Money touches every aspect of your life – and we all have different experiences and perspectives on personal finances. How do you manage conflicting opinions, desires, and values when it comes to managing money together?
In this episode of the Beyond Finances podcast, we’re talking about how to manage money as a couple. We’ll not just provide some big-picture tactics but also share the details on what we do on a personal level, and how we divide the responsibilities of financial planning and management in our household.
This is a serious topic, considering 48% of people report fighting about money.
60% of those fights tend to be about spending. 41% of Gen Xers and 29% of boomers report that money was a direct cause of a divorce, and some research shows that disagremeents about money are a leading predictor of future divorce.
Money touches every aspect of your life, and everyone has different money mindsets, perspectives, experiences. Given that, it can certainly feel like a setup for inevitable fights, arguments, and friction about finances in a relationship.
Dealing with money is a part of life. It’s inescapable no matter what your relationship status is. And, if you have a partner, that’s an added layer of complexity.
Not only do you need to decide what to do with your finances, but you have to find some kind of agreement or compromise with your significant other about it – and it’s not realistic to think you’ll always agree, every time.
So how do you work it out? How can you effectively manage money together?
Let’s dig into some approaches to consider.
3 Approaches to Managing Money with Your Partner
There are three general approaches that most people take. Most households either:
- Combine everything
- Separate everything
- Combine most things, but maintain a few separate accounts for specific purposes (for example, you might have a joint checking account where your paychecks go each month that you use to pay for joint expenses or fund shared goals – but each partner also maintains their own personal account with some of their own money that they have full control over without sharing access or decision-making)
One thing you don’t need is a single, set system or specific-and-unchanging way of doing things. A variety of approaches can be effective, productive, and successful.
Every relationship has unique dynamics and what works for one couple would feel like a struggle to another, so know that there’s not some ultimate, “correct” way to handle money together.
Well… except when it comes to one critical element.
You have to communicate, and you have to be open, honest, and kind when you do so.
The Bedrock of Successful Money Management within a Partnership
Success in managing money jointly with another person starts with good communication.
The lack of good communication can also upend even the best-designed money management system. It doesn’t matter how great your approach or strategy is on paper; if you don’t communicate openly and honestly, that stategy will not work in practice.
You don’t have to be an expert in any particular topic area to do well at money management with a partner. You simply need to sit down together and discuss things like:
- What you see in your financial life that works, and what doesn’t. Don’t make it about “right” and “wrong” – focus instead on what is effective and what is unproductive in terms of making progress and achieving goals)
- What topics or concerns you have, or places within your finances that don’t make sense to you. Be able to say “I don’t know” when you truly don’t, or speak up when you feel stressed or uncertain. Those should be addressed!
- What specific questions you have. Neither partner needs to have the answers right away, but you need to at least identify the questions so that you can begin a process of getting the information you need.
- Where you feel strongly. Do you need to set a boundary or outline what feels like a non-negotiable to you? Speak up so that the other person is aware. It’s unfair to hold them accountable for crossing a line they didn’t know was there.
- What challenges and opportunities you see. Both require planning and strategies to get through or take advantage of.
This isn’t an exhaustive list, but it should help cover a lot of ground when you talk about your finances with your significant other.
Simply talking about what’s going on is progress toward a better outcome, both financially and within your relationship.
Communication is one of the hallmarks of a couples money management system that works – regardless of the details of that system.
What’s Included in Any Good System for Managing Money with a Partner
There are many ways you could handle your finances together in a way that works for your relationship or family, but all of those strategies are going to have a few things in common:
- Open communication (because no, it can’t be emphasized enough!). Avoid assumptions and seek clarity from yourself and each other. Practice active listening to show that you hear and understand.
- Honesty, with your partner and yourself. Hiding information or outright lying about a money matter is a massive red flag and a setup for failure. Be truthful in your discussions. Remember that “being honest” also applies to what you know – being willing to say “I don’t know” is a massive strength.
- Be proactive and fall in love with the process. Know money stuff can be difficult and emotional, and learn to sit with that discomfort – know that it’s normal, and it’s also okay to feel how you feel about finances.
- If you need an expert, find one. You don’t need to waste time squabbling with each other over who is right or who has the better strategy; you can go, together, to an expert in whatever issue you need to resolve and say “can you help us work through this?”
- Keep everyone involved, even if you have separate finances or different responsibilities. An equitable relationship is not one that is perfectly 50/50 every time.
Remember, this is something you’re doing together. No matter the details of your setup or the particulars of your money management system, both of you need to be involved.
How to Get Each Partner Involved in the Financial Planning Process
Here’s what “keeping everyone involved” can look like, again with the idea in mind that things don’t have to be 50/50 to be fair, to work, and to function well.
Both people should understand:
- The general, big-picture plan and long-term goals
- What each person is responsible for
- What the questions, unresolved issues, or problem areas are
- The inventory of financial life: assets, liabilities, insurance policies, all bank and investment accounts and where they are located, etc
- Where to access critical information, from estate planning documents to online logins to contact information for trusted professionals (like CPAs, CFPs, attorneys, or other professionals),
You don’t have to know every last detail of these things or be able to recite from memory, but you should have a general understanding of the “where, what, how much, and why” behind the key areas of your financial life.
If nothing else, you both need to be aware in case something happens to one of you. You only do a disservice if the uninvolved spouse is suddenly left with the responsibility and the burden of not just managing a financial life alone, but of knowing where to even begin if they have zero clue what the setup looks like.
This becomes critical if you are a staunch DIYer and your partner has no idea what you’re up to. That’s a distaster waiting to happen.
What Won’t Be Effective When Managing Money as a Couple
On the other side of “what works,” here’s what you need to watch out for when managing money together with a spouse:
- Having one person be in charge of everything, with the other partner completely uninvolved (or simply in the dark about the details).
- Keeping things from each other (this applies even if you manage money separately; you shouldn’t hide things, and each person should have an understanding of the overall, comprehensive financial picture at the household level even if you maintain separate accounts).
- Blaming, shaming, or criticizing.
- Lacking commitment to the idea of a “team effort” or an ongoing process; there’s no “end” to financial planning. There are always financial decisions that will need to be made, and ideally, you’ll make those decisions together as the couple you are.
That covers some dos and don’ts for working together around financial issues.
With that groundwork, let’s discuss what we personally do in our own relationship and financial life.
How a Financial Planner Manages Money with a Spouse
Longtime Beyond Finance podcast listeners and readers of the BYH blog will not be surprised to know what Eric and Kali’s starting point is in managing money together:
It’s all about the values .
We get grounded in what we agree is most important to us in our lives and with our finances, then we follow that up with a number of other steps and actions to make sure we’re not just planning and managing well, but implementing and taking action too.
1. Discuss Values and Goals (and Set Goals That Align with Values)
We look at values every few years; those shouldn’t shift too much because they are core values. They do evolve over time, but not annually. Goals might shift faster.
We go through a big list of potential core values, and identfiy 5 that speak most to us. We do this separately to develop individual values, and then work together to develop a list of jointly-held, family values that help guide our goal-setting and financial decision-making.
(Ours are Contribution, Togetherness, Play, Growth, and Wellness – in case you were curious!)
When we make specific money choices, we can check back against both the individual and the fmaily values to ensure we’re making decisions that are in line what our stated core values.
2. Complete Big-Picture Financial Planning
We do a big, often hours-long planning session once a year. This is where we:
- Update any information in our existing plan as necessary
- Run long-term projections
- Evaluate various scenarios to help decide on potential courses of action
- Check in on progress toward goals
- Adjust any frameworks as needed (like savings rates or spending plans)
We also sit down on a quarterly basis for a mini planning session (that still make take several hours!).
In this quarterly meeting, we’re looking more granular: we’re evaluting specific line items in the budget, making specific short-term spending decisions, identifying any upcoming opportunities or potential pitfalls we may need to deal with in the next few months, and confirming we’re tracking toward yearly goals like amount of money saved.
3. Implement Our Financial Plan
This is where we start dividing up responsibilities and who is doing to actually implement the plan we made.
Eric takes the lead on investment strategy, tax planning, and insurance. Kali manages cash flow, budgeting, and tracking of all details (from individual transactions to scheudling the meetings where we’re sitting down and discussing our finances).
This system has evolved over time, and most couples will likely find this as well. What works for you when you start out will shift and change as your relationship develops and deepens.
4. Refer to Our Team of Professionals
Even though Eric technically is the expert as a Certified Financial Planner, even we don’t do this alone. We rely on our own team of financial professionals to ensure we’re maximizing what our money can do for us, and optimizing every single strategy.
We also want to have these objective third parties in the mix as they can provide a rational, outsider perspective which is heplful in making sure we uncover blind spots and giving us somewhere to go with the most advanced and challenging questions (especially if there’s something we don’t necessarily agree on between the two of us).
Here’s who we currently work with to help us with our overall personal financial planning:
- A CFA for investment strategy
- A CPA for taxes
- Various independent insurance brokers to help us get the best health insurance plans, P&C insurance policies, and life & disability insurance policies for our situation
- An estate planning attorney for protection planning
What Approach Should You Use to Managing Money as a Couple?
Ultimately, the exact structure you use to for managing money within your household is a personal decision you should make together with your partner.
But if you’re looking for a specific recommendation… we do give ours at the very end of this episode, based on what we’ve seen work for hundreds of client households: