Why financial planning should be done as a couple – and how cash flow planning helps

, 11 November 2020

There are lots of convincing reasons why financial planning should be done as a couple. Here are a few, and how cash flow planning can help this.

Every financial planner has been in a situation where one of the parties to their discussions is more engaged than the other. Often, when you meet couples, it’s clear that one of them deals with the finances while the other one shies away because either they are not interested or, more commonly, because they find finance hard to talk about.

The failure to talk about money is a common problem. Research from M&S Bank earlier this year revealed that just 17% of people in a relationship regularly talk about finances with their partner. The study found that more than one in 10 are apprehensive about discussing debts, do not share how much they earn, or know details of their partner’s wages.

Psychologist Emma Kenny says:

“The findings show that money can be a taboo subject in some relationships. However, it’s healthy for couples to discuss their finances and it’s important that they engage in open and honest conversations about financial goals and ambitions from the start.

In fact, this is often the key to a successful relationship. While how much a person feels comfortable disclosing is down to the individual, we would encourage people to talk more about money with their loved ones.”

In the first part of our #TalkMoney Week series we looked at how cash flow planning can enable financial conversations and get people to open up about their finances.

This second part looks at why it’s important for couples to tackle financial issues together, and how cash flow planning can help.

3 reasons why financial planning should be done as a couple, and how cash flow can help

1. Both parties can achieve their goals

Over the years, you will have met many types of clients. Some will have all the money they need. Others may have experienced financial issues in the past (perhaps a business venture failed) and their attitude towards money is driven by a desire never to repeat those problems.

In a couple, you might find that each party has a different relationship with, and attitude towards, money. It might not be apathy that is preventing one party from getting involved: they might have had a bad experience in the past which you need to be sensitive to.

Of course, two people may also have strikingly different goals or life ambitions. One may want to retire as early as possible, while the other may love their job and want to work for as long as they can.

Many people may never have discussed their true dreams. It’s your skill in understanding the root cause of a client’s behaviour, and teasing the information from them, which helps them to open up. Cash flow planning can help you to ask careful questions which engage individuals in the planning process, such as:

  • What is on your bucket list?
  • What do you want to do with your life?
  • What does your dream retirement look like?

Many clients have a difficult relationship with money because they fear what might happen in the future. How often have you heard ‘have I got enough?’ or ‘will I have enough?’

Cash flow planning helps you to explore a client’s relationship with money. This means you can tackle some of the issues mentioned above.

2. There are tax efficiencies

As a financial planner, you know that there are benefits to working together as a couple.

For example, if one partner is the main breadwinner, they will often miss valuable tax advantages and opportunities. One partner may have an unused Income Tax allowance whilst the other is being taxed at a higher than necessary rate. Or, perhaps, the pair haven’t taken full advantage of their Marriage Allowance.

Working together can also help clients to draw pensions tax-efficiently, and to extract profits from a family business without paying too much in tax.

Cash flow planning gives a client a visual representation of how their finances will look, from now into their latter years.

Seeing a visual representation of their financial position makes it far easier for them to grasp how their wealth will be affected over time, and you can demonstrate the benefits of working together and using the appropriate tax allowances and strategies.

As paraplanner Aishling Costello recently told us:

“It’s definitely helped us engage our clients a lot more – it’s got clients thinking about their futures and their financial position… it lets them understand their own position a lot better.”

3. It can ensure their joint objectives are met

There’s no template for a financial plan, and no right or wrong way to devise one. One client might have a particular idea of how they would like their joint finances to work. Their spouse or partner probably has their own ideas.

What’s important is not that a couple have the same goals but, in the spirit of Talk Money week, they collaborate and talk about how they achieve their joint objectives.

You’ll have met some couples who have ‘joint’ everything. They pool all their income and expenditure, and they use joint accounts for their banking and saving.

Other couples may keep their finances separate, and only collaborate when they are saving for a joint expense, or to pay household bills.

What clients should do, and where cash flow planning can help, is to enable discussions about money with both parties. By visualising their joint future, it can encourage collaboration and a plan that works for both individuals.

Clients who collaborate can take advantage of a huge raft of benefits, from ensuring that the impact of death and serious illness are considered, to ensuring they can meet estate planning objectives such as ensuring they leave enough for their children. Only by working together can clients make the most of their money.

We’ll talk more about the benefits of using cash flow planning live in the final part of our Talk Money series.

Get in touch

To find out more, and how you can enjoy a free 30-day trial, please get in touch. Email sales@i4C.technology or call 020 3308 9448.

This article was written by Rob Tedder, Client Cashflow Solutions Manager at i4C.