Deciding when and how to manage your finances as a couple can be a huge source of stress in a relationship. Developing a budget, combining finances, opening a joint checking or savings account or deciding where to park your emergency fund are all tasks that can be tricky to navigate if you and your partner aren’t on the same financial page.
While discussing money is uncomfortable, it’s worse if you avoid talking about finances before saying ‘I do’ or signing a lease together.
Keep reading to explore some pros and cons of sharing finances with a partner and develop a strategy to make combining your finances as smooth as possible.
Pros and cons of combining finances
Disagreements about money are often one of the main reasons why couples fight. While each person likely has their own method for handling money, combining finances is like starting over from scratch. Ignoring each other’s money tendencies and approach to finances until trouble arises can lead to disagreements or, sadly, even a breakup.
There are multiple ways to mingle finances with a partner, and each has its benefits and drawbacks. Most important to the life you’re building together is developing a strategy that works for both of you. Consider the following pros and cons when you combine finances in your relationship.
Combining finances pros
It keeps things (relatively) simple. Combining money with your partner can help you take the back and forth out of your financial discussions. There isn’t a question of splitting an expense or one person earning more than the other since all income and costs go into or out of the same pot of money.
You’ll have more flexibility. Knowing that you have a cushion if one of your incomes disappears can offer peace of mind. It can also make it easier for one person to go back to school or start a new business.
Both partners have insight into the money situation. It’s much harder to hide overspending, debt or other money problems when you combine accounts. But it can also mean there isn’t as much of a safety net for both people. Be sure to talk to your partner about their debt and any money-related issues, like gambling, that could cause trouble.
You can create shared goals. Knowing that you and your partner are working toward the same financial goals can help you stay motivated when the urge for some unnecessary retail therapy crops up.
The cons of combining finances
Debt may become an issue. Having one partner come into a situation with heavy debt or bad credit can make it harder for both of you to move forward. Although partners are generally not responsible for any debt not in their name, be sure to understand the laws of your state and be careful about assuming debt together.
You can feel hemmed in. When 100% of funds are combined, resentment might crop up for one or both partners. You both work hard for what you bring in. Evenly splitting the money when you don’t make the same amount as your partner can build up resentment or tie your (or your partner’s) self-worth to the amount of money you bring in.
You might get into more arguments. If you and your partner don’t have the same values and goals for your money, you may be headed for more arguments and stressful situations. Take the time to discuss your money values and check in with each other periodically.
Tips for sharing finances with your partner
There are three basic approaches to handling finances as a couple.
- Some couples choose to combine everything they make into a joint account.
- Other couples keep their money completely separate and have worked out who covers which expense from their individual accounts.
- Many people use a combination where everyday expenses are paid from a joint account that both contribute to. However, each person still has an individual account and control over their money.
Ultimately, deciding whether or not to combine your finances, or how much to share, will come down to what works best for you and your partner.
Communication is key
Like with most things in life, communication is vital to ensure that whatever system you and your partner choose works for both of you. Building a life together requires mutual trust, commitment and transparency, and combining your finances is no different.
Although it’s not sexy or fun, start talking about money early in your relationship, so you understand the other person’s experiences and priorities. You don’t have to dive into the details of your bank account on the first date. Though asking about how the other grew up or what their dream retirement looks like can give you insight into general compatibility and how they handle their money.
If you’re already in a committed relationship, schedule a time to discuss finances with your partner. Put it in the calendar, and don’t let it slip or get pushed aside. Discussing money isn’t fun. It is crucial and can be a sign of a relationship built on mutual love and respect.
Consider consulting a couples therapist and a financial planner to help you navigate difficult decisions and to be a neutral third party if things get heated.
Find the right split
Many couples find that the easiest way to combine finances is to keep everything separate and use a joint account for shared expenses. Every payday, each person deposits an agreed-upon amount into the joint account for the shared bills. They then have the rest of their money to spend as they wish.
That way, the bills are covered, but each person has the financial independence to do what they want with the rest of their money.
Deciding on how much to put into the joint account can be another potential landmine. Some couples decide on an even 50/50 split of all expenses. However, if you make significantly more or less than your partner, that can feel unfair.
To start the conversation around how much each should contribute, create a list of your combined expenses like housing, groceries, utilities, maintenance, insurance and taxes.
Then, add the total amount of your combined income, calculate the individual percentages you each bring in, and apply that percentage to the total expenses.
For example, consider a couple where one person makes $70,000 a year, and the other person makes $30,000 (for a combined total of $100,000 annually). The higher earner would cover 70% of the monthly bills in the most straightforward expense splitting, while their partner would handle the other 30%.
Because you make more doesn’t automatically mean you have to contribute more, especially if you have high student loan payments or are trying to get out of debt. Discuss it with your partner to find an equitable solution for both of you.
Save toward common goals
Regardless of how you ultimately split expenses, saving for emergencies and short- and long-term goals should be part of your discussions.
Start by each putting some of your discretionary funds toward an emergency fund and a shared savings goal, like a vacation or a down payment on a house. Discuss how much each of you will contribute monthly. Then deposit the agreed-upon amount in a joint high-yield savings account.
Saving together might seem mundane, but watching the balance grow based on both of your contributions can be exciting. So can discussing the future use of that money as a couple.
Agreeing on an investment strategy together can be a great bonding exercise. It might also highlight differences in your personalities and financial outlook. Are you aggressive about picking individual stocks while your partner wants to buy low-cost ETFs and index funds? Or maybe one of you doesn’t invest beyond your company’s 401(k) while the other keeps track of the ups and downs of the market.
You may decide to stick with your own investment strategies, but you can open a joint brokerage account and contribute a little bit each month.
Work together to learn more about investing by reading books, listening to podcasts or taking an investing course. Develop a plan for investing your combined brokerage funds, check in on your investments during your weekly or monthly money dates and decide on buying or selling together.
Bottom line of combining finances
Combining your finances has pros and cons. Finding the right balance for you and your partner will depend on honest and open communication. Spend time discussing your day-to-day finances and make room for big-picture topics like retirement and investing.
Managing your joint finances can get messy and complicated. But you can find a solution if you trust your partner and commit to working through issues together.
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