Relationship and Money: How can couples manage their finances?

It's a tale as old as time. Money is still the number one cause of couples' fights.

Managing individual finances is a chore; what more with a partner? In the most recent survey from TD Surveys, it finds that about one-third of married couples admitted to fighting over money at least once a month, and 44 percent of divorced couples said they had monthly arguments over finances while they were married.

Are you struggling to put your finances in order? Whether you're married or not, living together or not, there are better ways to handle your household finances and work towards a healthy relationship.

After all, Dave Ramsey sums it all, “Marriage is a partnership, and couples can’t win with money unless they budget as a team.”

*In this post, we would like to thank the YMYL (Your Money and Your Life) and Subtle Asian Personal Finance Facebook Group for sharing their insights about managing finances together as a couple.

How do you handle finances in a relationship?

When you're in a relationship, you can't avoid the topic of money. Many couples have their unique way of being on the same page with their partners. Others may not, but at least they're reading the same book. Besides, for married folks out there, they're bound by “for better, for worse, for richer, for poorer, in sickness and in health, till debt do us part,” (Oops! pun intended.)

But, more importantly, managing money matters in a relationship should be every couple's topmost priority. Not every method works as couples may have different goals and attitudes towards money. So long as both of you trust each other and communicate well, you guys are doing fine.

For instance, Karen and his husband have a unique approach to sharing assets ownership. “We have a google sheet that we record transactions by month. I bought our condo before we got married, so he pays me rent. We start with the rent and subtract/add from rent based on who made what purchases on our spreadsheet. At the end of the month, we balance out via Venmo.”

On the other hand, Beth, married, is “using separate accounts but split costs of household expenses, and rotate paying for fun things.“

Couples living together but not yet married commonly maintain separate individual accounts and shared household expenses. Meanwhile, married couples are more likely to combine checking and savings accounts and split down the middle whatever both of them use (rent, car, electricity.)

I found that joint accounts work best for married couples while for unmarried ones, separate accounts early in the relationship followed by joint after years of trust and commitment are the trend.

Can finances ruin a relationship?

Money is a critical part of every relationship. At the beginning of your budding romance and if you feel like this could turn into a more serious one, be open about your financial standing with your partner. Disclose any personal debts you may have or any credit history you can manage to share.

Discuss with your partner about your financial goals and keep an open mind and respect one another. Poor money management and debt can strain your relationship if both of you have no mutual trust and won't work it out.

If you also decide to open a joint bank account together, you'll be co-scored, and your credit rating will be linked.

So, if your partner has a poor credit history, it may not be a good idea to join your accounts together. Since in a joint statement, each holder is responsible for any amount owed. Talk about the possibilities of paying for someone else's debt!

Of course, you can mitigate this if you have complete trust with your partner and both of you know how to budget your expenses.

I've seen so many couples fight over money, even in my own home. My parents often argue about short budgets and stuff, so I know what it feels like.

However, money problems shouldn't let your relationship crumble and fall. There are ways for couples to get better at their finances.

It's either they agree to combine their finances or split it.

How do couples combine their finances?

There are a lot of ways couples can combine their finances.

Take, for example, Hannah as she shared, “We've been married for six years and combined our finances 100% once married. We were on separate accounts before. The only thing separate now is retirement accounts since they're in our names. We both have full access to everything, but I handle the finances.”

To make it easier, plan out your approach. In merging finances with your partner, you can do the following.

Have a Shared Account for Expenses

In this approach, both partners agree to contribute a share to pay off expenses and savings to a joint checking account while maintaining their separate checking accounts.

• PROS – Convenient and can save on fees.
• CONS – Buying gifts may be hard to pull off since you can see every purchase your partner makes. (you can use cash instead!)

Example: Kelly discusses and agrees to joint expenses with his wife and set up separate accounts for their personal expenses. “We have joint accounts and joint credit cards for household expenses and our kids. We contribute to the joint account proportionally (whoever makes more, contributes more.”

Kim also has a joint checking account with her partner. “We have a joint checking account where each of us deposits a fixed amount every month. That fixed amount consists of mortgage and fixed expenses projection (utilities, groceries, etc.) It's linked with our utility provider for a direct debit. We also use a shared Amex to pay for variable household expenses (furniture and maintenance).”

One For All, All For One

In this method, only one joint account is used to deposit both of you and your partner's paychecks. All payments and other contributions towards savings are made from this one single account. Typically, couples who follow this method are in complete transparency with each other.

• PROS – Ideal for simple budgeting.
• CONS – Potential money spats – you might need to discuss each item you buy with your partner and know how you handle purchases.

Example: Gary, in his 52nd year of marriage with his wife, has a system that works well for them. “When we married, we committed to each other, and we took that commitment seriously. Our finances are “ours,” over which both of us have equal influence and input so that we discuss arriving at the best solution for “us.”

Share and Divide

For this, both of your paychecks get deposited to a single account. But, you also have a separate checking account each for your fun money.

As a couple, you must decide how much will each of you contribute to fun money. Will it be in equal amounts or proportional to income? Or is it for expenses?

Moreover, you must categorize your fun money if it will be a shared expense or a fun expense.

• PROS – Simple and easy to work out; will lessen arguments about spending.
• CONS – Categorization of each expense.

Example: Jessica determined their joint expenses such as rent, utility bills, and groceries and split them in half each month. She and her husband are in the same profession with the same level of experience and have almost always been paid the same; splitting in half was easy.

“We started to deposit our paychecks into the joint account, and we figured out out an amount each of us could save into our accounts as each person's “fun money.” So now all our bills come from the joint account, we each have our credit cards, and most of all the money we spend, we put on our credit cards.”

From Elisa, “I do 95% of the shopping, bill pay, and budgeting. Everything is joint, but we both have an “allowance” per month. No questions asked. His fancy beer comes out of his allowance, and my expensive fabric comes out of mine.”

Yours and Mine

Many couples have been living together for a long time, may not be married, but still keep their separate accounts. There are many reasons or factors that would lead couples to do so.

One may be a difference in goals or wanting to keep debts separate. There's nothing wrong with that as long as you both agree on who will take care of specific bills and make arrangements to pay them on their own.

• PROS – Best if you value freedom and autonomy in financial decision-making.
• CONS – Has the potential to raise issues and conflicts if one partner is dishonest.

Example: Kelly Guysir, married for eight years and is maintaining separate financial accounts. “We come to agreements on who pays for what (since I make much less) and help each other whenever the situation comes up. We always list each other as the beneficiaries of our accounts. We discuss our financial goals often, review and modify our path.”

From Hui Lin, “We don't have a joint account. We have our account where the money goes into, I manage my own, and he manages his. Communication is key, and we address issues and strategies on big purchases. I have my retirement account, and he has his. Everything is really separate but not at the same time if that makes sense!”

How should married couples split finances?

If you're living together, married or not, there are means for you to tackle splitting or sharing expenses with your partner.

50/50

This is the most common method of splitting finances with your partner; by sharing it equally in half. You can work out on paying your fair share of cable bills; then, the other half should be shouldered by your partner. This means that when you add up your monthly expenses, and it comes to $1,500, then you and your partner pays $750 each regardless of how much your income may be.

• PROS – Simple and easy to budget finances.
• CONS – One might feel unfair, especially if he/she makes less and is left with little or none at all.

Proportional to income

If your partner feels that sharing is not going to work, you can share per one's income. The basic rule is that the higher income earner should pay more than the lower one.

So, if one of you earns $7,000 and the other $5,000, the $1,000 expense will be divided optimally. The person earning $7,000 should pay $583.33 (58.33%), while the other should pay $416.67 (41.6%).

• PROS – A suitable compromise method of cost-splitting so long as each person is left with proportional money for personal expenses.
• CONS – One partner may feel burdened or penalized for earning more by contributing a higher amount.

Joseph Lustre shared, “Split shared costs in proportion to income. Any purchases above $150 require consent from both parties and usually a 1-2 week waiting period.”

Per Usage

Some couples find it hard to share equally or by a percentage of each person's income as they believe it would lead to resentment by the high-income earner. Thus, they find it fair to split costs per usage or split responsibility for specific bills according to expenses.

This means that you may pay utility bills together, but others like phone bills, subscriptions, or other things that one person uses more, he/she should be the one to pay it accordingly.

• PROS – You will be mindful of consumption.
• CONS – Complicated, as some bills and services vary per month.

Additional Methods

Get allowance from spouse/partner.

Couples can also manage their finances by giving their partner an allowance every month. This is more common when only one partner is working or is better at handling money than the other. All financial responsibility falls on one person.

• PROS – One partner is financially adept and gets to decide what's best for the household, depending on a mutual agreement.
• CONS – At the same time, that partner may feel stressed if he/she is the only one working towards budgeting. The non-income partner may also feel isolated as he/she may be cut-off from any financial decision-making, as he/she is dependent on their partner's money.

Example: Alice, married. “I get a weekly allowance that I use to put money in kids' savings, my savings, and groceries. We only discuss large purchases.”

Live off one income.

This is ideal if one income is enough to sustain your family.  It's like living only on one income; you get the idea! And usually, you live off from a higher-income partner. The irregular income or lower one from another partner should be put to short-term and long-term savings.

• PROS – Can quickly achieve savings goals.
• CONS – Not good if you're living from paycheck to paycheck.

Savings Challenge

To spice things up in you and your partner's financial life, you can add a savings challenge to your financial goals!

Set aside a small fixed amount of dollars each week or daily and see how it will mount up at the end of the year.

Avoid dipping into it! In doing so, you and your partner are making yourself accountable to reach your savings goals.

Final thoughts

Joyce, “Last year, my husband started budgeting and reviewing our finances– and finally understood how much he spent eating out!”

Living with your fiance or spouse is different from having a roommate where you share expenses without accompanying responsibilities and family roles.

Overall, it all boils down to frugal living. Whether you share everything or use a take yours, mine, and ours approach, doesn't matter. As long as both of you meet your goals in life, together, you can win over your finances. Besides, two is better than one!

Couples can manage their finances to establish a spending threshold, avoid joint debts, and keep the balance between shared joint accounts. You can also take advantage of free budgeting tools to track your net worth.

Communicate well with your partner and cooperate with any financial decisions your family is about to take.

Remember, it's good to have money and the things that money can buy, but it's good, too, to check up once in a while and make sure that you haven't lost the things that money can't buy.

For couples out there, how do you manage your finances? Do you have any methods or tips you would like to share with us? Go ahead and comment down below! We're interested in what you are doing!