity in earnings still I think some things should be 50-50 so you know if it's sort of the basic bills of the house like food food you know utilities water gas electric things like that if you're broadly consuming the same amount you know if one partner was away a lot you might think but if you're both living there and you're both serving broadly the same number of showers i mean you really don't want to get into the minutia of said well you had five showers last week yeah i only had three just a recipe for disaster that's why you smell you minger yeah three showers a week yeah right that's more of the problem right now.

5:57Pete:So, you know, I don't think you should get buried in my new show like that. But if there's an obvious disparity in earnings or an obvious disparity in usage. Yeah, because it's interesting because Ben and I have had this conversation. Shock. Yeah, that's going to be the theme of the week, right? My boyfriend, Ben, about to live together. And we've had basically all of these conversations quite recently. You should be able to speak to some of these things. Indeed. in this case Ben you're not giving any details confidentiality yeah of course I'm not going to be like Ben earns this much guys poor Ben poor Ben bless his heart well he stopped listening to them so I think we I think we have every right bless him but he earns more than I do yes and he works from home yes so if I was living in that house by myself all of the time that I'm at work which is a large proportion of the week because I don't I don't work well at home I get so distracted you know that's power you know a lot of things that would be electric yeah it's not going to be like 90 10 it might be 60 40 or yeah you know if you build 75 45 like it's not going to be a lot um but because he earns more one would be using more in the time that i'm not at work that's kind of what we're thinking we're going to do but it might be as we get through we also don't know yet when we actually live it well that's an important point yeah we might need to change it but yeah so it's interesting it's not there's no should you're right so keeping yeah so I'm glad you've had an intelligent conversation about it never doubted it for a minute you know he's a good boy he is a lovely boy and very reasonable are there any bills that you would say should be shared and should be split I don't know why you would share like your mobile phone but if it's your phone yeah do you know what I mean yeah that's fair enough anything which is obviously individual you would probably keep individual but anything which is a shared resource which means the main utilities council tax rental mortgage that's probably it I mean if you're in when you get to the point of well actually you know we've now got kids then you would both be contributing contributing to costs for the kids whether that's childcare or uniforms clubs all of those things you would join so I think it's the only thing which is particularly yours so if you are a member of a gym does that have to be a joint expense?

8:20Pete:I'm not sure it does. Mobile phone, any other kind of sports clubs, any professional subscriptions, anything which is uniquely yours, you should pay for, I would argue. Unless you're in a situation where one person is earning and the other isn't, which was the case with your mum and I for a long time. It's all joint, pretty much, because there's only one earner. Otherwise the other one doesn't have anything. Yeah, it was hungry. Okay, so on those shared ones we've talked about, do you think it's wise to have a joint account for those? oh yeah it's not just both of us like to take me and ben let's say all the bills go out of my name he just transfers me i don't think there's anything wrong with that i think what's important is visibility and joint account helps for that um you know it's just like that's you can see what goes in and what goes out so you can see right we've put 250 quid a month each in for bills including food or you know pick a figure it's like actually you know three weeks into the month we it was getting a bit tight so maybe actually instead of 250 we need to put 300 quid a month in each or we need to spend a bit less you know the other option but there's visibility there which just makes it easy rather than not getting caught up with your individual spendings and oh but do you what was that pain because you'll be transferring money to each other all the time generally I'm sure so that could get lost in yeah so I mean if you went out for a meal the pair of you and it was something you decided to do together that could come out of a joint account couldn't it yeah true if he wants to take you out for your birthday it should probably come out of his so I think we can be pragmatic and a lot of this is fairly sensible all a joint account gives you is visibility and I think that's going to be really important for mutual accountability there's a lot to be said for removing any barriers I think and making it as easy as possible for you to work on this stuff together I just think a joint account facilitates that more easily so this next question I promise you wasn't written for my benefit it um so what if one person owns the home and the other one moves in do they pay rent how does the split work i i feel like it sort of makes sense for them to pay for the right to live there yeah to some degree how does that yeah well how does it work with the you yeah is it just bills you know is it you would essentially be giving your partner free board wouldn't you free lodgings I'm not sure any sort of reasonable partner would want to kind of accept that now I'm not a lawyer but if you own the property and your partner contributes towards it I'm not 100 % sure of the legal position Yeah, because you don't...

11:05If you don't want them to have stake in the house, not for a malicious way, but just if you're in relatively early days in a relationship, buying a house together is a big thing. So one person's bought it. Yeah, one person's bought it.

11:16Pete:It's yours. It's your security. If the relationship fails, then your partner should move out. It's not like you would sell and have to give them some equity. Yeah, and so it would be worth knowing where the rent that they've paid falls with that. yeah honestly it's a legal question that and i think there might be merit in taking legal advice yeah at some point well i will be so in our house series i'll let you know what my answer yeah i think that's that's a good point we must remember to do that so that is definitely a question to ask your lawyer boyfriend moves in and he's paying me for the right to live there does he accrue any rights in his own name so if the relationship breaks down have i got to buy him out that extends potentially to, okay, if he decides to do a big DIY project and improves your home, what happens then?

12:06Do I have to rip out the thing he built or whatever?

12:09Pete:You can give him the wood back. Scrape the paint off and give him that in a bag. You know, obviously not, but would you, could he then come and say, well, I did all this, you need to pay me for that now. What's the legal position? You don't want to get sort of stressy about legal positions. It's not romantic. It's not conducive to a trusting relationship but avoid avoidance of doubt is good exactly because you can say he's the love of my life she's the love of my life I want to yes we're going to have this beautiful hopefully I hope I imagine everyone who gets married has that mindset and yet there's divorce things happen that we don't you know it's as a hopeless romantic it's painfully pragmatic but it's unfortunately it's if you get the thinking done now when you're in And if you're in the situation where the relationship breaks down, it's good to have had the thinking done already.

13:04Pete:We live, yes, very much so, and discussion done already. We live in a small C conservative state. So... What? Okay. Buzzer. A lot of the law in this country is still sort of predicated on the fact that we are an inverted commas Christian nation. Yeah. So marriage is still favored in the legal code. Yes. Now, mercifully, thank God, in about 50 years too late, you know, same-sex marriage is now recognized, civil partnerships now recognized and given equal status with marriage. But there is still, you know, whether it's, no matter about sort of whether it's same-sex, heterosexual relationship or anything, the fact is marriage in whatever its form is superior in law to just living together.

13:58Yes, but brand new legislation's come out.

14:01Pete:Come out? Coming? Coming. Okay. Do you remember I've mentioned this to you? Literally in the last two weeks. Right, well then... If you've lived with a partner for like, I think it's three years. You're treated as common law. You get some sort of claim. Okay, well, these are things we might need to find out. But these are just emerging. Like, there's... Right, okay. You can find a family lawyer to come on the show, perhaps. We do. Yeah, that would be a good idea, actually. You know, ask a lawyer because what you don't want to do is to fall into a trap that you could have easily avoided. As ever, good communication and pre-thinking will serve you well.

14:34Yeah. All right. So we've talked about bills. Let's talk about saving together. Okay. So, again, do you think we could have or should have a joint savings account? Or should we keep our savings separate with the same goal in mind?

14:48Pete:Ah, well, that's the point. I think if you're saving for something together, there's a lot to be said for the visibility of joint savings. Yes. Mutual accountability. Have we both, you know, we've decided that I will put in 100 quid a month, they will put in 150 quid a month, so there's 250 quid. We can see it going in. Yes. No doubt. I was expecting you to pay 150 quid in. By now, what's happened? Ah, forgot. Totally, really sorry. Goes in straight away. You know, we know somebody who's had issues with this, right? Mentioning zero names. And it was very clear. Yes. who had put what in and when the relationship broke down it was very clear who owed who what yeah right so and that when there was a lot of complication with that it was difficult but having it as clear as that gave the other person clarity oh yeah absolutely I mean to the point of potentially going to court yeah so again visibility mutual accountability joint account for stuff you're saving for together if you are saving up for a new bike or to yeah girls holiday or whatever Then do that on your own.

15:49Pete:Yeah. What if one person can save more than the other? Towards a shared goal? I guess so. Well, if you've agreed that that's okay, then that's okay. It's all just about agreeing it. Yeah, I think so. So if there's income disparity, we want to go on Aldi next year. It's going to cost us 1 ,500 quid. Nice. But we've got, well, whatever, pick a number, right? You know, then, but if you agree that out of that 1 ,500 quid, you know, one person will pay 700 and the other one will pay 800. Yeah. Good maths. Then, yeah, double check then. Then so be it, right? Agree it and stick to it. Agree it up front and stick to it.

16:21I think the important thing with that is you've agreed it.

16:24Pete:Yes. So that'll come down to something you agreed together, for sure. So a lot, obviously, those kind of have been savings towards a goal, haven't they? So also important is to have an emergency fund. We've talked about this from the get-go. Yes. Do you, well, first of all, do you think there should be a joint emergency fund? I don't know how necessary that is. I think if you were married, perhaps. because what about let's say in mine and Ben's case something happens to the house we both live in is it because it's my house I pay it well like we the washing machine breaks or we both use that yeah good question I'm not sure it 100 % matters whether you sort of have a joint pot but you could agree to yeah so let's just have a little like you know you put 50 quid a month in it yeah and let's get it up to sort of 500 So if the washing machine breaks or whatever, or we need to call a plumber out because a radiator is leaking, we can just get it done.

17:23Pete:We're both living here. We're both benefiting from the washing machine. Let's just put that part aside. We both contribute it. We make it. It's there, but neither of us touch it. So you could do that again, joint accountability. You could have that in a joint part. But it's not kind of as necessary as maybe a joint account for bills would be. Yeah. I think as long as you've both individually got emergency accounts, if one of you loses your job or whatever, then there's safety. yeah the one doesn't have to bail the other out if possible yeah that would be ideal do you think there's like a set number for a joint emergency no i think you know if you're the costs that you're paying together are uh you know obviously your main stuff house related you could do it as a function of that so yeah if you pay 600 quid all in all bills and food maybe it'd be good to have two or three months of that?

18:12Pete:Oh, yeah, I'd say most. Yeah, it's... If you think, what is the emergency that we're likely covering here? If it's something breaking, then you probably wouldn't need that much. No. If it's the boiler replacing, and one of you owns a home and the other one doesn't, then that's quite an interesting conversation to have, isn't it? Who pays for that? Or maybe it's a three-quarter, one-quarter thing. Yeah, whatever. It's like, actually, you know, it's my house, I need to cover that. Yeah. And so you would then need to think about that for your own emergency fund the amount you have aside. Yeah. So it's...

18:44Pete:Situational, clearly. Well, yeah, I think it's more likely for smaller stuff. Sometimes I'm thinking on my feet with these. It's like, oh, that's a good question. What would you say? Well, this is, because that was an ad-libbed question. One of those. Oh, there you go. Drop me right in it. That's my job. Yes. That is the point. I'm supposed to know what I'm talking about. All right, so, joint savings. Yeah. What happens if we break up? So money you've saved together? Mm-hmm. You're right, you were going to go on holiday but didn't book it yet. then you break up. I think you should return what you've each saved.

19:13Okay. So it's not like there was a grand in it let's split it 500, 500 if one person put 900 in.

19:17Pete:Oh no, I think it would be reasonable. Yeah. It would be reasonable to return what each of you would put in. That just sounds logical to me. Yeah. Do you agree? Sometimes common sense really is just the answer. More often than not to be honest. Yeah, exactly right. On the side of common sense. Yeah, for sure. Okay. So we've done bills. We've done saving money. Now let's talk about borrowing money. Something of an inevitability. Yeah. To some degree, yeah. So is there like a set amount that we can borrow because we're a couple? Oh, so I mean, usually if you're going to borrow together, it's going to be pretty major.

19:50Pete:Probably it's going to be a mortgage, right? Yeah. So yes, you know, affordability will be based on both you as a couple and as individuals, right? So obviously it starts headline with your combined income. I don't know what the multiple is. I want to say it's probably three and a bit maybe. it's been a very long time since I've been a mortgage advisor so you should ask Gary that really more and more evidence that we need to have Gary on this show have you asked him? no you were going to oh ok neither of us have asked him so yeah it would be based on joint income but income is only a headline figure for the last 10-15 years affordability has been much more important which is a good thing literally when I was doing mortgage advice it was pretty much what you earned.

20:37Pete:And if you, you know, spank 900 quid a month on a... It's not just loans, actually, because that would come out of the wash in the credit checks and stuff. But if these days affordability includes things that you're kind of committed to. So I once had a conversation with my own mortgage lender who wanted to lend me less because I was paying into a pension. So that's a good thing. Yeah, that shows I'm responsible. Yeah, and I can stop that if I want. And I said to them on the phone, I've just decided to stop my pension contributions. Oh, it doesn't work like that, Mr. Matthews. For God's sake. It freaking does though, because you're the one who's created this stupid rule.

21:08Pete:Yeah, I don't have to commit to it. But anyway, so affordability is a bit more amorphous and your individual financial situations will speak to that as well as your joint one. Can you define amorphous? I think I know from context. Amorphous. Difficult to pin down in this case. Not what I was expecting. Yeah, I mean, amorphous generally means... That moulds and shapes and moves is kind of what I was getting from that. Yes, yes. the sort of picture that comes into my mind is sort of misty, foggy, moving. Difficult to grasp. Do you want to see what my picture was? Do you remember Mio and Mal? No.

21:43Mio, Mal. Mio, Mal. La, la, la, la, la.

21:48Pete:I'm sure a lot of people listening to this will.

21:56Pete:But that's meaningless to me. That was a clay animation show. and it was these two cats that were literally just blobs but whenever they walked they would like turn into a ball and roll or they would flatten themselves and like hide and it was literally it looked like it was made in someone's garage it was just a white backdrop anybody who might listen to this is thinking of morph yes very similar to morph so yes a morphous that's what I was picturing morph there you go okay so I hope some people know what I'm talking about and I'm not just looking like I've got dementia don't switch off please please I'm going to find it and prove that it exists you're going to stick it in the edit 100 % yep don't get us a copyright strike I've only done that once that was the very first time I did it we've done it several times since and we've not had a copyright strike touch wood and you know you're welcome okay so does my partner's credit score affect me not as on not as individuals but on anything that you do together so it would definitely affect a mortgage application yeah 100 % so you could have a whiter than white credit score if your partner doesn't that will affect the application because you know if you borrow money together you're both individually responsible for the whole thing not half each yeah exactly you're on the hook for the law if something happens to one the other one should be able well they might not be able to sustain it because that does happen that's why I have emergency funds yeah no but I mean as in they're not gonna make it needs to be something that could be reasonable it's not like I would buy the reason you're doing it together is you can buy more but you're not going to suddenly buy 10 times more than what you can afford on your own.

23:36Pete:That's why the multiple of a joint income is low. It's a smaller multiple than that of an individual income. Yeah, they're not, you know, lend you sort of four an hour, five times the individual but also four an hour, five times the joint. That doesn't make sense. They're building in some protection for themselves against one losing a job for a bit or having, you know, a pay cut or whatever. So credit score, yes, it would affect you. if you're doing anything together. But I think it's a little bit of a myth that it's kind of addressed based. There's always horror stories. It's like, well, I moved into a house and the previous owner or the previous tenant, you know, had tons of bad debt judgments against them.

24:12Pete:It's like, well, they can't be applied to you. No, you're a different person. And so even if, for whatever reason, a lender does mistake, because sometimes it's automated these days. Yeah, mistakes can happen. You know, you can say, well, that's not me. And you can challenge them. Okay. Right, but it shouldn't affect you in the long term. Every now and then I get an email saying, you've had a soft credit check run on your account. Yeah, there we go. And I'm like, ooh, people are talking about me behind my back. Yeah, it doesn't feel soft. So what happens then if you've got this joint loan? What happens if one person can't make their payment?

24:44Pete:Well, you'll have to agree what's going to happen there. This is, first of all, where you have an emergency fund. So if, God forbid, you're laid off from work, hopefully you find work fairly quickly. I do think sometimes we might just need to accept work it's like if I can't find a job you know that I want to do or is equivalent to what I was doing I might just have to pick up some shifts in a bar yeah you know pick up some shifts in a restaurant or whatever just to get some money in because you can't mess around particularly with a mortgage no and it's not fair to the person you're in a mortgage with no no you almost need to do whatever it takes to make those payments really I mean it might require between you a complete reset of how you pay for things, hopefully for a short period.

25:29Pause the gym membership. Right, okay, no takeaways this month. All right, we'll do it.

25:32Pete:Yes, those are the conversations. And have the roof over your head still. Oh yeah, man, you certainly don't want to be repossessed. The black mark against your credit. Yeah, for sure. So the fact is, particularly on a mortgage, you are both responsible for all of it. So those payments have to be made. Remember, if you're in difficulty though, you need to talk to your mortgage lender. Yes. are they like the same as other loans when we talked about in the credit episodes about how they've got a responsibility to look after you is it the same with mortgages yes in fact arguably even more so right because it's the roof over your head so you know the second it becomes really problematic you know so don't it's not a case of ringing them as soon as you lose your job no unless you don't have an emergency fund and it immediately becomes problematic but if you think actually I'm going to struggle to pay that in two months time if things continue that's the point with which you need to have a conversation.

26:24Pete:Yeah. Because they may be able to say, right, we can give you a payment holiday for two months or we can switch you to interest only, which would vastly reduce your payments for a period and then we'll switch you back. They'll do everything they can to help you if you involve them in this thing. Yeah. Notify them early. So notify them early and have an emergency fund is what I get from that. Always. So let's talk about something different now. We're in the protection because this is a big deal. Sharing finances is a big deal. You're responsible with other parts, someone else. Yes, for someone else.

26:52Pete:somebody else is dependent on you to some degree. To some degree. So, nice and chirpy, what happens to the joint finances if one of us dies? So joint finances, so like a joint bank account, usually, I mean, essentially those are, they're both owned by all of you. So the other person would... It's all owned by both of you. So if, let's say, you had 500 quid in an account and God forbid your partner dies, that 500 quid essentially becomes... Yours. Yours. Because you owned it jointly. but what about the stuff in their bank account well unless they've willed it to you it doesn't matter so the answer is you need to have a will you've read the next question I think everybody should have a will every adult so you haven't had yet but you will need to particularly once you own a house so that's just something you need to tap on Fairwill is it that we've got a will?

27:40Pete:Fairwill yeah meaningfulmoney.tv slash Fairwill we'll put a link it's just an affiliate link so we get a fiver basically if somebody does a will but Fairwill do a brilliant job it's really low cost they do you can basically answer a bunch of questions online and they will write it or there's a phone service and they can deal with pretty much anything it's not just simple wills really really great online service or you can go to a local will writer or a solicitor on the high street or whatever yeah um but the fact is most people think well surely everything just go to my partner or to my next of kin the answer is it depends if you die without a will you are said to die intestate.

28:18Pete:So that's a horrible word, right? But that's the official term, right? So if you don't, if you die and don't have a will, you are said to have died intestate. If that is the case, then there is a set of laws called the intestacy laws or rules. And those laws determine where your stuff goes. Now, if you're a young adult, you probably don't have loads of wealth yet. Maybe, maybe not, right? But you might have inherited or whatever. But you may not have had a chance to build much for yourself yet. That's just the nature of things. But that doesn't mean that you don't want to actually have some agency over what happens after you die.

28:54Pete:And the only way to do that is with a will. A will will cost you like 90 quid or 110 quid to make. It's money well spent. Yeah. Do we need life insurance if we live together? I think as you build a life together, you become increasingly dependent on one another. and the impact of one partner dying will increase over time. So if you're both on a mortgage, obviously you would take out life insurance so the mortgage is paid off if either of you dies. I mean, life insurance is dirt cheap. I had a conversation with Life Search the other day. Justin Harper. Thank you. Good job you're here. And Justin just gave an example.