Building a life with someone is full of conversations, big and small.
There are discussions about where you live, how to split up weekend chores, what’s for dinner, and where you see yourself in 5 years.
Money is a topic that evokes the most hesitation in conversations of this nature.
Many couples bring money habits to a relationship.
What one partner sees as a safe cushion in a savings account can be another’s view of excess money wasting away.
How couples spend money and how they make financial decisions can bring up a lot of past baggage.
The only way to navigate the complex process of money management in a relationship is to develop a routine that works for both people.
Creating a money system can become a stressful process, but it does not have to be if approached correctly.
Creating a balanced approach to money in a relationship does not have to mean losing your independence or agreeing on every single purchase.
The goal of a shared financial system is to create a structure that encourages trust, reduces money stress, and helps both partners work towards common financial goals.
Understanding Your Shared Financial Personality
Of course, there is a lot to work with when it comes to two people and their money.
Both of you have likely grown up with different habits and a different way of viewing money and spending.
Many arguments about money within a household stem from one partner believing the other has certain expectations about money.
So, how do you bridge that gap?
However you choose to start a discussion about money, it’s generally better to steer clear of line item budgets to start with.
Rather, ask the bigger questions that helped inform the money behaviors that your partner brought to the relationship in the first place.
For example, what did money mean in your household when you were growing up?
What are the biggest fears that you have around spending and around being in debt?
What does financial security look like to you?
By recognizing the reasons behind your partner’s spending habits, you can make peace with their ways.
The person who makes a list and sticks to it of all of your joint expenses is not trying to be a control freak; they are a predictable person.
The person who randomly picks up dinner is not being irresponsible; they value convenience and the experiences that they have with you over a strict tracking of your money.
You know, it’s really about empathy over arithmetic.
Choosing the Right System for Your Household
No one has a system that will work for their partner, so when it comes to structuring the money management for your household, there are generally three main ways to structure it, and most people adopt one of these structures, and it works for them.
There is full integration.
This is a way of managing money where all of your income is put into one pot, and you spend, save, and invest from within that.
This way of managing money requires the highest level of transparency and communication from both people, but it makes tracking and managing your money much easier in the long run.
The next approach is one of complete separation. In this system, both partners maintain their own personal accounts.
The two then agree to split shared bills. For example, they would each transfer half of the rent each month to the other’s account.
This kind of system allows for greater personal freedom, but can make it difficult to track shared long-term financial goals such as buying a house or planning a vacation.
And then there is the third path.
Option 3 – The Hybrid Model: Most Balanced for Couples. In this model, you and your partner maintain your separate personal accounts.
But for household expenses, setting up a joint bank account for couples gives you a clear central hub to manage shared bills and collective savings goals.
Each person regularly contributes a predetermined percentage of income (or a fixed amount) to the joint account(s) from their personal account.
The rest of their income is spent from their personal account as they see fit, without feeling guilty.
This hybrid model has the advantage of being clear. Household expenses are paid in an organized manner from a single hub. Each person spends the rest of the money in complete freedom.
Setting Up a Stress-Free Routine
In addition to deciding on a structure to manage your money, the next thing to do is to create a routine to manage your money.
Your routine should be designed to avoid financial shocks by preventing surprise bills.
Set up your money management routine to prevent stress.
There’s nothing worse than getting a surprise bill and having to discuss it in the middle of the night, in front of the computer with spreadsheets up on the screen.
This can be avoided by having a regular ‘money night’ every 1-2 months to go over upcoming bills for the following month and even to make changes to the amount each person contributes as needed.
It’s also great to have a regular time and place to review progress, such as over coffee. Celebrate your small savings victories!
The routine you set up for reviewing bills can also be used to review your savings. Work out the routine that is best for you both.
The Three Habits Of A Financial Couple:
- Focus on the future, not on past expenses. Rather than argue about what you spent in the past month, focus on the upcoming month and make sure that you have enough money to cover expenses.
- Automate the Bill Paying. Set up your computer to pay the same bills every month. And set up recurring transfers to your joint savings account to automatically build up your liquid funds.
- Third, have a process for larger discretionary purchases. Each of you can spend as you like down to a certain amount (say $100), and then you need to discuss and agree on whether to spend more for any given item. This makes sure you’re on the same page for bigger expenses.
Small habits build big trust.
Aligning on Long-Term Goals
Managing your money for your day-to-day living is very important.
But it is the money that you have for your long-term future goals that really unites your money management.
But what happens when your future visions don’t completely align right away?
Consider taking a step back and revisiting what matters most to both of you.
Map out your short-term, medium-term, and long-term goals together.
You can start with your short-term goals like your upcoming vacation or replacing a worn-out appliance.
Your medium-term goals can be to save for your wedding, your down payment on a home, or to start a family.
Your long-term goals will focus on your retirement and your long-term financial security.
Assign a rough timeline to each goal, and an estimated cost.
This will help you see just how small the amount you put aside each month is, and how that is contributing to the achievement of your shared goals and your shared vision of your future together.
Building a strong financial partnership with another person requires work, patience, flexibility, and communication.
A solid system of money management can be the cornerstone of financial harmony.
By working together to manage your money and striving to reach your shared goals, you can actually find financial management to be a positive and bonding force in your life.
