“What’s the best way to manage finances in a marriage?”
“How do other people manage finances in a relationship?”
“What’s the normal way of combining finances in a marriage?”
These are a few common questions people ask about finances in a relationship.
I love these questions because there is no right answer. It’s like every other aspect of a relationship. What you consider normal, another couple might think is totally bizarre.
What would drive one couple bonkers works for other couples.
Don’t believe me?
Ask 10 couples you know the following questions:
- Toilet paper on the roll – over or under?
- How do you load the dishwasher?
- What’s your morning routine?
Lastly, ask, “how do you manage finances as a couple?”
There is no right way to manage finances in a marriage or relationship.
There are wrong ways, obviously. Manipulative, abusive, and controlling behavior is never okay.
But, there is no right way. It’s an experiment that is always in process, always being refined. What worked at one stage in life may not work in another.
Let’s talk about the different ways you can manage finances in a marriage or relationship, a few pitfalls to be aware of, and how I am thinking about it as someone who is getting married in a few months.
3 Ways to Manage Finances in a Marriage or Relationship
First, everything I am talking about assumes a long-term, committed relationship. None of this applies to someone you have been seeing for six months.
There are three main ways to manage finances in a marriage or relationship.
- Everything separate
- Everything together
- Some separate, some together
Everything separate is exactly how it sounds. There are no joint accounts. Every bank account, investment account, and loan is in each person’s individual name.
Everything together is the opposite. There are no individual accounts, other than retirement accounts, which have to be in separate names. Everything else is titled in both person’s name with equal access.
Some separate, some together takes a balanced approach between the two. Some individual accounts exist, as well as joint accounts. The balance between separate versus individual does not matter – just that there is a mix of it.
Something to be aware of is that if you are married, most states are going to look at income, assets, and debt acquired in marriage as joint assets, even if you keep them in separate accounts.
If your spouse takes out a $20,000 loan and doesn’t pay it, you may be on the hook for it. If your spouse wins the lottery for $10,000,000, you may be equally entitled to a part of it. If you buy a stock that goes up 5,000%, your spouse also likely owns a portion of it.
While you can treat your assets separately, in the eyes of the law, most states consider married people to be a joint unit sharing in their financial successes and losses.
I’m a big fan of prenuptial agreements because they allow for more customization in how you treat your finances in marriage.
Let’s look at the pros and cons in each method of managing finances in a marriage.
Everything Separate
I’ve listed what I consider to be the pros and cons for each method below.
Pros
- Puts you in control of your own money
- Freedom to spend how you see fit
Cons
- Need to decide how to split bills
- More difficult to pay joint bills
- Lack of transparency
Everything Together
Pros
- Easier to pay bills
- Don’t need to decide who pays for what and in what proportion
- Complete transparency
Cons
- Less control
- Purchases may be scrutinized
- Need to spend time doing a joint budget
Some Together, Some Separate
Pros
- Retain some control
- More freedom to spend how you want than everything together
Cons
- More accounts = more complexity and money movement
- Need to decide how much goes towards joint vs. individual accounts
I know couples in happy marriages that use each method.
I also know couples in unhappy marriages that use each method.
In my experience, one method is not better than another. Like I said at the beginning of the article, one method may be more beneficial for one couple while that same method might be a disaster for another.
For example, if you grew up in a divorced family where a parent made a life-changing financial decision that caused a family to go bankrupt, I wouldn’t expect the transition to “everything together” the day you get married to go well.
More than likely, that person is going to want to retain at least some control over their own finances to start. They may work towards another method later in life, but I wouldn’t expect them to flip a switch that goes from individual bank accounts to joint in a day, or even a year.
On the other hand, someone who grew up with parents who stayed together, were happy, and had few financial issues might be more open to combining finances and having no individual accounts.
As Morgan Housel says in his book, The Psychology of Money, “Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works. So equally smart people can disagree about how and why recessions happen, how you should invest your money, what you should prioritize, how much risk you should take, and so on.“
What feels crazy to one couple may feel perfectly normal for another.
Don’t let what other people are doing influence the way that works for you.
Pick a method. If it works, great. If it doesn’t, talk about how you can change it to make it work.
If the current method doesn’t work, try a different method.
How You Managed Finances in a Marriage May Change
When talking with people about a financial decision, I’ve often felt like they think it is a permanent decision.
I see financial decisions as temporary decisions.
Life happens. Laws change. Babies are born. Family members die. Kids get sick. Parents lose jobs. Life-changing wealth is amassed in companies going public. Siblings need help.
The list goes on.
Life changes.
While having a solid financial foundation and reasoning for your financial decisions is important, it’s just as important to recognize that the decisions you made under a different set of circumstances may not be good decisions under the new circumstances.
New experiences change the way we look at the world and our approach to life, which in turn affects our finances.
I say this because as you experience life, and not necessarily because you are getting older, you may find one method no longer works for you.
If you start with everything combined and find it isn’t working, there is nothing wrong with switching.
If you start with everything separately, it’s okay to try everything combined, and if that isn’t working, switch back to everything separately.
It’s not necessarily a failure in your relationship or a bad sign. It’s just not working for where you are today, and that’s okay.
In my experience, I see more people lean towards everything separate or some together, some separate early in a marriage or relationship and switch to a more combined approach later in life, but not always.
Some keep it separate their entire lives. There is nothing wrong with that approach.
I want to normalize that as long as you are healthily talking about money, how you manage your finances in a marriage or relationship doesn’t really matter.
Leave open the room for change as life changes and continually check in to see how both are feeling about the method to manage finances in a marriage.
How We Are Managing Finances in Our Marriage
I’d be remiss if I didn’t talk about how we are approaching finances in our marriage.
I’m getting married in June, and I’ve been thinking more and more about how best to organize our finances.
I talk about money professionally for a living, and I still feel like I am in uncertain waters when it comes to this decision because I don’t know what’s going to work best for us.
I have a suspicion of what will work best, but I’m not 100% confident in that decision.
Right now, we have everything separate. There is no joint account. Thankfully, with modern technology like Zelle, it’s easier than ever to move money between our accounts.
For the most part, we are splitting bills 50/50, but even that comes with complexity because we don’t split every bill 50/50. Some bills are in my name, some bills are in her name.
One of us pays more in rent to make up the difference for another bill, but to be honest, I can’t remember which bill it is or for how much.
Do you see the problem?
We set up a system, and I am still not even sure how it is set up.
We’ve talked about a joint account a handful of times in passing to make it easier to pay joint bills, but we haven’t opened it yet. Someone is still a little uncomfortable with that (hint: it’s not me), and that is okay.
Even if we had a joint account, there would be added complexity of how much to deposit to the joint account. Do we split it between our incomes? What about net worth? How does that factor into the equation?
She has a higher regular income usually, but I have a higher net worth because I’ve been working for a decade and she just started working.
We both likely have similar long-term earning potential. Do we change it based on that information?
It’s tough to say.
I bring up these issues to highlight that no system is perfect. Each is going to require communication and probably a few adjustments along the way. Sometimes, it may require an entirely different approach.
Our system is working, but part of it also works because we don’t feel the need to split everything exactly 50/50.
We tend to rotate who pays for dinner, but even that changed. I used to pay almost 100% of the time when I had a higher level of income. When I quit my job to start my own financial planning firm, we had conversations about how life would change.
Life changed, and we talked about how to approach it differently, so we rotate now. Sometimes dinner is $30 and other times it is $50.
We aren’t keeping track of who pays what or a running tally.
We recognize we are becoming a joint unit over time and warming to that approach. As independent people, we both struggle with it at times. Okay, maybe a little more than “at times.”
And, that’s okay.
We also intentionally decided to keep assets and debts separate through the use of a prenup for the first part of our marriage. Then, at a certain date or event, income, assets, and debts acquired after a certain point are joint.
Are we crazy for wanting to keep things legally separate for the first part of our marriage?
No, but some people will think so.
They will say something along the lines of, “You are married! You should approach life together. You are one unit now.”
And for them, that works.
For us, it doesn’t. And, that’s okay.
We aren’t letting societal norms or individuals influence how we approach our money.
We picked a method to manage finances in our relationships, and we can adjust it as needed.
The key is to continually and mindfully check in to see how we are feeling about our system. From there, we can discuss changes and make adjustments as necessary.
It’s a work in progress and always will be.
Summary – Final Thoughts
Managing finances in a marriage or relationship is not easy. It takes work. It takes revisions. It takes open communication.
There is no right way to do it.
If you decide to manage finances in marriage by keeping everything separate, that’s okay. You can keep everything together, or do a split between individual and joint accounts.
Talk about it and decide what method you want to start with and don’t be afraid to make adjustments or change the method entirely.
What works for me won’t necessarily work for you.
I share what we are doing to bring light to the fact that even though I work around money, I don’t have the solution and still feel uneasy about it at times.
I feel confident our system will change over time, and that’s to be expected.
I wish you the best in learning what works best to manage finances in your relationship.