Creating a streamlined financial life as a couple can be challenging. Laura answers a question from a struggling newlywed and reviews three approaches to managing money based on your relationship and financial goals.
I recently received a question from Jessica W., who says, “I had a perfect financial system when I was single that I felt great about. But now that I'm a newlywed we need to join finances with a system of his, hers, and ours, so bills are paid from a joint account. But we're getting tripped up knowing how much we should each get. For instance, should I get more money because I need to pay for make-up and hair care? If he picks up extra work on the weekends, should that income be his or go to a joint account? What advice can you offer for joining our finances?”
Thanks for your question, Jessica. Creating a streamlined financial life as newlyweds can be challenging. In this post, I’ll cover three approaches that couples can take to manage money.
3 Ways to Manage Money as a New Couple
Since every couple is different, there isn’t a simple solution for how to merge money or manage it together. What’s right for you depends on the status of your relationship, your personalities, and how complicated your financial life is.
Here are the three ways you might set up your finances as a couple.
1. Create a complete financial union.
If you’re married or are in an equally serious relationship that you’re confident will stand the test of time, I recommend merging all of your finances. When you’re in a committed relationship, you’re a team, both emotionally and financially. That means all financial decisions and assets should be discussed and shared equally.
Money touches every aspect of your life. It’s better to decide as a couple how to budget, how much to save, whether to buy a home, and so on. Uniting money in joint bank and credit accounts allows you to truly work as a team to achieve your dreams and goals.
Since the day my husband and I got married, we’ve managed money as a unit. I can’t imagine any other system that would have allowed us to be as successful with our finances or our relationship.
There have been years where my husband earned double or triple my income, while I also incurred big expenses like graduate school. Likewise, there were years when I was the breadwinner.
You’ll always earn more or less than your partner or spouse, and you’ll also have different amounts of expenses and debt at different times. It doesn’t matter if only one person works, one earns much more than the other, or one brings more debt into the relationship. The financial give-and-take in a relationship is never even.
If you truly want to be married in every aspect of your life, all your income and expenses should flow through a joint bank account. Your incomes, expenses, debts, and savings are yours to share and strategize about together. Plus, an added benefit is that having fewer accounts and administrative tasks makes money management a lot easier.
It’s important to note that retirement accounts like 401ks and IRAs must be owned individually—you can’t own a retirement account jointly. Also, debt that you bring into a marriage remains in your name and isn’t your spouse’s legal responsibility. However, I still recommend tackling all debt as a couple.
You don’t need to change the ownership of loans and credit cards you previously opened in just your name. Instead of closing a credit card, which can hurt your credit, you might share a card with your partner, adding him or her as an authorized user.
As you need new credit accounts, such as a mortgage or car loan, you can apply for them jointly. Yes, this approach takes complete trust and transparency, and that’s the point.
When each of you knows the truth about your finances, it builds trust, fosters communication, and allows you to accomplish more together than you ever could alone. If, and only if, you’re a committed couple, consider leaping in and merging every aspect of your finances.