Three Phases to Managing Finances in a Relationship

Money can be one of the most stressful aspects of sharing your life with someone, especially in the early days of a relationship. So far, my wife and I have successfully navigated our finances through three different times in our lives: dating as students, living together, and getting married. These are the three ways we tackled the “money conversation.”

THE “EARLY DAYS” PHASE

As in many early relationships, we both had separate, private checking and savings accounts. Neither of us had credit cards, so life was simple! Each month we would send two separate checks to our landlord, each for fifty percent of the total, and we paid for groceries, internet, and electricity in a very similar manner. As long as we were able to contribute our fifty percent on time, we could do whatever we wanted with the rest of our available funds. This made the most sense for us early in our relationship, where having the independence and security of separate finances was important. It also allowed us to live more affordably since we were sharing the financial load.

THE “WORKING FULL TIME” PHASE

After we moved to Vermont for work, it was time to address our financial situation again. Life was changing and our relationship had become much more serious. We decided it was time to open a shared checking account and start thinking about our money more like a couple. It took a little bit of work and a great many conversations to figure out a new system that worked for us.

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Like before, we kept our individual checking accounts as the primary accounts to deposit our paychecks, but now we would cover our shared expenses from our new joint checking account. A gigantic financial spreadsheet was born—a re-creation with convenient round numbers is below, which you can also download to use for your own shared expenses—as a tool to make sure the money was flowing to the right accounts. This spreadsheet was critical to the way we managed our money together as it told us exactly how much of each paycheck to transfer to our shared account.

It worked by combining our pre-tax income and then divvying up our expenses based on what percentage of the whole each of us made. This way, if one of us was making significantly more than the other, that person would pay a proportional amount of our expenses. For example, if one of us was making 60% of our total income, that person would also be responsible for covering 60% of our expenses. The idea was to make it fair, manage our spending as a couple, and still preserve some of the freedom we’d become accustomed to.

While we loved our percentage-based spreadsheet, naturally it wasn’t perfect. For example, we weren’t yet saving as a couple since any leftover money from immediate obligations (like rent or groceries) was for each of us to use as we pleased. We also had no way of navigating the world of credit, and our system didn’t account for sudden changes in our financial circumstances, such as unemployment. As we prepared to get married last August, it was time to re-invent our financial wheel.

THE “MARRIAGE” PHASE

As a married couple, we decided our individual checking accounts would no longer be our primary accounts by default. Instead, our shared account and new shared credit cards would take over that role and our individual checking accounts would be for personal spending money—after expenses and savings had been covered, of course.

Our new system also has a big spreadsheet that essentially acts as a guide but no longer relies on percentages. Instead, our paychecks are deposited directly into the same shared account. In this system, the couple always comes before the individual. It is only after all of our obligations, our shared goals, and our shared savings have been taken care of each month that we distribute whatever is left for our personal spending. We each get exactly half of our leftover funds in our individual accounts; if I want to go out and buy a video game or another pair of headphones that are just for me, that spending money comes out of my individual account. If there is no money in there, I have to wait.

We’ve always been big fans of the envelope method of budgeting, where any money coming in immediately gets put into a spending category. As soon as our paychecks hit, the money is organized using a budgeting app called You Need A Budget (YNAB). We operate using roughly fifty different “envelopes,” or spending categories, that span everything from vacations to eating out. YNAB even tracks our credit card purchases and automatically moves money from one spending envelope to the credit card payment envelope so we never run a balance. If we want to buy something, we create a new envelope to add money whenever we can. Until we’ve hit our goal and the envelope for that item is full, we don’t spend money on that item because our system shows that we can’t afford it.

Our new system has a few benefits that our old system did not. The envelope method of budgeting provides financial transparency around our spending habits. With YNAB (or another budgeting app, if you choose), we both have access to our accounts and can easily see what is going on. I do not exaggerate when I say I check our budget two to three times a day.

One particularly important benefit of our new system is our ability to save as a couple. This has enabled us to build a small emergency fund, as well as a “just in case” envelope separate from our emergency goal. One of our financial goals is to provide a buffer so that paychecks are not being spent on bills immediately upon hitting our accounts. Combined with an emergency fund, we have a cushion if, for some reason, one of us lost our job or had a medical emergency—we’d have a few months of bills already budgeted for to get us through the hard times.

Did we get to where we are overnight? Absolutely not. It took years of thinking about money, talking about money, and learning about money to find a system that worked for us as our relationship progressed. We leaned on friends, co-workers, and family for advice and support. As much as our systems have helped at the end of the day it takes discipline to stick to the system and make the most out of our money.

AN IMPORTANT NOTE ABOUT EQUITY IN PERSONAL FINANCE

I feel like it is impossible to talk about anyone’s personal history with money without mentioning two important things. Firstly, everyone is going to have a different capacity to follow through on their budgeting plan. If you aren’t able to reach your financial goals, it isn’t necessarily because you’re bad at handling money or you aren’t working hard enough. Because of a number inequities and biases in this country, there are people working harder or longer than my wife or I have who still find it difficult to get ahead financially. We’re incredibly lucky for the opportunities we’ve had, and we feel grateful for them every single day.

Secondly, it’s important to remember that any time you hear someone talk about their personal finances, it is just that—their personal finances. You shouldn’t feel pressure to manage your finances the way my wife and I have, and you shouldn’t compare your situation to ours! My hope is that this blog is helpful to you in some small way, and that you get something out of it to help you on your own personal finance journey.