Joining finances with a spouse or loved one can be stressful for many people.
Fortunately, couples have many options. What works for one couple may not work for another, but there are many different ways that couples can combine their money (or keep it separate if needed).
Know the Different Options
In the past, joining finances with a spouse or partner often meant that one person was the money earner and that person controlled the finances. Now there’s a wide range in the ways that different couples handle their joint finances.
One Joint Account and Two Individual Accounts
Some couples choose to have one joint account that they contribute to equally, and separate individual accounts on the side. Joint expenses are paid from the joint account, while the individual accounts can be used for fun money, gifts for each other and personal items. This works well for couples who have similar earnings. For couples who earn significantly different salaries, some find it is preferable to contribute a percentage of the income, rather than contributing equal amounts.
What’s Mine is Yours
The What’s Mine is Yours approach means that the couple has one joint account, with no individual accounts. All debts, all expenses, are treated as joint debts and expenses. Everything is paid from one credit card or one bank account. This is similar to the traditional joint account structure, and many couples maintain this financial structure.
For couples who don’t want to combine accounts, the “everything separate” approach means that each person has their own account, and there is no joint account. The expenses are divided up between the couple. Some couples may divide the expenses equally, other couples may assign different bills to each person. Often the “everything separate” approach works well for couples who each have their own investments and debt history.
Come to An Agreement
The best way to ensure that a couple’s financial system will work is for the couple to sit down and have a discussion about financial priorities, ground rules and expectations. Couples who have separate accounts may limit the amount of money they put in those accounts. They may also limit what can be paid for out of those accounts. Couples with one joint account may need to establish rules regarding how money is spent out of that account.
How is it decided what the joint account is used to buy? Are there separate discussions for individual purchases? Are there certain purchases that are automatically alright to make, and others that warrant discussion? Establishing these things in advance can prevent arguments in the future.
Bring Debts Into the Open
Often, couples who join accounts later in life bring their own debts and obligations to the table. These debts and financial obligations will have an impact on the way the money is spent out of joint accounts. Discussing these things in advance is important for the financial health of the couple, and is also important for the success of the relationship.
Couples who share finances, pay bills together and who make purchases as a unit must occasionally re-evaluate the way that their financial system is working. Even if the couple pays for bills out of separate accounts and have independence from each other financially, it’s a good idea to talk about bills, debts, purchases and money on a regular basis. This touch base can help prevent problems and ensure that everyone in the couple is on the same page.