4 Ways To Handle Your Finances as a Couple

Updated: February 4, 2021

What’s the best way to handle your finances as a couple? How can those in a relationship do money management? How should couples share their income and split their expenses?

It’s important to know the answers to these questions because money is one of the most common reasons why couples fight. In fact, next to infidelity, financial problems are the leading cause of divorce in America.

Unfortunately, there’s no best setup when it comes to handling money in a relationship. My parents combined their income and it worked for them. But I also know of a couple who found success in doing separate accounts.

Personal finance is personal, and what worked for others may not work for your case.

So, here are four options you can consider. The goal is to experiment and even customize these basic strategies until you find the best one for you and your significant other.

1. Separate Finances

Money is kept in separate bank accounts, and each one has full control over how their money is spent. All expenses are negotiated, which can either be split equally or however the couple finds fair.

For example, one can pay for the electric bill while the other pays for the water bill and cable TV subscription. Then for the groceries and rent, both parties give their equal share.

Benefits:

  • Quick and easy to set up.
  • Each one maintains financial autonomy, i.e. there’s no need to ask permission for personal expenses.

Challenges:

  • It’s not always easy to find a fair split when negotiating their common expenses.
  • One person can mismanage their own finances, which can affect their ability to contribute to the couple’s expenses.
  • There’s less sense of financial union in the relationship.

This can work for:

  • Couples who are still dating or just engaged.
  • Couples who both want to maintain autonomy over their own income.
  • Couples who are both financially disciplined.

2. Proportional Earnings

Money is kept in separate bank accounts, but each one has to contribute a portion of their income to a joint account. They maintain full control over their personal account, but the couple must have a consensus over how the joint account is spent.

For example, each one gives 80% of their income to the joint account, while keeping the 20% for themselves. They can spend that 20% in any way they want without asking permission from the other.

Benefits:

  • There’s a sense of both financial autonomy and financial union in the relationship.
  • Less likely to have conflicts on personal expense decisions.

Challenges:

  • There’s a need to maintain several bank accounts.
  • The set up can get complicated when the combined income is barely enough to over their joint expenses.
  • Shared account can get mismanaged if one lacks financial discipline.

This can work for:

  • Couples who are not legally married but living together.
  • Couples who both have substantial income.
  • Couples who tend to have a lot of personal expenses.

3. Joint or combined accounts

Money is kept in a joint account. The couple must both agree on how the money is spent, regardless if it’s for a shared or a personal expense. A joint or combined account is only possible if both have income. Otherwise, this setup becomes the One-income setup that’s described next.

Benefits:

  • There’s a great sense of financial union in the relationship.
  • With their incomes combined, there’s a bigger budget and more financial options available for the couple.

Challenges:

  • Financial decisions can take longer as both have to agree on the expense.
  • The set up can get complicated if there are trust issues in the relationship.
  • One person can see the setup as unfair when they start to earn significantly more than the other.

This can work for:

  • Couples who are married.
  • Couples who both have modest income.
  • Couples who have similar spending habits.

4. One-income setup

If only one person is earning in the relationship, this becomes the default setup. The dynamics are similar to the Joint Account where all financial decisions should be made by the couple.

However, it is recommended that the breadwinner gives their partner a regular allowance for personal expenses to give them a sense of financial autonomy. This may not be necessary if the other one has some form of income, albeit smaller and irregular when compared to the breadwinner.

Benefits:

  • The non-earner can focus on taking care of the household, especially when they already have kids.
  • The non-earner can explore and study income opportunities with higher than usual risk. Because the breadwinner covers their essential expenses, any financial losses in those opportunities won’t much affect their lifestyle.

Challenges:

  • The breadwinner must earn a significant amount to cover the household’s expenses.
  • The breadwinner may feel entitled and demand to be the sole decision maker of their finances, which shouldn’t be.
  • The non-earner may experience self-worth issues and feel less about themselves in the relationship.

This can work for:

  • Couples who are married.
  • Couples where one earns a significant amount than the other.

Which one of these setups are you doing? How’s your experience so far? Share them in the comments and let’s have a discussion.

Moreover, I talked about Personal Finance for Couples in episode 6 of my podcast. You can listen to it and check out the show notes here.

3 comments

  1. May I choose “all of the above and other tweaks?” Our financial agreement has had to adapt over time to allow for many changing circumstances. We may disagree and even be guilty of arguing over a few things but money is NEVER one of our arguments. Beautiful Bride and I started out with my accepting her two ideas. 1. Since she brought three children to our marriage, she insisted that she support them as she feels they are her responsibility. She asked only that I help support any children we have together. 2. Her dream was to live on the amount of the smallest salary or earnings and bank the larger amount. On #2, I let it run a few weeks and then explained to my new wife why I will always earn much more than her due to the leverage in the options I sell for income. I told her “I have an unfair advantage over most wage earners.” We then made some adjustments.

    Once we settled into the everyday pattern of our marriage, I suggested that I support the entire home witch I was doing anyway before my wife came into my life. The only difference would be an increase in water, power and groceries in my monthly budget. I had learned of the many things she wanted to accomplish and we had begun to discuss business ideas. My thinking was to free my wife of most of the burden of home life and she could concentrate on building up her financial reserves and really get things in order. Something that was difficult for her do as a single Mom even though she had way above average earning from her academic writing career. My wife is way too generous with many people that took advantage of her kind heart and never got ahead to a point anyway near where she should have been. I made sure my wife understood that “I have her back” and that she was free now to take on some risk and to make some bold moves.

    Fast forward four & a half years and one new family member. We have come through the COVID 2020 crisis mostly unscathed, We were bruised from our business ventures being shuttered for most of the year. My wife was fortunate to have writing projects flowing in until almost the end of our first lockdown. Since my Mother-in-law had a small investment in our main business and it was shuttered, Mother-in-law received zero income from her investment. My wife took over support for her Mom. I reliably received my US SS check and was able to supplement that money with trading income witch actually went UP due to the increase in volatility. Option prices increase in volatile times so option sellers actually earn more money! We were able to increase chartable giving as we learned of the huge increase , in the needs of the instructions we support.

    We started 2021 pleased that business is doing well. We had launched yet another business during the height of the pandemic and it is growing nicely. My Beautiful Bride took advantage of a one time special offer to earn a fourth college degree. She already had all prerequisites completed from her earlier degrees and the new degree will certainly add credentials to help the new business. I asked my wife to to at least take a short break from writing and concentrate on her studies. Believe it or not, my somewhat stubborn wife still insists on writing a few papers every week to help out! A few more months and Beautiful Bride will have her fourth college degree!!!

    Where we are now financially: In less that the first year of business, my wife exceeded her income goal. Even accounting for the “time out” with the 2020 lockdown we have now (in year 3 of the business) exceeded everything that both of us were earning + my SS retirement check with our local business. We did this by never touching any earnings and reinvesting that money back into the business. For the first time ever, we actually did take out a few weeks earnings from one portfolio to help fund a new special project. I may stop transferring money now with the US Dollar plunging and start to live from a small amount of the business income. We would continue to reinvest the major portion of business income to grow the business. Doing that for a year or so will allow us to build one heck of a cash fund with my brokerage firm in the US.

    YES, this is a work in progress. Just maybe I will take a break and enjoy a little of what I helped my wife build? Maybe we will discuss a new budget using all locally earned income. Maybe we can set up something that will send regular support to the institutions we currently support out of non-business earnings. So many possibilities. I am pleased that we have the freedom of choice. I am pleased that my Beautiful Bride and family will enjoy financial security because of good planning. I am also thankful that constructing yet another new budget plan will NOT be an argument but a labor of love.

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