Money can be tricky to manage as a married couple. While there is no one-size-fits-all approach to cover every financial situation, there are some general principles that are best practices for successful relationships.
To help you think through your joint finances, I’ve provided three systems in my latest blog post to successfully divvy up your funds.
Guiding Principles for Couple’s Finances
Before you pick a strategy, it’s vital to uphold these core values in your marriage:
- Disclosure: Be forthcoming about your debts, spending habits, and anything else that might impact your financial situation. It can be difficult to share, but they’re essential if you want to handle your finances as a couple.
- Honesty: Don’t lie, cover-up, or hide your transactions. Being truthful is paramount to avoiding conflict and unnecessary drama around money.
- Open Communication: Have plans to make a big purchase? Want to go to college? Talk to your partner as soon as possible. Frequent and deep conversations about money will help uncover the best strategy for each decision.
- Goal-Setting: Define what you’re looking to achieve, both individually and as a unit. Create a budget that details your income, debts, and expenses to determine how much you’re saving to achieve your long-term goals. Setting a target will help you construct a solid plan to achieve it.
- Roles & Responsibilities: You’ll have to figure out if one or both of you will manage the money. Play to each of your strengths. Perhaps one of you is better at accounting, and the other thrives in high-level management. Or maybe you do everything 50/50. Talk through roles and responsibilities before setting a plan in motion.
3 Ways to Manage Money
Use these three strategies to start a conversation with your partner. First, if you’re in California, learn about the definitions and nuances of separate and community property. Then, take a look at your specific situation and goals to help you determine what works best. Remember though, without a prenuptial agreement, all income earned during marriage is community property, regardless of whether the account is joint or in your name alone.
1. Combine All Your Funds into a Joint Account
In this method, both you and your spouse open a joint bank account. You agree to deposit all your income here and spend exclusively from this account.
Keep in mind that you’re pooling your resources to pay for bills and save. You’ll have to decide whether expenses are paid 50/50 or if you want to account for who makes more money or has more debt. The latter adds a layer of complexity to accounting. Only go this route if one or both of you are committed to calculating proportional spending percentages on a regular basis.
Thus, a joint account is best for couples who want to streamline money management and view money as a shared resource for all expenditures. It’s a “we over me” mindset.
- Pros: It’s easier to manage one joint account.
- Cons: Surprise gifts will be harder to pull off and can get complex if you account for disparities in income or debt.
2. Use Both a Joint and Separate Accounts
Here you create a joint account for combined expenses like rent, groceries, utilities, etc. But each of you also has your own checking and savings accounts to do as you wish. Typically, you’d deposit both of your incomes into the joint account and then transfer an agreed amount into your accounts.
Remember the same considerations apply when deciding if expenses are paid equally or proportioned to your respective incomes.
With this method, your shared costs are covered. But you also have the freedom to buy things at your discretion or surprise your spouse with a gift.
- Pros: Shared costs are covered, and you have your own money too.
- Cons: You have to manage multiple accounts, and transferring to your personal account can start to feel like an allowance.
3. Use Completely Separate Accounts
This strategy allows both of you to manage money through your own accounts (and no joint account). However, this doesn’t mean that it’s each partner for themselves! It’s still imperative that you talk about finances regularly and discuss how you pay shared expenses.
In fact, you should communicate even more regularly than if you had a joint account. You’ll have to think through what expenses each of you will cover every month, how to spend money on large purchases and vacations, and who is responsible for paying down debt.
Separate accounts may work for those who are financially disciplined and talk often, but it may not feel as partner- or team-oriented as the other methods.
- Pros: Autonomy in managing your finances.
- Cons: It’s less transparent, and your relationship can become divided or contentious if regular communication starts to dwindle.
Put Your Plan in Motion
That’s a lot to consider! Nonetheless, talking through the strategies in this guide and upholding your core values will help you foster a successful marriage — one rooted in trust, honesty, and transparency.
Once you develop a sound plan, you can enforce it using a prenuptial or postnuptial agreement to help solidify it into a contract that ensures your financial future. Feel free to reach out to me to talk through your goals — I’d be happy to help.