Managing Finances as a Couple? Ask These Five Questions
Differences over money are one of the most common reasons for divorce. So, whether you’re just married, newly engaged, moving in together, or another kind of couple, how do you successfully manage your finances together? Here are a few questions to ask as you figure out what makes sense for you and your partner.
SHOULD YOU COMBINE YOUR FINANCES?
This is probably the most common question for couples. Do you create one pot of money for your combined spending and saving? Broadly speaking, there are three approaches you can take to managing your finances as a couple:
- Combine everything: Pool your savings and send your paychecks to the same accounts. You both have access to your combined incomes, savings, and credit as a couple. Research shows that couples with shared finances tend to be happier, but it could also be that happier couples tend to combine their accounts.
- Create some joint accounts, keep some separate: Share a joint checking account for paying bills and shared savings for your financial goals or retirement plans. Have separate accounts for your personal spending. One benefit to this approach is that not every financial decision has to feel like a conversation. The two of you have agreed on and budgeted for it already, so you can spend the money in your account on what you want, free of guilt.
- Yours and theirs: You each keep your individual accounts and credit cards, then contribute your respective percentage of shared expenses. Is it a bad sign for your relationship if you keep your accounts separate? Not necessarily. In fact, this might be the most sensible approach if one of you has a significant amount of debt.
Which is the best approach? It all depends on your financial circumstances and the nature of your relationship. Every couple does it a little differently, as you can see in this Wall Street Journal piece. Even the financial experts fall on both sides of the argument. Do what’s right for you as a couple. For my wife and I, we started combining our finances when we moved in together—we were in a serious relationship and didn’t need to wait to share a credit card.
HOW SHOULD YOU FUND ACCOUNTS AND SPLIT COSTS?
Think of this as a sub-question of combining your finances. Whether you keep some or all of your accounts separate, you’ll want to decide how you plan to distribute funds and share expenses.
If you have joint checking and savings, what percentage of your income should go into each? How much are you putting into your personal spending?
If all of your accounts are separate, what percentage of the bills are you responsible for? Will you split everything 50/50 or pay a percentage based on how much money you each make?
Some of this will be driven by the numbers, some by the nature of your relationship, and other parts will be driven by your financial needs and goals.
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WHAT’S YOUR FINANCIAL SITUATION? WHAT ARE YOUR FINANCIAL GOALS?
You can’t manage your money as a couple unless you have a conversation about money as a couple. Do either of you have debt? What assets do you have in savings, real estate, retirement funds, or elsewhere? Do you want to own a home together? Do you want to have kids? Are you all about that Mr. Money Mustache FIRE lifestyle (financially independent, retire early)?
It’s extremely important that you have an honest and open-minded conversation. It doesn’t do your finances or relationship any good to surprise your partner with a hidden debt. And you don’t want to be judgmental when you talk about your finances, either. It’s hard enough to talk about money as is!
(You know, on second thought, you should probably have these conversations long before deciding the nuts and bolts of money management.)
WHO’S THE MONEY MANAGER?
Every couple divides and conquers in some fashion—one cooks and the other washes dishes, one walks the dog while the other takes out trash and recycling, and so forth. So, who’s keeping track of your finances?
It doesn’t have to be one or the other, of course. You can both take ownership of your accounts. For instance, you can use a budgeting app that lets you both enter and track your transactions. But there are still ways of splitting it up. As one example, maybe you’re the stockbroker who oversees your retirement plans and investment accounts, while your partner takes care of the day-to-day by paying bills and building your emergency fund.
But there are many couples in which one person is solely responsible for managing their finances. You might also decide to outsource some of your money management and financial planning to a broker or advisor.
Ultimately, you want someone in charge to make sure your financial planning is going as…planned.
HOW WILL YOU CONTINUE THE CONVERSATION?
The two of you have decided how you want to manage your finances. But the conversation doesn’t end there.
No matter what approach you take, make sure you check in regularly to see how you’re doing with your spending and saving, and how your financial goals may have shifted. Maybe that looks like a monthly “meeting” where you sit down and look at the numbers together. Or maybe it’s an annual review, both of the past year and what you want to focus on in the year ahead.
With enough planning, talking, and budgeting, you can keep both your finances and your relationship healthy.
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