How will you manage money as a newly married couple? One practicality you need to discuss, preferably before saying, "I do," is what your money style will be going forward. While it’s true that, in general, getting married makes financial sense, how do you make it make sense—and cents—for you?
There are three main ways that couples can manage their finances: separately, jointly, or with a combination of separate and joint accounts. Here are a few tips to help you figure out which strategies will work best for you both, along with the pros and cons of each system.
Key Takeaways
- Honesty about money is essential for trust in a marriage.
- Couples can manage their money with separate accounts, a joint account, or some combination of the two.
- Separate accounts help avoid arguments but take more planning, and you may lose out on the best way to manage your family money.
- A joint account makes budgeting simplest but can lead to more conflicts if partners’ spending habits don’t mesh.
- Combining a joint account with a private checking account for each spouse lets you track expenses and creates fewer money conflicts.
Money can be one of the most difficult topics for couples. But no matter how uncomfortable it feels, the two most important words to remember about marriage and money are: Never lie. Just as honesty is crucial to any relationship's success, honesty is essential in any discussion about money. Lying about finances to a spouse damages trust and can ultimately lead to the divorce court. Don't be tempted.
Managing Money as a Newly Married Couple With Separate Accounts
Keeping separate accounts may be a comfortable starting point for many couples, especially when they are accustomed to managing their own finances and don’t yet have many shared expenses. When couples move in together, there will likely be at least some income difference, not to mention debts that may be brought into the relationship. A separate accounting system can help clarify income disparities, debts, and potential spender-versus-saver personality conflicts.
Despite the autonomy, separate accounts actually mean more communication—about who will be responsible for paying what. Some couples decide to split expenses down the middle, while others may be more comfortable paying proportionately according to what they earn. A shared spreadsheet may be the easiest way to track expenditures, or using a joint credit card may be preferable.
You will still have to budget for household expenditures and discuss long-term savings and retirement goals. Still, separate accounts provide you with more freedom to manage your money with autonomy.
- Pros: You are each responsible for your own spending habits and paying off any debts you brought into the marriage. Provided you are both happy with how you’ve agreed to split the shared bills, this money management method is the most “fair,” and you may be less likely to argue over your spouse’s spending habits.
- Cons: Keeping track of who owes whom what is a lot of work each month. This financial management method gets more difficult if children enter into the mix or if one of you wants to change careers or go back to school. If you are both saving for retirement or goals based on your own incomes, you may not be optimizing your investments.
With a Joint Account
In terms of simplifying your management style as a couple, this choice is probably the easiest, though there are some fine points to consider. No one needs to determine relative income payment levels, you don’t have to update a spreadsheet each month, and all children’s expenses get paid out of the family account. Budgets can be easily tracked on a spreadsheet or on budgeting software that is available online or via smartphone apps,and the simplicity will make tracking spending easy.
- Pros: It’s easier to track budgeting and spending, plus there is no monthly division of resources, and no financial changes are needed as the family grows.
- Cons: Judging your partner’s spending habits can lead to resentment, especially if one partner earns more than the other. It also may be hard to keep surprise gifts a secret.
With Both Separate and Joint Accounts
Having both separate and joint accounts can be complicated, but it also may be the best solution for some couples. This method's idea is that all income goes into a joint account or accounts, and all savings, debt, and retirement are managed jointly. In addition, each individual has a private checking account into which a set amount is transferred each month.
This “personal fund” can be spent on any wants or needs of either spouse that aren’t a joint expense—or on gifts for the other spouse. This way, your spouse can never judge you for buying $400 shoes or top-of-the-line headphones, as long as you pay for them out of your own account. The amount that goes into the personal accounts each month needs to be discussed and agreed upon to avoid conflict.
- Pros: You have the ease of tracking that you get with joint accounts, and you don’t have to deal with income disparities while paying the bills. You each have the freedom to buy what you want without discussing it with your significant other, but you also work together toward joint goals and retirement.
- Cons: This method is simple to track, but it requires opening and managing several bank accounts. Having an amount deposited into your personal account each month may feel like an allowance, which might rub some people the wrong way.
Additional Tips for All Couples
Regardless of how you decide to manage your money, you must also consider many things when planning your lives together.
Every household has to decide who pays for what. Unlike your past experiences with roommates, however, you probably won’t want to keep pantry items separate in your marriage. You also have a vested interest in paying bills on time to preserve your credit.
A spouse isn't just a roommate; you need to figure logistics and plan as a family for shared goals and an excellent credit rating.
While it’s not the most romantic part of moving in together, newlyweds need to talk about household logistics—who pays which bill, how you will reimburse each other, and how you will work toward shared goals. Plan to sit down and discuss these logistics to ensure you both understand and agree on the plan and that all your bases are covered.
Once it’s decided who will pay which bills, automate the payments, so you’re never late, and your spouse never has to worry. And continue to discuss your finances regularly. In money matters, clarity is paramount.
Newlyweds should also discuss retirement and long-term goals, such as buying a house or taking a dream vacation. If, as a couple you can afford to, it's a good idea for both spouses to be contributing to retirement accountsand set up an automated system to facilitate saving for those long-range goals now.
What is the 50/30/20 Rule?
The 50/30/20 budget rule is an approach to budgeting that involves splitting your after-tax income into three spending categories: 50% for needs, 30% for wants, and 20% for savings. Needs are defined as bills that are necessary for your survival, such as rent or mortgage payments, groceries, utilities, and car payments. Wants are things like eating out, a gym membership, or tickets to concerts, all of which are optional (you can choose to eat in, work out at home, or listen to music on iTunes, say). As a married couple, you may decide to ascribe to the 50/30/20 budget rule as a way to allocate your earnings.
How Do Second Marriages Handle Finances?
Finances for a new marriage can be more complicated if one or both of you have been married before. One (or both) of you may have unpleasant experiences of a previous spouse's money mismanagement and/or have financial obligations related to a former spouse or children from a previous marriage. You may want to have a prenuptial agreement or financial agreement to spell out how money will be handled to avoid repeating past mistakes.
It's important to honestly disclose all of your assets, obligations, and debts to ensure that your relationship is built on openness and trust. If one or both spouses have children from previous relationships, it may be simpler to keep your finances separate. Depending on the complexity of your situation, consider contacting an estate planning attorney to discuss these matters.
What Is Financial Infidelity in a Marriage?
Financial infidelity is when a couple that has chosen to combine their finances lie to each other about money. Examples include hiding existing debt, making a large and expensive purchase without telling the other partner, or lying about how money has been used. It can cause a rift between partners that can be difficult to fix. But coming clean about the lying and consulting a counselor to discuss the issue can help to rectify it. Having a budget that you create together and stick to can help too.
The Bottom Line
There is no right way to manage your finances as a new couple, but with communication, trust, and a bit of planning, you and your spouse can have a marriage that’s free of conflicts about money. If you’re struggling to come up with a joint plan that sits well with you both, seek the professional advice of a financial counselor.
