Different couples have different dynamics – emotional, physical, spiritual, and financial.
So, there is absolutely NO “one advice fits ALL” that can be applied to how people should manage their finances as a couple.
With this being said, I’d like to share with you today my observations from my clients’ stories as well as my own experience and let you decide what makes sense and what can work for you.
So, here’re 3 Simple Guidelines for Sharing Financial Responsibilities as a Couple:
1. JOINT OR INDIVIDUAL ACCOUNTS?
For many couples, having all money together is a preferred way of managing money. They have only joint accounts and pay all the expenses, allocate savings and investments from the joint accounts. If this is your situation and both of you’re happy with it – great.
However, keeping all money together doesn’t work for all couples, especially when it’s a second or third marriage… So, how can you handle your finances if you want to maintain some level of financial independence in your relationship?
In two-income situation in a relationship, the easiest setup is to have individual accounts, where both partners maintain their own assets, AND have joint account(s) where both partners contribute to in order to pay shared expenses.
It’s the least complicated way to share the financial responsibilities of the day-to-day expenses while maintaining a level of financial independence in your relationship.
From observing my clients over the years and from my personal experience in the first and second marriage, having both, individual and joint accounts, works well for most couples.
And I believe it works well because it takes away some of the control issues that tend to be associated with how OUR money is used.
However, the most important factor here is Trust and Transparency.
Because having joint account(s) requires transparency, trust and mutual commitment toward common goals.
Also, please don’t forget that while you have separate bank and brokerage accounts, you’ve got to have each other names listed as beneficiaries.
If you live in a house that was purchased by one of the partners prior to being in a committed relationship, you can create a trust document and spell out what will happen if you die or break up.
If you rent or purchase the home together, both partners should be listed on the lease or deed to the house. This will increase a sense of joint financial commitment and help avoid “my house” or “your apartment” language.
2. WHAT IF ONE PARTNER MAKES MORE?
So, if you choose to have individual accounts as well as joint accounts, the way each of you contribute to the joint accounts must be discussed and agreed upon, so you both feel content with this arrangement.
So, what contribution arrangements work best?
Most likely, you and your partner earn different salaries. So what would be a “fair” contribution to your joint accounts?
I would say definitely not equal contributions, not 50/50.
You can either decide:
1. Who pays for what. For example, one partner pays for the mortgage and taxes, another pays the utilities, food, cloth, transportation, etc.
OR
2. Contribute proportionally to your individual income. For example, if you make $40,000 and your partner makes $60,000, then you should pay 40 percent toward the shared expenses and your partner 60 percent. For instance, if the rent is $2,000, you’ll pay $800 and your partner will contribute $1,200.
To simplify this, you and your partner can set up a direct deposit from your individual accounts to the shared joint account for your agreed contribution amounts.
If you choose to go this route, make sure you adjust the contribution amounts if you have any changes in your life; for example, one partner starts making more money or one of the partners loses a job or is on maternity leave, etc.
Be ready to adapt to changes and keep some money in reserve in joint and your individual accounts to cover any unexpected expenses or to make investments.
3. DECIDING WHO PAYS FOR WHAT?
In the simplest terms, your money conversation can start with questions like these:
– What are our shared expenses? The mortgage/rent, utilities, internet, food, etc.
– How do we handle individual outstanding debt (e.g. student loan payments, car loan payments, individual credit card debt)?
Obviously, these would be individual decisions for different couples, but talking about these matters will help find solutions.
You can choose to offer to help your partner pay off outstanding debt and make him feel free sooner by creating a shared financial goal. This will likely create an additional bond in your relationship.
Or you may offer to take on a larger percentage of the household expenses, therefore, freeing your partner to tackle her debt payments.
Or, if your partner insists on paying his bills by himself, you can offer to pay for fun activities (e.g. dinners out, concerts, vacations, etc.) from your individual account.
These conversations need to happen and all the money matters need to be openly discussed so you don’t have taboo topics in your life as a couple.
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To your Health, Wealth, and Freedom!
