There are many obvious ways in which the old adage, “two can live cheaper than one” is true. If you live in one household, you don’t pay double mortgage or rent; people living together use less power, water etc; you can make do with one microwave, or TV. And married couples – or so they say – tend to stay home more and spend less money on eating and entertainment.
But there are also ways couples can choose to organise their financial affairs to make savings, or to maximise their joint income, which aren’t available to singles.
Pay less tax
If you both have income from investments – bank deposits, dividends from shares and managed funds, etc – think about transferring some or all of them to the partner with the lower effective income tax rate. This works only up until both partners’ taxable income reaches the same effective rate, but the savings can be significant.
Pay less interest
Similarly, if one partner has debt – on credit cards or hire purchase agreements, for example – and the other has cash earning interest, it will generally make sense as a couple to use the cash to pay off debt. That’s because banks and other deposit takers/lenders pay a lesser interest rate to the people they borrow money from than they charge on loans, so the saved interest costs will be greater than the interest forgone on cash deposits.
Access higher interest
Banks and other deposit-takers are willing to pay higher rates of interest on larger deposits than on smaller ones, so consider pooling your savings to access higher rates. Again, there could be an advantage in concentrating deposits in the name of the partner on a lower effective tax rate. Do take tax treatment into consideration if you’re making joint deposits.
Review your insurance
Many insurers offer discounted rates to couples who have the same type of insurance with them. AA members, for example, will add a spouse at a discounted “associate member” rate. Insurers can also offer “couple” rates across a range of insurances – vehicles, and home & contents, for example. It’s also worth asking your AdviceFirst Adviser to find out what life insurers and health insurers can offer to you as a couple.
Working for Families
If you have kids, check whether you are entitled to Working for Families tax credits. The more kids you have, the higher the income cut-off, and it’s surprising how many couples on relatively high incomes assume they earn too much to qualify.
There are many other ways you can save money, and it’s worth going through your finances and spending item-by-item. If you both have the same online subscription, consider accessing it through one account. Link your loyalty cards to give yourselves greater spending power. Ask yourselves whether the cost of owning and running two vehicles is really worth the convenience.
The views and opinions expressed in this article are intended to be for general purposes only. To the extent that any of the above content constitutes financial advice, it does not constitute personalised financial advice for an individual client under the Financial Advisers Act 2008.
Before taking any action based on the above information, we recommend seeking advice relevant to your personal circumstances from a qualified financial adviser.
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