Just Married? 3 Ways to Manage Money as a New Couple
Creating a streamlined financial life as a couple can be challenging. Laura answers a question from a struggling newlywed and reviews three approaches to managing money based on your relationship and financial goals.
Laura Adams, MBA
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Just Married? 3 Ways to Manage Money as a New Couple
I recently received a question from Jessica W., who says, “I had a perfect financial system when I was single that I felt great about. But now that I’m a newlywed we need to join finances with a system of his, hers, and ours, so bills are paid from a joint account. But we’re getting tripped up knowing how much we should each get. For instance, should I get more money because I need to pay for make-up and hair care? If he picks up extra work on the weekends, should that income be his or go to a joint account? What advice can you offer for joining our finances?”
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Thanks for your question, Jessica. Creating a streamlined financial life as newlyweds can be challenging. In this post, I’ll cover three approaches that couples can take to manage money.
3 Ways to Manage Money as a New Couple
Since every couple is different, there isn’t a simple solution for how to merge money or manage it together. What’s right for you depends on the status of your relationship, your personalities, and how complicated your financial life is.
Here are the three ways you might set up your finances as a couple.
1. Create a complete financial union.
If you’re married or are in an equally serious relationship that you’re confident will stand the test of time, I recommend merging all of your finances. When you’re in a committed relationship, you’re a team, both emotionally and financially. That means all financial decisions and assets should be discussed and shared equally.
Money touches every aspect of your life. It’s better to decide as a couple how to budget, how much to save, whether to buy a home, and so on. Uniting money in joint bank and credit accounts allows you to truly work as a team to achieve your dreams and goals.
Since the day my husband and I got married, we’ve managed money as a unit. I can’t imagine any other system that would have allowed us to be as successful with our finances or our relationship.
There have been years where my husband earned double or triple my income, while I also incurred big expenses like graduate school. Likewise, there were years when I was the breadwinner.
You’ll always earn more or less than your partner or spouse, and you’ll also have different amounts of expenses and debt at different times. It doesn’t matter if only one person works, one earns much more than the other, or one brings more debt into the relationship. The financial give-and-take in a relationship is never even.
If you truly want to be married in every aspect of your life, all your income and expenses should flow through a joint bank account. Your incomes, expenses, debts, and savings are yours to share and strategize about together. Plus, an added benefit is that having fewer accounts and administrative tasks makes money management a lot easier.
It’s important to note that retirement accounts like 401ks and IRAs must be owned individually—you can’t own a retirement account jointly. Also, debt that you bring into a marriage remains in your name and isn’t your spouse’s legal responsibility. However, I still recommend tackling all debt as a couple.
You don’t need to change the ownership of loans and credit cards you previously opened in just your name. Instead of closing a credit card, which can hurt your credit, you might share a card with your partner, adding him or her as an authorized user.
As you need new credit accounts, such as a mortgage or car loan, you can apply for them jointly. Yes, this approach takes complete trust and transparency, and that’s the point.
When each of you knows the truth about your finances, it builds trust, fosters communication, and allows you to accomplish more together than you ever could alone. If, and only if, you’re a committed couple, consider leaping in and merging every aspect of your finances.
See also: Get Out Of Debt Fast—A Proven Plan to Stay Debt-Free Forever
2. Maintain complete financial independence.
While the benefits of merging money with your life partner are huge, so are the downsides if your relationship doesn’t work out. So, my advice is very different if you’re not married, not committed, or not confident that your partner will be with you for the long haul.
You might feel sophisticated buying a house together or sharing a credit card, but it’s incredibly risky to share debt, bank accounts, or investments with someone you don’t fully trust. Untwisting a financial knot with someone can be a nightmare if the relationship ends, even with a formal court-ordered divorce decree.
Co-signing a loan or credit card means that your credit is on the line and that you’re responsible for the entire debt. If you own it, you’re legally on the hook for every penny charged on a card, even if you weren’t the person who used it. And having a joint bank account means that either party can drain it at any time.
So, if you’re not committed, it’s better to maintain complete financial independence—even if you love each other. Wait to marry your finances until you’re certain that you’ll stay together.
But what about committed couples who just can’t agree on how to handle their finances, such as sticking to a spending plan or how much debt is enough? You’ve heard the saying that opposites attract in couples. Maybe you like the beach and he likes the mountains. Or you’re shy and she’s outgoing.
Financial behaviors and habits in couples can be very different as well. For instance, are you a compulsive spender or a strict saver? Do you swing for the fences or take a conservative approach with investments? Are you at ease with or terrified of debt?
It’s important to try to work through your money differences so they don’t drive a wedge between you. Fights about finances are a common reason that couples split, after all.
See also: 8 Tactics to Stop Living Paycheck to Paycheck
Ideally you should come to an agreement on how to manage every aspect of your money. But if you know your partner well enough to know that your financial philosophies will never be the same, it may be wise to split up your finances and keep completely separate accounts.
Some reasons that I’ve heard people give for their refusal to blend finances is the fear that combined accounts will make either party more likely to overspend or that one’s investment risk tolerance is much higher or lower than the other’s.
Another reason may be that one person brought a lot of debt to the relationship that they don’t want to burden the partner with. Debt that you bring into a marriage isn’t your spouse’s legal responsibility; however, as I mentioned, I still recommend tackling debt together.
Being remarried might be a situation where it makes sense to keep separate finances. If there’s alimony and child support to pay, for instance, a spouse with those responsibilities may feel that it’s too complicated to share equally with a new spouse.
The problem with managing completely separate finances is that both people have to be good bookkeepers and budgeters to make sure nothing falls through the cracks—and that’s usually not the case.
Also, some expenses aren’t easy to divvy up. How do you decide who pays for groceries, an appliance repair, or a bundled phone and cable bill? Splitting everything up by usage and as a percentage of income gets complicated.
To simplify accounting, you could split household expenses down the middle or allocate certain costs to each person. Some arrangement, such as one person pays the mortgage and the other picks up groceries and utilities, could keep the peace.
See also: 7 Financial Accounts You Need for a Richer Life
3. Partially merge your finances.
The third solution couples can consider is merging a portion of their finances. But again, if you’re not 100% committed and certain that you’ll be with your partner forever, or you have any reservations about merging money, then please don’t.
This is a yours, mine, and ours approach where you contribute to a joint account, but also maintain separate bank or credit accounts. It may work well for people who come together after managing finances on their own for a long time and want to keep some financial autonomy.
The downside to this approach is that there’s a lot more bookkeeping to do. You need to establish what flat amount or percentage is equitable for each person to contribute to the joint account and which expenses should be shared. This is what Jessica says she and her new husband are struggling with.
There’s no right or wrong way to divvy expenses up. Just be clear about what you want so there aren’t any resentments that could cause problems later on.
I’d try to find the most simple solution, such as having your paycheck direct deposited into multiple accounts. You might have 95% sent to joint checking and 5% to individual checking.
Your separate account could be fun money or used to buy gifts for your spouse. As long as you’re not using a separate account to commit any financial infidelity, it could be a good solution if you need some independence with your money.
If you prefer a system where you settle up with each other at the end of the month, try personal finance programs such as Mint or Quicken that import bank and credit card transactions into a dashboard. Expenses you want to split up can be assigned to a special account like “joint household expenses” so you can see a report and grand total for that category. If you need to reimburse your partner, apps such as PayPal and Venmo allow you to transfer money in seconds.
See also: 7 Micro Habits That Create Financial Success
How to Communicate About Money as a Couple
Even if you feel well-aligned financially and don’t see any potential problems, my best advice is to begin talking about money as early in your relationship as possible. By the time you have enough trust to ponder collapsing two households into one, you should already be talking about your income, expenses, credit, debt, and savings.
Communication is the key to a successful relationship and that certainly includes the topic of money. How a partner handles money or opens up about it should be a major factor in whether you decide to get serious in the first place.
I feel fortunate that my husband and I are more alike than different in how we view life and our finances. But we had our share of disagreements about money in the early days that had to be ironed out.
One aspect of good financial communication (and a prerequisite before merging money, in my opinion) is talking about your goals. This is the best way to truly know if you’re headed in the same direction as a couple.
For instance, if your idea of bliss is to make just enough money to live and work while traveling in an RV, but your partner wouldn’t dream of leaving his hometown, you may be headed for trouble. Or if your partner spares no expense because she believes life is short, but you want to live frugally and retire early, you may have fundamental financial differences that are irreconcilable.
Discuss the specifics of what you want to achieve with your money in the short-term, such as one to five years. And also talk about your long-term dreams for retirement. Some of your long-range plans may change over time, but having huge differences of opinion is something you need to address earlier rather than later.
Arrange your coupled finances in a way that works best for you, but also be open-minded about setting new guidelines and changing tactics if your setup for handling money together isn’t working.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.