To Love, Honor and Your Money

My husband Michael and I are coming up on our one-year wedding anniversary next month and we are still trying to figure out how to better manage our money together. Before I was married, I spent many, many years living out my life, paying my own way, deciding for myself where I wanted to spend my hard-earned dollar and establishing my own financial goals. After I got married, I wanted to remain financially independent. I worked full time and felt strongly that I wanted to fully contribute equally to our household bills.

Finances are a hot topic for any couple and can become a real argument if you don’t work out a strategy you both feel comfortable with at some point between falling in love and picking out your China pattern. And with today’s economy, many couples do require two incomes. So what are the best ways to work out financial responsibilities. I gathered some interesting data from various financial web sites. Here are some suggestions:

Joint Finances

In this system, all of your earrings are combined into one account and all of your household expenses are paid out from here. There is no division of who it belongs to.

One benefit of putting all your money into one pot is it is just easier. There is no “Mine, Yours and Ours”. Another benefit of sharing everything is it could put you on the fast track to achieving your financial goals. You will be able to invest more and create savings plans more effectively when you put your money into one joint account.

The disadvantage is if one spouse is a saver, and the other is a spender. Having all your purchases scrutinized can be a nightmare.

Tips:

• Agree on a budget
• Discuss spending money for each spouse
• Discuss purchases made over that threshold (car, gifts, vacations)
• Set mutually agreed upon savings goals
• Keep regular discussions on your financial situation

Yours, Mine and Ours

In this scenario, you manage your money independently from your spouse, but share joint household bills. This is how Michael and I still manage our money because it gives me a sense of independence. There are two different methods:

Even Steven: This is also known as college roommate style. Deposit your paychecks into separate checking accounts and share the cost of all your bills fifty/fifty. Here, you’ll each contribute half to the mortgage or rent, utilities, groceries and other monthly bills. The advantage of this system is fairness, each contributes equally to the household expenses and still has money to call his/her own, while the disadvantage is the unfairness to the person who earns less and therefore gets stuck paying a higher percentage of his or her income on household expenses and has less to spend on discretionary things.

Proportional Contribution: This method is similar to the “Even Steven” contribution, but works for a couple with vastly different incomes. In this case, each person has their own account and each pays a percentage of their income towards the bills. You need to determine what percentage of income you bring to the household and then contribute that amount to the monthly expenses. For example, if one earns $100,000 and the other makes $60,000, you’ll contribute three-fifths and two-fifths of the total cost of the bills.

The advantage of this system is that each pays an equal percentage of their income. The disadvantages are similar to the “Even Steven” system in that the person with the higher income will still have more money to spend on discretionary purchases.

Tips:

• To make life easier, you can calculate a total contribution each month required by both of you for bills and transfer that amount to a joint account.
• Make sure you both contribute to a rainy day slush fun for savings and emergencies each month.
• Be aware that one may be spending all of the leftover money, while the other decides to save it.
• You still need to discuss and agree upon long-term goals and retirement plans
• You will file income taxes jointly so plan for this accordingly.

Independent Finances

Here, you can still manage your finances separately without contributing to joint bills together. In this scenario, each spouse pays for different bills out of their own account. For example, one spouse is responsible for the cable, insurance and entertainment, while the other spouse pays the electric and groceries.

The benefit of this are the simplicity of each being responsible for certain bills and you only need to keep track of your own account.

As long as you find a way to divide the responsibilities in a way you are both happy, it can work. Just make sure you periodically check in to be sure the system makes financial sense and you are both are still in agreement.

No matter what strategy you decide, there will be bumps along the road. When that happens, you need to take a step back and cool off. Money matters are always a highly sensitive issue for any couple. Avoid making any decisions in the heat of the moment. Always check in with your spouse on money issues. Even if you do your own financial planning, independent of each other, there are always joint expenditures like children and vacations. Michael and I may have different spending and saving ideas, but they are slowly and surely become one.