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How to Approach Money as a Couple

Finance Coach, Carol Glynn tells us why is it important to take an active role in the family finances?

Did you know that money is the number one cause of arguments in marriages?

It’s the second leading cause of divorce globally. According to a Kansas State University study, arguing about money is ‘by far’ the top predictor of whether a couple still stays together or not. Researchers found arguments about money tend to take longer to recover from and are more intense than other issues.

It’s also one of the top three reasons why women don’t leave toxic relationships, especially when children are involved. It’s rarely about the lifestyle their partner is providing. The fear of being unable to provide basic needs such as food and shelter for themselves and their children holds them back. The University of Wisconsin-Madisons Department of Psychology published their research on the Effects of Domestic Violence on Women’s Financial Well-being. Within it, one study discussion was based on 103 domestic violence survivors. All of the women reported being psychologically abused by their partners, 98% had been physically assaulted, and all but one (99%) had experienced economic abuse (Adams, et all., 2008).

Economic abuse is when one partner controls the other by restricting their access to finances. They don’t have access to bank accounts, savings or investments. Their abusive partners control access to medical insurance or they restrict their access to assets by refusing to include their names on homes or vehicles.

But thankfully this is not the norm. In my experience, most women who are not involved in the family finances do so willingly. They hand over their financial power to their partners, placing all responsibility on them to manage the finances. Their husbands tell me how they wish their wives would take a more active role in the family financial decisions as they would like to have a partner they can share the responsibility with. They feel the burden of such significant decisions and they worry about how their wives would cope financially should anything suddenly happen to them. Would they know how to access the bank accounts, life insurance or investments? Do they know how much and how to pay the mortgage? What happens if they make an honest mistake? This is when trouble can brew as it’s very easy to blame and point fingers from the outside.

Having open, honest, vulnerable conversations about money plays a significant role in healthy relationships. Ideally, this happens early on in the relationship, maybe before they move in together, but certainly before marriage.

How should you manage your money as a couple?

I am regularly asked how couples should manage their finances. What is the right way? Couples want to know how should they spend their money. Should they combine everything, keep it all separate or have a shared pool of family money. How should they decide who pays for what, and how much of each other's income they should contribute? Who makes the money decisions such as life insurance, mortgages, investments and planning for retirement? So many shoulds!

My answer to this question is no different to almost every other financial question I am asked. There is no one right way. There are no ‘shoulds’. There are only ideas to consider and discuss.

The goal is to find a way that is in line with your values and goals and is respectful and agreeable to both parties.

What is most important here is communication and mutual respect.

The goal is to find a way that works for both of you. One that results in both individuals feeling respected and secure in the arrangement and there is an even distribution of control.

What are the possible ways to manage money as a couple?

1. Combine finances but each partner gets ‘fun money’

This common approach is to combine all incomes into a single account. All payments, savings and investments are made from this shared account. Each partner will also have their own separate accounts into which a set amount of money is transferred from the shared account. This is the individual's fun money and they are free to use it however they want.

The benefit of this approach is both parties have equal access to the family money and so there is complete transparency. It prevents resentment caused by one partner feeling they are paying more than the other.

Having your own fun money affords the freedom to do whatever you want with it without having to consider or consult your partner. It’s important to discuss and agree on how much fun money each partner gets. Possible ways to calculate it are based on proportional income, or maybe it’s equal amounts. It’s also important to be clear on what categories fall under fun money versus the shared family pool.

2. Keeping your finances completely separate

In this approach, your money doesn’t merge at all. You each have your own separate bank accounts, bills, budgets and responsibilities. Each partner is independent and in full control of their own money.

In some ways, this way is easy as you only have to worry about yourself and you decide what you spend your money on. However, it is close to impossible to have zero shared expenses so that may get confusing to deal with. Does one partner pay all the rent or mortgage for example while the other lives rent-free? It also lacks the sense of unity and ‘in it together' that sharing at least some financial aspects generate.

3. Split bills based on a percentage of each individual's income

This is when each individual contributes a percentage of their income towards shared expenses and responsibilities. The person that makes the most money pays the larger percentage of the bills. For example, if you earn 70% of the family income, then you will pay 70% of the shared costs.

To decide on how much each partner contributes, you add up all the family expenses and multiply that number by each person's income percentage. This is best managed by opening a shared account and paying all shared expenses from this account.

Similar to the fun money approach, the amount not contributed to the shared bank account is used by each individual however they wish.

4. Split responsibility for certain expenses

Each person will take responsibility for certain expenses. This is the most common approach I see with couples in the UAE. Usually, one person pays for housing, insurance, school fees and large expenses. The other will pay for example groceries, clothing, children's needs and Adhoc family expenses. Outside these main expenses, each individual’s income is their own to use how they see fit without consulting their partner.

5. Combine all your incomes and expenses

This is when couples have one bank account into which all income is received and all expenses are paid. To ensure this works well, it’s important to discuss family finances regularly. This approach allows for full transparency but to avoid confusion or missed payment deadlines, it’s important to assign roles and responsibilities such as who will process the payments. Automating expense payments like mortgages and utility bills is wise to avoid confusion or arguments about who’s job it is to make the payments each month. When your finances are so intertwined, you need to be on the same page with your spending and money goals. When this approach is implemented well, it can generate a strong sense of being on the same team working towards the same goals. There is no distinction between what’s mine and what’s yours.

However, it can cause resentment if one partner feels restricted from spending on themselves, or if they are judged for the odd extravagant purchase.

6. Split shared bills 50/50

This is the least common way I see couples manage expenses. In this approach, each individual contributes the same amount of money for shared expenses.

Splitting bills equally may sound fair, but if one person makes significantly more or less than the other this could put more of a strain on one person than the other. Splitting bills equally will also affect big future purchases (like houses) because you will have to make sure each person can afford the expense.

How to decide which approach is right for you?

It is really helpful to understand each other's money mindsets. Few couples talk about their money mindsets, their money fears or their childhood experiences with money with each other, or anyone else. Our feelings about money often start at home, in our childhood and that is unique to you. Even your siblings may have very different perceptions of money from you.

So when you talk about money with your partner, give each other grace, and make sure you listen. Be honest and talk openly about your financial goals, childhood experiences with money, your fears, your goals and very importantly, your values. Talk about your feelings on each approach discussed above, why you prefer one over the other, maybe some trigger your insecurities or some drive fear if you don’t feel confident enough to be responsible or heavily involved in financial matters?

And last but not least, I am often asked who should manage the bank accounts and make significant decisions?

There's that should word again. It is ok for one person to manage the family finances. What is important is both parties have a clear understanding of their responsibilities and role. Each individual can have input into financial decisions and there is full transparency. It’s not healthy or safe for one person to have full control over all the family finances without the other's knowledge.

No matter how much you love your spouse, trying to merge your lives and your money, can be a bumpy and emotionally charged ride. But handled well, in an open-minded, safe and loving environment, sharing your financial vulnerabilities can help bring you closer to your partner and foster an even happier and healthier long term relationship.


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