We have all heard that money is the #1 cause of divorce. I am not starting with this to scare you — I am saying it because you need to be mindful of how complex it can be to merge your financial life with someone else. You grew up in completely different ways leading you to have completely different beliefs around money. Due to that, merging your finances will not be a simple task.
Influences in your life are going to tell you that you have to merge your finances together completely, but that is not true. There is not one correct way to handle your finances. Just because you have separate checking accounts does not mean you trust or love your spouse any less. This is your life, you get to pick the best way to manage your finances with your significant other.
To help you understand your options and determine the best structure for you, I wanted to outline the 3 to 4 most common ways you can manage your finances as a couple.
#1 Completely Joint Finances
With this structure, you manage your financial life as one. All income you have goes into a joint checking account where you use that account to pay for your monthly expenses (savings, debt, mortgage payments, utilities, food, etc.)
Everything you do with this approach is together. Sure, you have to have separate retirement accounts, but you view your financial life as one. Your spouse’s debt is your debt. So you will help pay it off through both your incomes. “What’s yours is mine and what’s mine is ours.”
#2 All Finances Separate
Couples can also view their finances in the exact opposite way, as completely separate. Many times in this structure couples will split up responsibilities based on needs — meaning one spouse is responsible for mortgage, insurance, gas, etc. and the other is responsible for utilities, food, entertainment etc. They have all separate accounts and almost manage their financial life like roommates after college would — where you divide and conquer certain expenses when you can but pay for all your own things on your own.
#3 Combination of Joint and Separate
Plenty of dual income households manage their finances this way, especially if they get married later and are used to managing their own financial life.
Most times, these couples have a shared checking account where they pay for their shared monthly expenses (mortgage/rent, utilities, food, etc. typically they only share on expenses in the needs category). Let’s say a couple realizes that their shared monthly expenses are $4,000, they would then each put in a certain amount of their income to get to that $4,000 — then the rest of their income goes into their own checking account. Many couples like this, because it allows them to spend their own money the way they like vs how their spouse wants them to spend their money. I have found this structure works well if you take care of priorities first like savings, debt, retirement, etc. Then each individual is allowed to spend their surplus however they want.
#3b Combination of Joint and Separate – But Each Should Take Care Of Own Responsibilities
Some people take this a step further and handle things in a slightly different way. In this option, they view retirement and debt as the other persons. So if one spouse has credit card debt, car debt, student loan debt, etc. they view that as that one person’s job to take care and should only use their income to do so.
So What Option Is Best?
Really, any of these models can work for you and your spouse. What is important is that you talk about it and figure out the structure that will lead to the best outcomes and least amount of fights — but remember, pushing things under the rug is not the right way to handle money. You need to have open conversations and create a plan on how to manage your finances and goals. Don’t listen to what other people say, there is no right way to handle it. Pick the way that fits your family.
If you are looking for an advisor and want to learn about how this specifically matters to you and your plan, you can book a meeting with this link.