Liz Koh: Love and ledgers, a guide for couples

Liz Koh offers tips to working out finance as a couple.

Your relationship with money is often a reflection of who you are as a person and how you interact with the world.

If you are by nature cautious, you will probably be very careful with your money. Likewise, if you are a go-getting risk-taker in life, chances are you will take risks with your money.

The way in which money is managed within a relationship often reflects how committed the relationship is and how the two people concerned have dealt with their individual differences in their relationship with money.

There is a continuum of possibilities for managing money in a relationship. Bad experiences with former partners can cause people to be cautious and keep their money separate.

A big difference in income between two people can have an influence as well.

Some couples keep track of every dollar that is spent on running the household and split the costs equally or in proportion to their income.

Such arrangements often reflect lack of trust and commitment.

That is understandable in the early stages of a relationship; however, as time goes by and the level of trust and commitment increases, ideally the way in which money is managed should change.

Money can be used much more effectively when it is treated as a combined resource. To avoid conflict, priorities for spending and saving should be agreed, and each partner should have an amount of money which they are free to use as they wish without reference to the other person.

Relationships don't always work and it is wise to think how finances would be separated along with the relationship. The longer the relationship lasts, the less important this is, so it is important to regularly review any agreements.

Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free, call 0800 273 847. For free e-books see moneymax.co.nz and moneymaxcoach.com