How Couples Can Share Finances Fairly and Wisely

by Venus Zoleta, on category "Personal Finance"

February 21, 2019


How to Manage Finances With Your Spouse | Moneymax

When couples get married or move in together, they naturally take shared responsibility for their money along with their lives. How to split finances becomes one of the most important and urgent matters to settle from the get-go.

“Should we manage our finances jointly or separately? Is it really fair to share finances 50-50 as a couple? Should I rather keep my finances totally separate from my partner?”

There’s no one-size-fits-all rule when it comes to money management for couples. How to manage finances with your spouse depends on many factors, like your individual income, attitudes toward money, spending habits, and preferences.

It’s up to you how you’ll share expenses—as long as you do it fairly and wisely to avoid ruining your relationship. Just keep in mind these three nuggets of wisdom for managing your finances as a couple.

Set Your Financial Goals Together

Everything should start with a goal—more so if you’re handling finances with your spouse. Identify what you want to achieve together and how you’ll get there.

Some considerations you must discuss with your partner:

Find a Money Management Strategy That Works for You as a Couple

Taking your shared goals into consideration, decide on a strategy for managing your money together.

Newlyweds, soon-to-weds, and live-in partners may consider these five money strategies when exploring the best way on how to share finances as a couple.

1. Keeping Finances Completely Separate (“What’s Mine is Mine and Yours is Yours”)

Ideal for:

  • Married couples who want to maintain their autonomy in handling their individual expenses
  • Couples who are living together (Merging finances together may not be a good idea for unmarried couples. They don’t have the same legal protection with married couples, as in the case of a breakup.)
  • Couples who are both financially responsible and disciplined

How It Works:

  • Keeping money in separate bank accounts instead of a joint account
  • Splitting of shared expenses (utilities, groceries, rent, mortgage, etc.) either equally or based on the same percentage of income

Pros:

  • Easier to implement than other money management methods, as people are in charge of their individual expenses
  • Lesser chance of conflict due to money issues
  • Maintaining each other’s freedom in handling money

Cons:

  • Lack of sense of financial union
  • Spouse picking up the slack for the partner who mismanages his or her money (For instance, if your partner can’t pay his or her share of rent because his or her paycheck is already wiped out, you’ll have to shoulder the entire rent for the month.)

How to Manage Finances with Your Spouse Fairly:

  • Even if you manage your money separately, communicate about your individual finances regularly to plan your shared expenses accordingly.
  • Make sure you’re on the same page when it comes to splitting your responsibilities.
  • If you’re earning more or less the same income, divide your expenses 50/50.
  • If one of you is earning significantly more than the other, divide your expenses based on a percentage that’s proportional with each other’s income. This way, the higher-earning person pays more, and the lower-earning partner pays less.
  • Fight the temptation to overspend so that your partner won’t be burdened to cover the expenses you can’t pay for.

2. Combining Finances Completely (“What’s Mine is Yours”)

Ideal for:

How It Works:

  • Pooling all income in a joint account
  • Using the combined income to build joint savings and pay for all bills and purchases

Pros:

  • Easier budgeting, as both have control over their money and can track spending
  • No need to compute and keep track of each other’s contributions for expenses

Cons:

  • Dealing with conflicts when a spouse spends way too much
  • Resentment when the partner who contributes more feels that his or her spouse splurges their money
  • Not ideal for people with trust issues

How to Manage Finances with Your Spouse Fairly:

  • Keep your spending in check—always consider your partner before making a major purchase decision.
  • Identify a spending limit and agree on it. If a spouse wants to buy something worth more than the threshold, he or she can only proceed with the purchase when the partner agrees with it.

3. Managing Finances Both Jointly and Separately (“What’s Mine is Yours, But Let’s Keep Separate Finances, Too”)

Ideal for:

How It Works:

  • Sharing most of the expenses but still having separate incomes
  • Having both joint account (for shared expenses) and separate bank accounts (for personal expenses)
  • Both people contributing equally to the joint account

Pros:

A good compromise between sharing responsibility for finances as a couple and maintaining each other’s financial autonomy and privacy

Cons:

  • Quite complicated to manage several bank accounts and sets of expenses
  • Not ideal for people with trust issues

How to Manage Finances with Your Spouse Fairly:

  • Clearly define and agree on which expenses to pay from your joint account.
  • If you’re earning more or less the same income, divide your expenses 50/50.
  • If one of you is earning significantly more than the other, divide your expenses based on the same percentage of your income.

Read more: How to Budget as a Couple with Nico Bolzico

4. Living Off One Income (“I’ve Got This”)

Ideal for:

  • Couples in which one person makes significantly more money than the other
  • A spouse earning unstable income or no income at all (i.e., taking care of the kids at home, taking up college or graduate studies, having a serious illness, etc.)

How It Works:

  • Main income earner pays for all expenses
  • Keeping separate accounts, with the breadwinner transferring a weekly or monthly allowance to his or her partner’s bank account for household expenses, personal expenses, or both

Pros:

  • A sensible and practical setup for single-income households
  • No pressure for the other half to earn income to contribute for expenses

Cons:

  • Resentment coming from a perception of the setup being unfair to the main earner (However, raising kids at home—while not earning money—can be considered a full-time job.)
  • Non-earning spouses may feel less dignified receiving an allowance rather than making money on their own
  • Can easily cause disputes and misunderstanding about money management as a couple

How to Manage Finances with Your Spouse Fairly:

  • Both persons should be comfortable with and agree on the idea before going ahead with this setup.
  • The breadwinner should not treat the allowance as a favor being given to his or her partner.
  • The non-earning spouse should consider taking freelance work, part-time job, or side business if he or she wants to contribute to certain expenses.
  • Be clear on what specific expenses are covered by the allowance.
  • Make sure that the amount can adequately pay for the intended expenses.
  • Discuss the eventualities. For example, if the non-earning partner gets a full-time job, agree on the new money management strategy you’ll use. Also, talk about whether the partner will shoulder most of the shared expenses to make up for the years he or she didn’t contribute.

5. Living Off a Spouse’s Income and Saving the Other Half’s Income

Ideal for:

  • Couples who are both earning money, with one having a stable, well-paying job and the other having irregular income
  • Couples who will shift to living off a single income in the future (such as in the case of a partner who wants to become a full-time mom to her children)
  • Those with no emergency fund yet and/or plan to save up together for a home purchase or retirement

How It Works:

  • Using the income of the spouse with a steady salary for all household expenses
  • Setting aside the income of the spouse who earns inconsistently for savings

Pros:

An effective way to keep household expenses low, increase savings to meet your financial goals as a couple sooner, and prepare for having a single-income household

Cons:

Issues may arise when the partner with irregular earnings loses his or her source of income and stops contributing to the couple’s savings.

How to Manage Finances with Your Spouse Fairly:

  • Control your spending so that your stable income-earning partner won’t be burdened with paying for all expenses.
  • Stick to your budget and savings target.

Review and Discuss Your Finances Regularly

Regardless of the money management strategy you’ve chosen, always keep open communication with your partner about your finances. This will help you address possible problems before they happen. For example, if you’re worried about your partner spending too much (or being too stingy), don’t hesitate to let him or her know your concern.

Make it a point to review your budget, income, and spending—then see if these along with your money strategy are helping you achieve your financial goals as a couple.

Final Thoughts

Along the way, you might realize your current method may no longer work because your circumstances have changed, like a partner suddenly losing his job or being unable to work due to an illness.

You can change your strategy as you and your partner see fit. It’s okay to try different ways on how to manage finances with your spouse until you find the right balance between splitting your expenses and handling money on your own.

Which money management method for couples do you think will work for you and your partner? Have you tried any of these strategies? Share your thoughts and experience below!

(Photos from Freepik.com)