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Combining Finances as a Couple

A question that comes up often when clients and friends that are preparing to cohabitate or get married is "what is the best way to combine our finances".  Even couples that are already married can question whether they are doing things the right way. There are several options available and every couple has to choose what works best for them. The two extremes would be keep everything seperate or combine everything. Obviously there are many options in the middle of these two extremes.

Keeping your finances separate and split the bills-

This approach may work for individuals who want to maintain control over their finances, however, if there is a significant difference in salary, someone in the relationship may feel like they are bearing an unfair amount of the expenses or that one partner has more expendable income. This could cause issues down the line. Before taking this approach make sure that the lines of communication are open and everyone is on board.

Have a joint account or credit card for shared expenses and keep separate accounts for all personal expenses-

This approach could be a good compromise between sharing everything and splitting everything. The amount each party contributes to the shared expenses may need to be discussed to ensure it is an equitable amount that feels fair for both parties. A couple using this approach may also want to have a savings account together in case of emergencies, last minute trips, etc. 

Keep all accounts joint-

This can be the most convenient approach for some couples because there is full transparency. It can also be the most risky. Both people in the relationship contribute and can withdraw, pay bills etc. Taking this approach will require both parties to be on the same page as far as financial goals and spending habits. If one party is a big spender and the other wants to save, this approach can be problematic. Even when splitting bills, attitudes towards finances play a large role in a couples harmony. Ensure you discuss this before making commitments together in general. 

Keep things flexible- Different methods may work better at different stages of life

Most couples move from one method to another as their relationship changes. When dating, most couples wouldn't want to commit to combining all of their finances. There is probably some form of splitting shared costs and keeping the rest in a separate account. The amount being split will probably become a larger part of your salary if you decide to cohabitate or have a child together. After marriage, cohabitating, having children and deciding that your financial goals and habits are on the same page, going all in may make sense.

My story

My husband and I have similar spending habits and savings goals, so after we got married, we decided it was best for us to combine everything. It takes the stress out of paying bills and saving for us because we view everything as ours. We also have a  situation where we both view each other as equal contributors in one way or another to our financial future. Before we were engaged, we split joint costs and kept our accounts separate. At the time, thankfully, we didn't have a whole lot of cost because our home was paying for itself (with rental income), we didn't have car notes or children, so almost all of our costs were discretionary.  Life has since gotten a little more expensive for us but we also started bringing in more income. After I started my own firm, my personal income became more volatile than when I was working a 9-5. At this point keeping things separate would not work for us.

So what do you do?

There isn't any magic method for any couple and goals and attitudes towards money play a huge part in how you decide to share it. There should be a good amount of discussion and thoughtfulness when deciding which method would work best for all parties. Over time relationships evolve, the breadwinner could change, and financial investments made now can pay off in the future. Be sure to be fair to your partner regardless of what stage of the relationship you are in, but even more importantly, make sure you are both on the same page and headed in the same direction financially. 

Alicia Jegede is the principal CPA and financial planner at New Gen Financial Planning, LLC. 

Disclaimer: This article is provided for general information purposes only. Nothing contained in the material constitutes advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Alicia Jegede.  All rights reserved.