Finances are a hot topic for any couple. Money is often cited to be one of the major factors in a lot of divorces. There are a lot of ways for couples to manage their finances. How do you manage your money with your spouse?
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Everything is ours
This way is one of the most popular ways for couples to manage their money. All the earnings are combined in one pot and all the expenses are paid out from this pot. It might be a one income household or one spouse earning a lot more than the other, everything goes in one pool, after that is common money. This is one of the easiest systems too, but for this to work smoothly, the spending patterns of the couple should be very similar.
How to make it work?
- Have common goals and a joint budget
- Have regular discussions esp. if one person manages most of the bill paying
- Have a threshold and discuss purchases over that threshold
Mine, Yours and ours
This is a hybrid method, some bills are paid jointly but part of the money is managed independently by each spouse. There are two ways to implement this –
50/50 : Each spouse has their own separate accounts and there will be one common account for household bills. Each spouse contributes to pay half of the household bills – mortgage, utilities, groceries, children and other monthly bills. The left over amount in each spouses account is spent according to their wishes. The problem with this method is, if one spouse earns a lot more than the other, it leaves a lot of extra cash for the higher income spouse and very little for the lower income half.
Proportional contribution : This fixes the problem with high income gap. Each contributes a percent of income proportional to what they are earning to the common household bills. If one spouse earns $100000 and the other spouse earns $50000, and the mortgage is $1500, the spouse earning $100k contributes $1000 to pay the mortgage bill whereas the other spouse picks up the rest of it.
How to make it work?
- Discuss savings. Both have to contribute for retirement, common goals and emergency funds. Discuss on how that will work.
- Be aware of each others spending habits. If one spouse is a saver and the other person is a spend thrift, it might strain the relationship.
- Have a common joint account to contribute and pay the bills from.
Lets keep it separate
This might work well for couples getting married at a late age or unmarried couples living together. In this method, each person takes care of specific bills – one spouse pays for groceries, utilities and kids expenses and the other spouse takes care of the mortgage.
How to make it work?
- Clearly discuss each spouses responsibility and settle on a fair system.
- Discuss the ways of paying exceptionally large bills (if kids need braces)
- Discuss long term goals. Know how you are going to handle savings and retirement goals.
How we do it?
If I have to categorize our system, I would put it in the “everything is ours” method. We are a dual income no kids household. We have a budget and a set of goals – long term and short term. Each of us contribute to our retirement savings, almost equal amounts. And we pay all our household expenses from my husband’s salary and “pay” for all our short term and long term savings from my salary. We do this just because we already had separate accounts we brought into this marriage. But we see all the savings accounts as ours and the contribution is ours.
There is no one size fits all strategy. We should just pick one that will work well for us. I think as long as we have some guidelines and work towards a common goal, we should be fine.
How do you and your spouse manage your money?
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My wife and I are hard-core all-for-one, one-for-all with our finances. She has small separate checking account for her personal spending, funded from our joint account. That was my idea – so I’m not forced to see what she is spending her money on, some of which I don’t understand!
One factor some people overlook in this equation is asset protection. In many states, including ours, marital assets held as tenants by the entirety are more secure against attacks by personal judgment creditors. We are very careful to define this form of joint ownership for all of our major assets.
My future wife and I both have discussed having a budget. We will both get spending money and then each week spend some time discussing where we are financially. I never thought about having a personal checking account for her own personal splurges–but that is a pretty smart idea!
My wife and I determined that we want to maximize savings and I made it automatic. We enjoy traveling and include savings for that. We keep a low profile lifestyle and I monitor the expenses to meet those goals. We work together on the planning of the budget, but I keep us on track to our goals.
Everything is ours. We each contribute to the household in different ways, sometimes financially but often intangibly and just with hard work. I think it should be a partnership, equally shared.
We just have one big pot for our money. Joint names on everything. Neither one of us are spenders, and we don’t generally go on independent trips or anything, so there has never been a reason for us to keep separate finances.
I think having common financial goals is one of the most important things in a relationship. It is no fun to fight about money, and I would go nuts if I saw my husband wasting money on stupid things.
I manage all the household finances, and I talk our financial situation over with my husband frequently. Everything is an ‘open book’ though. If I died tomorrow though, it would not be a seamless process for him to take over, so we need to do better.
Looks like “everything is ours” is the mostly used way to manage finances. As I mentioned in the post, conceptually we keep everything in one pot but we have not closed all the individual accounts we had. I am just worried about losing all the checking/credit history we built so far to completely close them out.
We are in the everything is ours category. Before we got serious about our finances I took care of everything, but now we actually have meetings and focus on our financial goals and figure out how we are going to get there. This has made things less stressful by far. I still do the finances but it’s nice to have someone to bounce ideas off of.
My wife and I also put everything in the “ours” bucket, pay bills and decide together what to do with the discretionary funds. My wife and I do most everything together anyway, so this works for us. 🙂
Slate did a big series on this early this year http://www.slate.com/articles/life/home_economics.html
It was really interesting.
Hubby and I are both “common potters”. We’ve been this way since before we were married.
We do each have a monthly allowance though, and can save up money, allowing us to make a big purchase (often a gift for the other) without consulting. Before the allowance system, our threshold for what we could buy without a conversation really depended on our current financial situation- sometimes it was anything over $5, and others it was up to $50.
Great post.
I would say my wife and I use a hybrid method. Both of our money comes to one pot. We use this money to achieve our long and short term goals. We both have to agree on how the money is ultimately spent/invested/saved. Out of that pot we send an agreed amount of money to each others personal accounts (fun money). Right now it is 500 dollars at the beginning of the month. She spends her fun money how she please and I spend my fun money how I please. Life is simple 🙂
Mr. LH and I are also a DINKS household and we’ve always been an “everything is ours” kind of relationship. Thankfully, we know each others spending habits and budget and set goals together. There are no secret spending sprees or hidden habits (especially since I can see everything! ;)) It’s always worked for us and is easy to keep track of. However, I know plenty of couples that do a hybrid of the other strategies. I’d say, whatever works for that couple, go with it.
We do the 50/50 his, hers & ours method. We’re both very happy with it. We’ve had fairly disparate incomes in the past, then exactly the same incomes, and now we’re back to disparate but in the opposite direction. It’s still worked out fine, I think because we don’t make a big deal of it. If one of us wants to do something that the other doesn’t have in their budget (or the desire, for that matter), the other just pays for it.
Great post. The way that my ex-wife and I did it was whatever she made she kept for spending money. The understanding was that she couldn’t take on any debts. There was a huge income gap. I paid all the bills. This system worked for us, I guess.
We’ve been doing the separate account thing for almost 15 years and it’s just now that it’s not working anymore. When you don’t have a lot of income left over after spending and automatic savings like the 401K, then it’s simpler. Now that we have unequal levels of expenses (I still pay a lot of the bills and the ones he used to pay are paid off), it’s not working as well. Although we are on each others accounts, I have never really accessed his even though the bank is down the street. It’s silly I know, but to me it still feels like that account is ‘his’ money, not our money…even though he doesn’t feel like that at all. I think mentally it would be good to have an “our” pot.
My husband and I have a all the money is ours account. However in the beginning having this type of account caused problems simply because he is more of a saver and investing and I will lets just say not so much. We had to break down what goals we could do together. I now have my own personal account and so does he that is solely for our personal expenses. We both get the same amount and if I spend mine on purses or shoes its okay. Same as him funding projects that might lose or make money but in the end nothing affects the family emergency or expenses accounts.
We’re currently using proportional budgeting. After reducing our household expenses and having one of us on mainly freelance income, my husband’s money,75% of his net pay, goes entirely to the joint checking account and my variable income gets sent to joint savings. This has helped build our savings aggressively and kept a steady amount going to pay bills.
We go 99% “Ours” route. The only separate money we have is the monthly fun money we both get, like adult allowances. We can both touch all of that too since it’s in joint ING accounts, but that money is for each of us to spend whatever way we wish, lol.
We’ve been married for 30 years and everything has always been ours. Joint accounts always. It takes mutual trust and agreement on how to use money. It works for us and certainly simplifies our financial life!
For us, we put it all together. trust! 🙂 And I completely trust my wife.
She does pay the bills, but I have to coax her to spend. I’m the shopper … except that I’m not much of a spender.
If one’s spouse (whether it’s husband or wife) is of like mind when it comes to saving, spending, being thrify/frugal, etc… it’s alot easier to achieve milestones. We are DINK’s .. Double Income, No Kids. Easy to understand those who have kids aren’t able to sock it away as easily.
We’ve always had one account, but then again I’ve always been the one to work outside the home. I do though have a habit of stashing a little nest egg, dollar by dollar, until I have enough for a special night out for the both of us, or a gift to myself or to my honey.
My wife and I combine our finances and we budget together and it is our insurance for success in our marriage. I think if you do things together it leads to less strife in your marriage.
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