To Share or Not to Share? 5 Ways Newly Married Couples Manage Their Finances
If you’ve recently been married, congratulations! There are so many things to love about being married, not least of which is the opportunity to partner with someone who shares your values and vision for the future.
But if you know anything about divorce statistics, you know that financial problems are in the top five most common reasons for divorce. No matter how wonderful your marriage is, managing finances with another person can cause stress even for the happiest of couples.
However, being proactive and developing a plan to manage finances that works for you and your spouse makes it less likely that you’ll become one of those statistics. Your finances may be just one component of your marriage, but they’re important to consider early on so you and your spouse can develop a system to manage finances that encourages harmony and agreement.
What Is the Best Way to Manage Finances as a Couple?
The truth is, there’s no one right or wrong way to manage your finances as a married couple. Different couples manage their finances in different ways, and one way is no better than any other.
It’s all about finding the right strategy that works for you and your spouse – with the ultimate goal being a happy marriage, stress-free finances, and the ability to reach your shared goals.
Below, I’m sharing five ways I’ve seen couples successfully manage their finances. When you know your options, you’re in a better position to make a decision that is right for your unique personalities and marriage.
1. Mingle Your Money
Perhaps the most “traditional” approach for married couples is to completely combine your finances with your spouse’s finances. A combined approach means that you open a joint bank account and don’t keep separate individual accounts. All income goes into the joint account, and all expenses are paid out of the joint account.
With this approach, all income belongs to both spouses equally, regardless of who earned the income. Even if one spouse makes more money than the other, couples who use this system consider all income joint property. What’s mine is yours, and what’s yours is mine.
For this approach to work well, newly married couples need to be on the same page with all financial decisions and goals. Many newlyweds who successfully combine their finances spend time budgeting together, talk about their finances often, and generally agree on how to spend and save their money.
(Here’s a secret: Just because your parents did it this way doesn’t mean that you have to!)
2. Mingle Your Money, But With Separate Splurge Accounts
This is a modified version of the mingled approach described above. With this method, you and your spouse share a joint account where the bulk of your money lives. Both spouse’s paychecks get deposited into the joint account, and nearly all expenses are paid out of the joint account.
But both spouses also keep separate accounts they can use for “fun money.” You and your spouse will have to agree on how much each person can transfer to their splurge account each month. You may decide to transfer equal amounts or amounts that are proportional to income. You’ll also have to decide what expenses are considered joint fun money and what expenses are considered individual fun money which can be a bit of a challenge.
A mostly-combined-but-partially-separate method allows you to retain the transparency of knowing how much money you have together without sacrificing your autonomy to spend your fun money how you like. And a huge plus is that you can still save for goals together without feeling that one partner is able to save more than the other.
3. Keep Your Finances Completely Separate
Some couples prefer to keep their finances entirely separate for the duration of their marriage. This is absolutely fine, and it works well for many couples who stay married for life!
With this approach, you don’t intermingle your money. You have separate accounts, separate budgets, and pay for expenses independently. Couples who keep their finances entirely separate don’t share any joint accounts.
This approach works well for couples who simply have different money mindsets and different financial habits. Perhaps one person prefers to budget meticulously and track every dollar they earn, while the other is content to fly by the seat of their pants and trust that everything will balance at the end of the month.
Of course, this approach has some challenges as well. For couples living together, it’s virtually impossible to have no shared expenses. Therefore, it can be difficult to figure out how to split shared bills like rent and utilities. To address this issue, some couples prorate their shared expenses based on how much they use something or what their respective incomes are.
4. Keep Your Finances Separate With A Joint Account for Shared Bills
Another solution to this problem is to keep separate accounts, but with one joint account that pools money for shared expenses. With this approach, each spouse’s paycheck will be deposited into their respective accounts. Both spouses will then transfer enough to cover shared expenses like rent or mortgage payments, utilities, groceries, and more.
There are several ways to approach a joint account that’s only used for necessary shared expenses. Some couples prefer to split shared expenses right down the middle. You both contribute the same amount of money to joint bills. This approach may work especially well for partners who make similar incomes.
However, if one spouse makes significantly less than the other, the 50/50 approach may not be fair. In this case, some couples adopt a proportional (or percentage) approach, in which each spouse contributes an amount proportional to their income.
To use the percentage method, determine how much money each partner brings home (aka take-home pay) and then calculate each person’s income percentage. Next, add your shared bills together and multiply that number by each partner’s percentage. The numbers you get should determine how much each person contributes to the shared bills.
Here’s a formula to clarify how to calculate each partner’s bill percentages:
% Partner 1 Should Pay = (Partner 1’s Income)/(Partner 1’s Income + Partner 2’s Income) x 100
% Partner 2 Should Pay = 100 – Partner 1’s %
For example, imagine you and your partner collectively bring home $120,000 a year. If Partner 1 makes $80,000 a year and Partner 2 makes $40,000 a year, this is how you would use the formula:
$80,000/($80,000 + 40,000) x 100 = 66%. Partner 1 should pay 66% of the shared bills.
100 – 66% = 34%. Partner 2 should pay 34% of the shared bills.
5. Live Off One Income – And Save The Rest!
This approach only works if one partner makes enough money to cover both of your lifestyles and expenses. If this is possible for you, pretending that you only have one income allows the spouse who makes less money to save all of their income toward shared future goals or toward large amounts of debt like student loans.
This approach can be especially beneficial for couples who plan to have one spouse stay at home when they have children. Living off one income before babies are born helps train couples to know what a single-income lifestyle will be like, how to creatively manage their expenses, and how to find clever ways to save money.
And if this option appeals to you, consider taking advantage of auto saving options through your employer so that your entire paycheck (or even a large percentage of it) is transferred directly to your savings account when you get paid. That way, you won’t even be tempted to spend it.
Partner With a Financial Coach for Couples
When it comes down to it, one of the best things you can do for your marriage is to choose a financial management approach that works for both of you, rather than trying to do it the same way your parents did. At Budget Babble, we work with couples all over the spectrum who manage their finances in different ways and still work toward achieving shared goals.
To see if we can help you and your spouse develop a financial management approach that enhances your marriage and goals, send me an email to schedule a complimentary discovery call at lindsay@budgetbabble.com, or simply click here to find a time on my calendar.
Written By: Lindsay Dell Cook
Lindsay Dell Cook is a CPA and Financial Coach. She founded Budget Babble in 2016 and has been working with individuals and couples to improve their financial lives since. When she’s not working, Lindsay can be found on a walk with her family or snuggled up with a cat and a good book.
