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Yours, mine and ours - Handling money as a couple

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Deciding as a couple to live together or get married is a major decision. It’s easy to get caught up in the emotion of the moment and assume that you and your partner share the same financial values and goals. After all, you’re in love! What could go wrong?

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As it turns out, financial differences can be a common cause of stress, arguments and break-ups, so it's an important topic to discuss. Couples should consider their personal values and unique situations when creating financial solutions that work for both of them.

Choosing what works

Generally speaking, there are three primary ways couples may decide to manage their assets, income and expenses with the opportunity for many variations to accommodate individual situations. As you review them, think about how each might work for you and your partner, the additional discussion that it might generate, and how you might customize the scenario to arrive at a mutually agreeable routine. Regardless of the style you choose, it’s essential that you build an emergency fund to create a “cushion” that you can fall back on if one of you loses a job or becomes sick. For your emergency fund, decide on a goal; a good rule of thumb is to have enough available cash to cover six to nine months of living expenses, held in an FDIC-insured account, such as a savings or money market account at a bank.

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Ours — This approach is most closely aligned with the traditional practice of combining all household assets and income and paying all expenses from joint accounts. A major potential advantage of this arrangement is simplicity — money is deposited and deducted from a central source. It’s easy to keep track of your financial standing and, with most financial institutions offering online and mobile banking, both partners have access to the account. Couples who choose this option may believe that merging their assets is an additional demonstration of their trust in each other, and enjoy the partnership and teamwork involved in managing their finances together as a team.

However, even with the best intentions, couples may struggle to reach agreement on virtually all aspects of their finances, all the way down to deciding what items to purchase at the grocery store or the mall. Resentments about who contributes more to the household accounts can crop up, especially if one partner earns significantly less than the other. In the end, open communication and compromise is essential. Consider dividing up responsibilities so neither partner carries the whole burden of bill paying or income tax preparation and neither feels like they are in the dark about monetary matters. Another technique is to consider setting a spending ceiling, where purchases or expenses below the ceiling do not need to be discussed. Or, you may choose to assign a dollar value to nonfinancial contributions that a partner might make, like serving as the primary caregiver to the couple’s children.

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Mine and Yours — At the other end of the spectrum are couples who choose to maintain completely separate financial identities, and share no joint accounts. In some cases, there are financial or legal reasons for these arrangements, ranging from pre-nuptial or prior divorce agreements to insurance coverage and governmental benefits. However, some couples simply prefer the freedom that comes with managing their own money.

This arrangement can be very effective for couples where one is a “saver” and one is a “spender”, especially if they’re somewhat extreme in those tendencies. Neither partner sacrifices their personal priorities for the sake of meeting joint household obligations as they each pay half of the bills from their separate accounts. Or, they may analyze household bills and divide them equitably, so that while one pays the mortgage, the other pays all utilities and food expenses, for example.

Couples who use this approach may avoid conflicts driven by monetary decisions. It may also motivate each partner to remain financially literate. However, maintaining an individual financial identity may not work for every couple. Relationship bliss may start to fade when account balances impact plans and goals. For example, buying a home, starting a family or taking a vacation may all be dependent on both parties equally sharing the expense; if one person is short on cash, both may suffer. This can lead to resentment, anger or disappointment.

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Yours, Mine and Ours — Couples who truly embrace the “yours, mine and ours” point of view contribute to a joint bank account from which they pay household expenses, and maintain separate accounts that enable them to enjoy “guilt free” personal spending.

There’s a lot of flexibility in creating a blended financial routine, and funding of the joint and individual accounts can vary from a little to a lot. Some couples may use a 50/50 rule where each partner contributes half of the money necessary to pay the bills and keeps the rest of his or her earnings, while others adopt a proportional method where the higher earner contributes more.

It’s a good idea to define and agree upfront to which expenses will be handled jointly, such as the mortgage or utility bills. Couples may also decide that there are certain expense thresholds that should be discussed before they’re paid from individual accounts, especially those that may generate ongoing expenses like an auto loan payment. Continual evaluation and adjustments to this financial arrangement can prevent couples from getting stuck in endless negotiations. Yet, with open discussions, they can enjoy both financial unity and independence.

When finances and love come together

When it comes to decisions about how to handle household finances, couples are likely to encounter as many emotional considerations as practical ones. There may be added complexities for blended families or lingering money issues stemming from different childhood experiences and upbringings. Yet, with true care for each other’s happiness, couples can make sound decisions about how to handle money as a team — regardless of the arrangement — that contributes to mutual financial well-being and a successful relationship.

Learn more and take action

There are many resources available to couples who are ready to begin the process of choosing how to handle money together. Here are a few that can help you get started:

 
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