Believing “I can depend on my partner’s financial management” is a financial fallacy due to several reasons:
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Personal Responsibility: Relying solely on someone else for financial management relinquishes personal responsibility. Individual financial behaviour and knowledge are pivotal for financial security.
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Risk of Disagreements: Money is often an area of contention among partners. Depending on your partner entirely for financial matters might contribute to potential clashes and disagreements.
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Change in Circumstance: Circumstances can change swiftly. From relationship breakdowns to the sudden death of your partner, these situations demand personal financial vigilance and ability.
It’s easy to understand why one might fall for this fallacy. In relationships, we often divide labour based on skill sets or preferences. If your partner is a financial wizard, it’s tempting to leave them in charge of the money. Trust is a fundamental part of any partnership, and in a healthy relationship, there’s an inherent belief that your partner has your best interests at heart. The issue is not trust, but rather the need for personal empowerment and contingency planning.
An appropriate financial practice encapsulates:
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Financial Literacy: Make an effort to understand the basic concepts of finance including investing, budgeting, taxation, and retirement planning.
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Co-management: Financial decision making should be a shared responsibility in a partnership. Discuss and establish financial goals together.
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Personal Savings: Always have personal savings apart from the shared ones. This creates an additional safety net for any unexpected financial plunge.
Further readings:
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“Your Money or Your Life” by Vicki Robin & Joe Dominguez. Book Link. This book provides a comprehensive view of managing personal finances.
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“The Only Investment Guide You’ll Ever Need” by Andrew Tobias. Book Link. A clear, accessible guide on investments.
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“Smart Couples Finish Rich” by David Bach. Book Link. Tailored towards couples, this book gives financial advice for co-managing finances.
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“The Total Money Makeover” by Dave Ramsey. Book Link. This book talks about setting up an emergency fund, paying off debt, investing, and more.
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Article: “How Financially Literate Are Women? An Overview and New Insights” by Tabea Bucher-Koenen et al. Paper Link outlines the difference in financial literacy between genders and the importance of financial understanding.