Tip Content Provided By: Kelley Long, CPA/PFS, CFP® at Financial Finesse
Many years ago while attending a wedding, I overheard the couple’s accountant (it was a HUGE wedding where literally everyone the couple knew was invited) tell them that the best way for them to manage their money was to just, “go all in, combine it from day 1.” The couple looked skeptical, and for good reason — what works for one couple when it comes to money very rarely works for the next.
The truth is that there is no right or wrong way to manage money in a marriage — the perfect way is the way that works for your specific relationship. And what works will most likely evolve over the years as your marriage changes. However, there are basically three different ways to do it, each with its own pros and cons. Here they are:
METHOD 1: GO ALL IN AND COMBINE EVERYTHING
Plenty of couples choose to do this and it works great. For others, putting everything in one pot leads to endless fights about differing spending and saving priorities. Regardless, the most important key to success if you choose this method is that both partners know what’s going on with the money and that you agree on your financial goals.
My husband and I were in our late 30’s when we married, so this was not even something we considered at the outset. However, as we are celebrating our third anniversary, we are definitely getting closer than when we first married.
Pros of going “all in”
- No worrying about who pays for what
- Easier to budget
- Could save a “spender” from him/herself
- Easiest to manage — if one person likes handling the money more than the other
- Harder to hide financial issues from each other — forces honesty
- Forces you to get on the same page with financial goals
Cons of going “all in”
- No autonomy — you can’t surprise each other with gifts
- Potential for fights about perceived over-spending or differing priorities
- Could put one person in a power position if the other person doesn’t get involved in the finances
- Can lead to resentment if one partner brings a lot of debt into the relationship
Who it works best for
- Younger couples who haven’t yet had a chance to establish habits and mindsets
- Families with one working spouse and one spouse who cares for the family — no need for an “allowance”
- Couples with nearly identical money personalities, especially if both are savers
- Situations where money is tight — no room for over-spending, so you feel like you’re ‘in this together’
- Couples where a spender requests that a saver help him/her to be a better saver (not so much if the spender isn’t on board)
METHOD 2: KEEP EVERYTHING SEPARATE
There are people out there who will tell you that couples who keep all their money separate are headed for failure and that they must have something fundamentally wrong with their relationship. My parents, however, are a testament to just how untrue that is — for 45 years they have kept their finances separate, divvying up the household expenses according to who has the financial capacity to handle it. The key to this method’s success is that they still have shared goals and they never go into big purchasing decisions without consulting each other.
Pros of keeping it separate
- Complete autonomy
- No need to justify spending (or saving)
- Helps ensure both partners know how to handle cash flow
- Avoids fights for couples who have opposite money personalities
- Can prevent issues surrounding debt that’s brought into the marriage
Cons of keeping it separate
- Allows for money secrets — could lead to trust issues
- Potential for resentment if there is a large income disparity
- More challenging to work toward common financial goals
- Shared expenses can be complicated
Who it works best for
- Couples with kids from prior relationships
- Couples who have established financial habits and don’t want to change
- Dual career couples with ample income
METHOD 3: HYBRID USING THREE ACCOUNTS
This is probably the most common method I see these days among peers, and also the method my husband and I use. We have a joint checking account where we pay all of our shared expenses, including the obvious things like housing and utilities, but also food and entertainment, as long as we are both benefiting. We contribute proportionately to this account, which can be a little complicated to figure, but once the numbers are set, we only have to adjust them when there’s a big change to income or expenses. For example, I carry my husband on my health insurance through work, including contributing to a Health Savings Account, so he puts more into our bills account to make up for the reduction in my paycheck for covering our healthcare.
Pros to the hybrid method
- Still gives autonomy while allowing shared expenses to be shared
- Feels fair — we both have about the same left over each month to spend on what we want
- Avoids fights about differences in spending — I like to spend money on wine and Athleta clothing, my husband prefers to spend his on bourbon and concerts
- Keeps us both engaged in the household finances
Cons to the hybrid method
- Can get complicated figuring out how much you each contribute to shared stuff, especially if there’s an income disparity
- Expenses outside the norm such as vacations or home maintenance require discussion about who will pitch in extra to cover
- Doesn’t necessarily solve for common fight areas, like gifts — we agreed that gifts for family would be a joint expense, but we have differing ideas of how much to spend
- Could lead to resentment if one partner tends to save all his/her “extra,” while the other partner spends
- Still have to designate one person to be “in charge” of the joint expenses to ensure you’re not making double payments
Who it works best for
- Dual income couples where income is pretty equal
- Couples who want to ease in to combining finances
- Couples who just can’t get on the same page about discretionary spending, although they are on the same page about what they can afford with shared expenses
NON-NEGOTIABLES FOR EVERYONE
Regardless of which method you choose, it’s essential that you both have a clue what’s going on with all the money coming in and out of your house. I’ve seen too many situations where the “non-money” spouse ends up in a panic trying to figure things out because the “money spouse” is gone, either due to death, divorce or even just a traumatic accident. It’s up to both of you to make sure that should something happen to one of you, the other would be able to quickly get up to speed and manage the household expenses.
ONE FINAL WAY WE AVOID MONEY FIGHTS
The only money fights that we’ve ever had have been when I’ve sprung a financial question or decision on my husband over breakfast or in the car — he wasn’t prepared to discuss it at that point, and therefore tended to react negatively regardless of the question. We quickly learned to designate what we call “office hours” to discuss stuff like this. It’s a standing appointment on our shared iCalendar, and we keep a running agenda of what we need to discuss in the notes.
Setting aside time to specifically discuss financial issues gets us both in an open and trusting mindset and that has made all the difference. Currently on our agenda: taxes, planning an international trip, adopting a dog and completing some household repairs. These may not be specifically about money, but they all involve money and are areas we may have differing ideas or opinions.
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