Check out these 8 different ways to manage money as a couple. Stop the money fights with your partner by choosing the method of handling finances that works best for the both of you.
My husband and I are opposites in many ways.
He’s tall, I’m short perfectly sized.
He’s a runner, I’m a sitter.
He’s a morning person, I’m a night owl.
He likes to shower at night (ugh, why???), I like to shower in the morning.
I love that we have different personalities, habits, and quirks. It makes life interesting.
However, I knew that we had to be on the same page with how we dealt with our finances. There are so many statistics that point to money problems as a major cause of divorce. I didn’t want to have anything to do with that.
And so after we got married, we sat down and tried to figure out how to handle our finances as a couple.
There are so many ways to handle money with your partner and I hope to summarize them here. Then, you and your partner can sit down and decide which way works best for the both of you.
Will you pick the right one the first time? Maybe. But chances are there is going to be some trial and error. Don’t let that stop you – getting on the same page financially with your partner will get you one step closer to a successful lasting relationship.
1. Combine all your finances
The details. What’s yours is mine and what’s mine is yours. This is the old-fashioned (but not necessarily outdated) way couples manage their money. All the money goes into one pot and comes out of one pot.
The good. You guys have complete transparency with finances. You are on the same team working towards the same goals. Your motto: sharing is caring.
The bad. Every little itty bitty purchase you make, your spouse will know about. You can’t even get them gifts without them knowing where you purchased it and how much it cost.
Complication scale. Super easy. All of your income goes into the same bank account and all your expenses come out of the same bank account – could it get any easier?
Making it happen. Open up a joint banking account. Make sure each person has equal privileges and access. Deposit all paychecks into this joint account and pay all bills from this joint account.
2. Combine finances, but each partner gets fun money
The details. You combine your finances, but each person gets a ‘fun allowance’ every month that they could spend on whatever they want!
The good. You get the benefits of combining your finances (complete transparency), but your fun money allows you the freedom to buy whatever the heck you want (without your partner agreeing, or even knowing). The guilt of those random expenses are gone! You avoid discussion and judgement over personal expenses. It truly doesn’t matter if you spend $200/month on donuts!
The bad. If one of you is a saver and one a spender, the balance of your fun money may be drastically different in a few years. One of you may have thousands; the other, just pennies. This isn’t necessarily bad, but one of you may be “rich” and the other “poor” in terms of your fun allowances.
Complication scale. Pretty easy. The only complicated part is the semantics of how the fun money will be dispersed and tracked.
Making it happen. Open up a joint banking account, deposit all paychecks into the joint account, and pay all bills from this joint account. Figure out how much fun money each person is going to get (will it be the same amount?). Figure out how to disperse the fun money: will each person get cash every month?; will each person have a separate bank account for their money?; will it simply be tracked in budgeting spreadsheets or software? Discuss what type of expenses are for your fun money (and which expenses belong in your joint budget).
3. Keep your finances completely separate
The details. You guys are married (or dating), but your finances aren’t. Your money doesn’t intermingle – you’ve got separate bank accounts, budgets, bills, etc.
The good. Each of you are in control of your money. You don’t have to financially rely on your significant other, and they aren’t relying on you. If your partner is bad with money, it won’t affect your finances.
The bad. You may be clueless about how much money your partner is making, how much they are spending, saving, wasting, giving to family, hoarding, etc. You are totally uninvolved in their finances (and vice versa) and that may make you feel uncomfortable, suspicious, worried, or jealous at times. You might not have the same financial goals. You may have a lot of disagreements on who should pay for what: housing, utilities, kids’ stuff, vacations, etc. If there is a big discrepancy in finances, you may be living two completely different lifestyles.
Complication scale. In some ways, this is easy: you only have to worry about YOU, and your bank accounts, retirement accounts, investments. But in many ways it’s hard: you may still worry about your partners finances (even though it’s separate from yours), it’s nearly impossible to have no shared expenses so that may get confusing/hard to deal with, and the emotional aspect of separate finances could get ugly.
Making it happen. Make sure you both agree that this is the lifestyle you want. Talk about those expenses that you are both responsible for (housing, kids, utilities) and how you are going to deal with them. Talk about who is going to pay for simple things like date night. Talk about what will happen if you have kids and one person wants to stay home. What will you do for retirement/savings? Will you keep your assets separate too?
4. Split shared bills 50/50
The details. Every expense is split two ways. You both contribute the same amount of money towards all bills (hence the name 50/50, where each person contributes 50% of the bills) to be used for any agreed upon shared expenses like housing, utilities, vacation, date nights, etc.
The good. You have control over your own money, but have an easy way to share expenses with your partner.
The bad. Splitting bills equally sounds fair, but what if one person makes significantly more/less than the other? Certain expenses will be a heavy financial burden on the person who makes less money. There may be some discontentment because they are struggling to pay their 50% share of the bills while the person who makes more can easily pay them. Splitting bills equally will affect future purchases (like houses) because you will have to make sure each person can afford the expense. There may be purchases down the line that one person thinks should be a shared expense, but the other person thinks should be an individual expense – a recipe for anger and discontent. There isn’t full transparency in each persons’ financial life.
Complication scale. In between easy and hard. You may have to revisit the dollar amount every few months. You may disagree on whether an expense should be shared or not. Maybe one person eats more than the other person. Maybe the house is under one person’s name, so the other person doesn’t feel right contributing to 50% of the mortgage without getting any of the equity.
Making it happen. Keep all of your accounts separate. Open one joint account under both of your names, making sure that you both have equal privileges. Create a list of all your shared bills (think: housing, utilities, cable, internet, groceries, property taxes, vacations, kid related expenses, house décor, etc.). Add up the cost of all these shared bills, and then divide that number in half. This is the amount each person must contribute. Decide if you want to contribute to the shared account weekly, biweekly, or monthly. Do you want to add a buffer (maybe 10%) to account for fluctuating or unexpected expenses? Do you both want to contribute an initial amount to the account so you don’t have to worry about a negative balance? Decide what should happen when a new expense comes along – will you have a discussion on whether it’s a shared expense or not? What will you do if you disagree?
5. Split shared bills by a percentage of each person’s income
The details. A percentage of each person’s paycheck goes towards joint bills. The person that makes more money pays a larger percentage of the bills; the person that makes less, pays less money. If you earn 65% of the income, you will pay 65% of the shared bills.
The good. Both you and your partner ‘feel the pain’ of the bills equally since you split them based on your salary. For example, the housing bill will be 20% of both of your salaries. You have control over your own money, but have an easy way to share expenses with your partner.
The bad. You don’t have complete transparency of your finances since you keep some of them separate. Any time someone gets a raise or bonus, the contribution amounts will have to change. You will have to decide what to do with year-end bonuses.
Complication scale. In between easy and hard. You may have to revisit the dollar amount every few months. You may disagree on whether an expense should be shared or not. It can get very complicated when one person has an inconsistent income.
Making it happen. Keep all of your accounts separate. Open one joint account under both of your names, making sure that you both have equal privileges. Find out how much you and your partner make and then calculate each person’s income percentage (if you make $70,000 and your spouse makes $30,000, then your percentage is 70% and their percentage is 30%). Create a list of all your shared bills (think: housing, utilities, cable, internet, groceries, property taxes, vacations, kid related expenses, house décor, etc.). Add up the cost of all these shared bills, and then multiply that number by your respective income percentages. This is the amount each person must contribute. Decide if you want to contribute to the shared account weekly, biweekly, monthly. Do you want to add a buffer (maybe 10%) to account for fluctuating or unexpected expenses? Do you both want to contribute an initial amount to the account so you don’t have to worry about a negative balance? Decide what should happen when a new expense comes along – will you have a discussion on whether it’s a shared expense or not? What will you do if you disagree?
6. Split responsibility for certain bills.
The details. Each person takes complete responsibility for certain bills. For example, one person many be in charge of housing, utilities, and cable – they pay 100% of these bills. The other person may be in charge of groceries, clothing, and kids stuff – they pay 100% of these bills.
The good. Each person is financially responsible for a portion of the bills required to run the household. Bills can be split it many different ways (larger bills can go to the person making more money; grocery bills can go to the person who does the grocery shopping).
The bad. The amount for each bill may change over time, so one person may feel like they are contributing more than their fair share. You might fight over who is responsible for surprise expenses. For example, if the roof needs to be fixed – who is responsible?
Complication scale. Whatever is in between easy and hard. Some parts are easy – everyone is responsible for paying and organizing their bills, so that simplifies everyone’s workload. Hard because there may be expenses that don’t fit into your already agreed upon responsibilities.
Making it happen. Create a list of all your bills (maybe you already have one from a previous budget). Go through each category and assign someone to be responsible for paying each bill. Make sure you agree on what will happen if a surprise (uncategorized) expense comes in. Make sure you agree on a time when you will reassess who is responsible for each bill.
7. Get an allowance from one spouse/partner
The details. One partner pays a monthly allowance to the other partner.
The good. Each person feels like they have their own spending money, even if one partner isn’t working. Finances are kept separate which may make the main earner feel more secure. It could be a nice way to make the non-earner (or low-earner) feel like they have their own money to spend.
The bad. You could start feeling like you have more of an employer/employee relationship rather than loving couple. Or, even worse, it could start feeling like a parent/child relationship. The low earner may feel left out or excluded from family finances…and even family decisions.
Complication scale. Easy on the numbers side. Significantly more difficult from the emotional/relationship viewpoint.
Making it happen. Since your finances are separate, read the “making it happen” part of Method #2 above. Then, decide on an appropriate amount for an allowance – what is something you are both comfortable with? Decide who is going to pay the bills. Decide on a time to reassess the allowance. Decide what the allowance should and shouldn’t be spent on.
8. Live off one income
The details. All of your expenses are paid from one partner’s paycheck and then you save 100% of the other partner’s paycheck. You are essentially pretending that you only have one income to live off of.
The good. This method ensures you are always saving money – that’s awesome! You will continue to find clever and frugal ways to save money since you are only living off of one person’s paycheck. You also have complete transparency of finances since you are both living off of the same income.
The bad. This isn’t possible for everyone. Not every couple can live on only one income…especially if their expense are high, they are trying to pay off debt, or they simply don’t make enough money.
Complication scale. Pretty freaken easy. Automatic deposits of one paycheck into a savings account and automatic deposit of the other paycheck into a joint account where all bills are paid from.
Making it happen. Set up two accounts – one for spending/living (paycheck #1) and one for saving (paycheck #2). All expenses should be paid from the checking account. Decide how you are going to save the money – will it sit in a savings account, will you distribute to IRAs, will you invest it?
So many options…which one should I choose?
Well, I can’t help you with this one. I don’t know you, your partner, your financial goals, your life goals, etc. Personal finance is personal.
Have a discussion with your partner and decide together which way of managing money suits you guys best.
None of these will work for us. What do we do?
You and your partner might not fit into a perfect cookie cutter way to manage your money. That’s okay. Personalize a method, combine two methods, ditch it all and come up with your own family way to manage money.
Just find something that works. There is no right or wrong way to do it.
If you can get on the same page as your spouse/partner with finances, you are setting yourself up for a successful relationship.
Which option avoids a budget?
Hehe, are you trying to make me laugh? No option avoids a budget. Whether you end up creating a joint budget, or an individual budget…the budget has to happen. You need to know what money you have coming in (income) and what money you have going out (expenses) in order to reach your financial goals.
How do you manage your money with your partner?