Some friends of ours are newlyweds and trying to figure out how they’ll manage their money together. Finances are a hot topic for any couple, and can often lead to arguments if you don’t devise a strategy that you both feel works for you.

Money Management Styles

There isn’t one right way to manage a couple’s money. It’s largely dependent on your personalities, how you were brought up, your values, and your expectations about money.

The best way to find out what works for both of you is to have an open discussion about your money, goals, and money management styles, preferably before you get married. Try out your plan, and if it doesn’t work, make adjustments.

1. Joint Finances

This is how Scott and I manage our money. All of our earnings are combined in one account. All of our expenses are paid out of the joint account, and once money comes into our house, there is no division of who it belongs to.

We contribute to retirement plans, benefit packages, and savings by evaluating the best offer. For example, when we were saving over 50% of our salary for retirement, I took almost his entire paycheck and deposited it into his 457 and 403b plans, because they were better options than my 401k I had at work.

Tips for Success:

  • Agree on a joint budget.
  • Include spending money for each spouse in the budget.
  • Determine a threshold, and discuss purchases over that threshold.
  • Set joint savings goals.
  • If one person manages the money, have regular discussions about the status of the family finances.
  • Be open to change if it isn’t working.

2. Yours, Mine, and Ours

There are two different methods if you want to manage your money independently from your spouse, but share the joint household bills.

Even Steven. This is the college roommate style. Deposit your paychecks into separate checking accounts and share the cost of all your bills evenly. You’ll each contribute half to the mortgage, utilities, groceries, and other monthly bills. With the leftover amounts, you can save or spend as individuals on your own interests and hobbies.

Proportional Contribution. This strategy is similar to the even contribution for a couple, but works well for a couple who have vastly different salaries. You each determine what percent of income you bring into the household, and contribute that amount to the household expenses. For example, if one spouse makes $80,000 and the other makes $20,000, you’ll contribute 80% and 20% of the cost of the bills.

Tips for Success:

  • To ease bill paying, you may want to calculate a total contribution each month required by both of you for bills and transfer that amount to a joint account.
  • You both will need to contribute to savings and an emergency fund each month for the long term.
  • Be aware that one of you may be saving all your leftover money, and the other spending it.
  • You still need to discuss your long term goals together and plan for retirement.
  • At tax time your money will be combined on your tax return; plan for this to avoid frustration and to account for the Marriage Tax Penalty if it returns in 2011, as planned.

3. Independent Finances

You can also manage your finances separately without contributing to bills together. And it does work successfully for some couples. I watched my parents practice this method of money management all my life and it works for them. They split their bills into his and hers. For example one spouse may pay for groceries, cable, and insurance and the other spouse pays for gas, clothes, and electricity.

As long as you find a way to divide the responsibilities in a way that makes you both happy, it can work.

Other Impacts

In some cases your money management is largely influenced by where you live or who you work for. For example, we live in a community property state, so all of our income is viewed as 50/50 by law. While it doesn’t matter for your day-to-day money management, it does impact your taxes (both for filing status and eligibility as an innocent spouse), and if you ever divorce. It’s something to be aware of if it applies to you.

Another example is working for the military, which is subject to different laws. I don’t pretend to know anything about military laws, but if it applies to you, you may want to check out the Military Finance Network.

Tips for Managing Money with Your Spouse

No matter which strategy you choose, there’s bound to be bumps in the road. When that happens, keep some of these tips in mind.

Cool down. If you have a disagreement about money, try not to discuss it in the heat of the moment. Let some time pass and be prepared to discuss it when you both are calm.

Establish guidelines. Even if you decide to use one of the more independent money management strategies, you’ll still have to discuss money with your spouse. For example, if you have kids, you’ll need to agree on your plans for spending money on them. Setting up guidelines ahead of time, will avoid conflict down the road.

Give credit for good things.
When you have a disagreement about money, keep your perspective. I have to admit that 11 months out of the year, my husband is exceptional at managing money. We always discuss large purchases and he tries really hard. It’s probably a challenge for him, since personal finance isn’t an interest. I try to remind myself of this if we ever have a money matter that we don’t agree on.

How do you manage money with your spouse?






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Comments to How to Manage Money in Your Marriage

  1. Angel and I certainly live by the “Yours, Mine, and Ours” philosophy.

    Great article. ;-) Stumbled.

    Marc and Angel Hack Life

  2. I like how you broke these down. My husband and I definitely live by the “one income fund” fund. We have joint accounts. Even when we didn’t, we both considered the money “ours.” When we first met, Tim was working and I was on disability. Now he’s on unemployment, which may run out soon, and I’m still getting disability and doing a small amount of part-time contract work. So we’re bringing in about 50% each. That certainly helps me, since I hated that he made the money and I decided where to put it – always against debt, but still….

    That said, one day I’d like to have a system that’s a hybrid of the first two. We’d have a common slush fund where most of our money went. But small individual accounts. This would help us buy each other presents (the other won’t see the charge on the credit card) etc. Also, I just think it’s important to have a little money to yourself. Right now, it’s just $10 a week. But the other person has no say in how it’s spent. (Though sometimes I remind Tim that if he keeps spending it on immediate wants, he’ll never save up for those headphones he pines for.)

    Also I love the point you made about remembering the good stuff during an argument. My husband has some money management issues that stem from attention problems/short-term memory failure. But he tries as hard as he can. He just grew up with different parents than I did, so I’m used to categorizing all the ways to prevent spending. He’s not. That said, he’s made changes in leaps and bounds in the three years we’ve been together. So I try to acknowledge his efforts even when I’m seeing red.

    Another great piece of advice (not necessarily PF, but for every sector of marriage) was to remember that when you use the words “you never” or “you always” you’re automatically wrong. I often find myself saying that, then stopping and correcting myself. It actually does make a huge difference. The person sees that you’re trying to give a more accurate representation of their actions. That can go a long way.

    Abigail

  3. Very good tips. I am also a big believer in establishing guidelines about finances early in a relationship. Giving each other compliments when one makes a good judgment about money- matters makes a huge difference. Arguments over money is the biggest cause of break-ups and divorce.

    PennySue

  4. I liked the article. I am the primary breadwinner in our relationship, and we use the Proportional Contribution method. It works for us! Check out my recent success story on Mvelopes (www.blog.mvelopes.com).

    Joy (from Just Plain Joy)

  5. Great article. I’m unfortunately guilty of throwing away some of the more important articles…now I know better.

    Ryan Williams

  6. We seem to do a bit of both I guess. Even when we had two incomes, we put it all together into one account. which made it easier when I stayed home, we didn’t have to make any big decisions about where to put the money.

    A major benefit that we have found is having separate hobby funds. Money gets transferred out of our joint account every month, and into individual accounts. We both do a lot of buying and selling, and this way weren’t tempted to borrow from the family budget to buy something “extra”

    Staci

  7. I think the more you can view finances as a team, the more it leads to unity overall. My wife and I have been in a variety of situations where one of us at times has earned significantly more money than the other… or when one of us stayed in a cruddy job to keep the health insurance, etc. All in all, if you work together as opposed to separately, it helps a lot.
    Jerry

    jerry

  8. There is another option for “yours, mine and ours” Instead of depositing the same amount to the joint account, deposit the same amounts to your personal accounts and the rest to the joint. This is the only way that both partners have equal money of their own. The proportional amount has always rubbed me the wrong way (why should one spouse get more spending money???). This has given me and my husband equal “allowances” even when one or the other of us has made a lot more.

    Adrienne

  9. We are definitely in the “ours” category with a $100 threshold on big purchases. We have daily, weekly and monthly discussions on our progress and occasionally readjust savings goals. DH has always made more money than me, but it’s always been “ours” which makes me feel really respected.

    We have 2 joint accounts and each of us is the “primary” owner on one. This keeps us from writing 2 checks from the same account on the same day. We simply transfer money back and forth to pay any large bills. We have the same percentage put into retirement, so that’s the only “disadvantage” I have due to making less money.

    Having everything out in the open really works for us.

    Golfing Girl

  10. We implement the Even Stephen option of Yours, Mine, Ours. My wife is a stay at home mom with the opportunity to make some income sporadically through a family business. All money that she earns goes directly into our joint checking account. From my paycheck, $200 goes into two individual checking accounts (one for each of us) every month, and the balance goes into the joint checking account. All of the bills are paid out of the joint account, and the individual accounts are for us to use on daily personal expenses, like gas and eating out. We find this to be a very effective way to budget.

    Adam @ Checkbook Diaries

  11. We’re an unmarried couple living together, and we currently subscribe to the proportional yours/mine/ours strategy. What we’ve found especially helpful is our annual contract – it spells out what expenses are joint (like in-city transportation to/from work, doctor’s appointments, etc.) and individual (prescriptions, fun money, etc). We keep very strict documentation of everything – it helps that we’re both math people. And there are very few arguments because of that annual contract. It helps get everything out in the open early on, which I highly recommend.

    Molly

  12. What a breath of fresh air, someone talking about marraige and money. I wish I found more posts on this subject. Good stuff!

    Ken

  13. I would like opinions from others. I am thinking of getting married to my boyfriend. He feels the same. HOWEVER he is nearing the decision of a very long, drawn-out divorce. When that is finally over, he will be living on less than half his salary, the rest going to the ex wife for life-long alimony and child support for his 4 children. I have one teen son, age 15, who lives with me half the time and I receive NO child support from the father, nor do I pay any child support. I currently work two jobs. My boyfriend lives in MY condo which I furnished myself. He pays me rent, per the rental agreement I had him sign. We both have lawyer debt to pay off; his is more than mine, but he has significant savings he may be able to tap into once the divorce is finally settled and hopefully he can sell the big house she’s still living in with the 4 children.

    As far as money goes – with blended families, kids, child support payments, etc. etc. our money situation is complicated.
    I’ve been single my whole life, never married. I am now 50. I can’t figure out the best way we should handle bills, accounts, who pays for what?

    Joint? I’ve never done that. He did that for his entire 22-year marriage. I don’t think I can do that. I will have more money than him, and will wind up using MY hard-earned paychecks to pay for his ex wife’s alimony payments.

    He is very traditional when it comes to marriage. His ex is the one who cheated and wanted the divorce and had him kicked out of his house by her lies.

    What would you do? All separate money? Some joint?

    CarrieGyrl

    • Why do you suggest that you will be paying for his ex-wife’s alimony payments? You earn your money, he earns his, but he has to pay significant support (both to his ex-wife and to support his children). That should be deducted from his income, and you share the rest. If he can’t afford half of what you share, you could try the proportional to what you are each able to contribute to the family expenses.

      You certainly can’t count the money he has to pay to his ex as part of his proportional contribution to the shared expenses – those are separate and have to be kept apart from what he can provide to the new relationship.

      GC

  14. i work hard in the oilfield for my money .and my gf witch i live with always needs like out of a 1400 pay check she says i should get 150 for my needs cause she pays bils needs make up whatever im pissed cause i work so hard for the money and she wants it all and calls it ours ,yeah right and suggestions ?????????

    robert

  15. What are the disadvantages of spending lots of money in marriages?
    Can anyone help me by telling me the disadvantages?

    Garvit


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