3 Ways to Manage Money After Marriage
Every marriage starts with someone popping the question. And while that’s easily one of the most important questions a person can ask or answer, it won’t be the last one. Once someone has said yes, a next big question is “My money, your money or our money?”
Marriage signifies a union between two people, but that union can look a lot of different ways when it comes to handling and disclosing finances. It can be a difficult topic to navigate because it’s likely both individuals are used to being completely financially independent. Very quickly, things that were clearly “mine” or “yours” become less clear. Goals (financial or otherwise) that were once made in isolation become joint efforts. And all of this should lead to creating a plan for how you’ll manage money together.
Like relationships themselves, there isn’t a one-size-fits-all approach. But the plans do tend to fall into one of three categories: Mine & Yours; Ours; or Ours, Mine & Yours.
Mine & Yours
Each person keeps their own accounts, keeps track of their own money and pays their own bills personally. Couples will often assign certain monthly expenses to each person until all are accounted for, and this allotment is typically based on the income ratio. If both people make roughly the same amount of money, the expenses can likely be split evenly. But if one person accounts for a substantially higher percentage of the income, they’ll likely take on the equivalent percentage of expenses.
This approach does give both individuals the greatest financial independence and control. But there are potential pitfalls. Most common issues come with larger purchases, like homes, cars and vacations, where income from both individuals may be needed. Having completely separate accounts makes this process a little trickier, needing to either sync up independent payments or transfer money to the payer’s account. A similar issue can arise in the case of an accident/emergency if funds need to be moved quickly. Having separate banking accounts may make things more complicated should anything unplanned occur. It’s strongly recommended to at least use the same bank so it’s simplest to transfer funds quickly. Or check what options you have to add your partner to your account as an authorized user/emergency contact.
Maintaining separate accounts works best when both individuals share a similar high emphasis on financial accountability and upkeep. Communication is critical to make sure things don’t slip through the cracks, so talk often—especially when there are new payments or changes to one person’s income.
Combining all of your finances into shared accounts is the simplest method for money management once you’re married. With shared checking and savings accounts, there’s no confusion about how expenses will get paid. All money goes into one account and all expenses come out of that same account, with both parties having full access to log in and view/make changes.
The biggest threat to this plan’s success is when one person abuses the system. The entire premise is based on both people putting in and taking out their fair share, so it’s important to define what that means from the start and then update it as needed (new jobs, raises, new expenses, etc.). Make sure both sides understand and agree on a budget to ensure the expenses are covered, but don’t stop there. Talk about how the rest will be used for things like savings, emergency funds, fun money and any other priorities.
Ours, Mine & Yours
Ah, compromise: the hallmark of any great relationship! This hybrid approach attempts to take the best of both worlds to maintain personal independence, but with the comfort of pooled resources. In this instance, couples create shared accounts (checking, savings or both) for shared expenses, but maintain separate checking and/or savings accounts for personal expenses.
The most common method to execute this approach is to figure out what the monthly expenses are (check out these tips on how to build a budget) and then have each person contribute the necessary amount to the shared account. There are a number of ways to determine how much each person contributes, but it’s often based on income ratio. If one person makes X% of the couple’s total income, they’ll contribute the same percentage for expenses. Once those shared expenses are covered, each person’s remaining income flows into their personal accounts to use as they wish.
As long as the expenses are covered each month, this method tends to work well even though it requires the highest number of total accounts. Again, keeping all accounts in the same bank can help make this easier for regular and emergency transfers. There’s a bit more housekeeping involved in this concept, but it can be the best of both worlds.
The first step for all of these financial approaches is to have the conversation early and often. Normalize talking about your finances and smooth out those natural rough edges that come with talking about money. Get on the same page and be aware that your plan could change—which is why being able to talk about it is so important. Be ready to adjust as your lives evolve together.
Talk about your shared finances early so there aren’t any surprises regardless of which method you choose. It turns out that communication isn’t just important to reaching relationship goals—it’s just as important in reaching financial goals.