How to Manage Finances as a Couple

The relationship between love and money has changed. For most of the 20th century, the default way for couples to manage their finances was to merge everything into one account. In many cases there was only one primary earner in the home and the other person was reliant on that earner for their livelihood. Today the majority of households have two earners and couples are getting married later in life, after years or even decades of financial autonomy - this has created a paradigm shift in the way we think about managing money in our relationships.

If you and your partner are considering different ways of managing money together, we’re here to help! Before you begin talking about this, remember that there is no one size fits all - there are many factors that you and your partner may want to consider before deciding how to handle your finances together. Some of the things you should discuss include:

• What stage of the relationship you’re in and how each of you may want to change the way you manage finances as the relationship develops (ex. before or after marriage or children)
• Any childhood traumas or previous good or bad experiences with how you managed money in romantic or family relationships and how those impact you today
• How similar or different your spending habits are and how that may affect the ways you spend shared money
• Any difference in incomes and how that may impact the way you share expenses now or in the future
• How important it is to each of you to maintain financial independence
• Any existing assets or debts that impact each of you financially and how those will be handled
• How each of you may want to work together financially on big purchases in the future such as buying a shared home
• What each of you expect to happen to any shared assets in case you separate at some point down the road

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Three Approaches to Managing Finances as a Couple

There are three primary methods that couples can use to manage their finances:

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1. Fully Separate Finances

Those who choose to keep their finances fully separate usually maintain their own checking accounts, savings accounts, and investments. As a result, if you choose to live together and/or have shared pets, children, or purchase large assets together, you will likely need a comfortable method of accounting for who owes who for which bills. Some systems that work best for couples with this set-up include keeping tabs of expenses in a shared Google Sheet or Excel file and settling up periodically (ex. once per month) or using Splitwise to track expenses. Often there is one person who spearheads this process and will let the other person know when it is time to settle up - it’s important to define how you will manage this process together so that it doesn’t feel awkward to one person to ask to be reimbursed. 

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Among those who choose this set-up, some couples prefer not to keep track of who owes who and just trade off paying for expenses. This usually works well in the early stages of the relationship but can start to feel unfair when you have many larger expenses such as shared rent, pets, children, etc. If you choose not to keep track of expenses, it’s important to ensure that you and your partner are both comfortable with this approach and that sometimes one person may spend more than the other.  

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Some couples prefer keeping finances fully separate because it makes it easier to split assets in case of a separation down the road. However, If you are married, keeping your finances fully separate doesn’t necessarily protect your assets in the case of divorce. Many states consider all assets earned during the marriage to be joint, regardless of which accounts they sit in. If you feel strongly about maintaining separate finances, it is best to have a pre/post nuptial agreement to reinforce the separation of finances.

Pros:

• Best for couples who are dating and/or living together and/or not ready to have any finances merged
• Each party maintains full independence and oversight of their own accounts and is not exposed to any financial risk from the other party
• Keeping a google sheet or other log of various items for reimbursement can make shared budgeting easier

Cons:

• For couples who live together or have shared assets, pets, or children - the number of shared expenses and high dollar amounts often entails a cumbersome monthly tracking and reconciliation process.
• If you split expenses at a ratio other than 50/50 on all or certain categories, who owes who can become harder to keep track of.
• One or both partners may feel emotions including awkwardness, shame, pettiness, or guilt when adding smaller expenses to the list and/or asking for reimbursement. There may still be some awkwardness about who pays for what, who pays for dinner at a restaurant, and whether or not a purchase will be reimbursable. 

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2. A Yours, Mine, and Ours or Hybrid Approach

In a “yours, mine, and ours” set-up, couples choose to have some money separate and some money combined. Oftentimes, couples maintain the separate accounts that they had prior to meeting each other and then also open up a new joint checking account, joint credit card, and/or joint savings account in both of their names. This approach enables each party to maintain a sense of independence and also facilitates an easier way for both parties to participate in shared expenses without worrying about reimbursements. 

Pros:

• Works well for couples who are living together, engaged, or married. 
• Enables each party to maintain a sense of autonomy and can sometimes reduce arguments over how each person is spending money because a concept of individual and shared dollars is formed. This can be particularly helpful for couples who have different spending habits (ex. one is a saver and one is a spender). 
• No awkwardness or friction over who is paying for a shared meal or living expenses and no tracking of shared expenses, since shared expenses can go on a shared card or be auto deducted from a shared account.
• This approach allows you to build trust over time given you can always put more money in the shared account as the relationship develops.

Cons:

• You and your partner will need to figure out how much money to put in the shared account each month and whether or not you would like to put money in that account 50/50, based on a % of income, or some other way. This may change over time in case one of your incomes change or someone loses a job.
• You and your partner will still need to manage the balance of that shared account to ensure it always has enough money in it to cover your bills. We suggest creating clear roles and responsibilities for who will be responsible for paying off your shared credit card and ensuring the shared accounts have the appropriate balances. 
• You may still need to transfer money to/from your personal and shared accounts in case one of you receives a payment via Venmo, PayPal, in cash, etc. that would otherwise be deposited in your shared account

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3. Fully Combined Finances

If you choose to fully combine your finances, you and your partner will likely open up a new shared checking and savings account and new credit cards in both of your names and transfer all of your existing assets into those new accounts. This is the most traditional model and the way that most married couples have managed their finances historically. This approach enables you to approach all financial decisions from a team perspective but also means that you need to be more on the same page about how you spend, save, and invest your money. Early research shows that couples who have fully combined finances are more likely to stay together, driven by feeling more like they are on the same team and thinking of everything as “our money”.

Pros:

• Easier to keep track of your money because everything is combined and offers greater transparency on how money is being spent
• Mental benefits of feeling on the same team
• Budgeting, saving, and investing decisions can be made together instead of alone

Cons:

• Can cause more arguments over how money is being spent, particularly if you have different spending habits
• One person usually takes the lead on managing the shared finances and may feel increased responsibility or resentment as a result
• Can make it much more difficult to divide your assets and track which assets were premarital assets if you get divorced (in most states, premarital assets are considered your own separate assets in a divorce proceeding)
• Can create a lack of privacy for any personal purchases or gifts to one another if all purchases are made on shared credit cards

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Choosing the Right Approach for You

We hope that laying out the three primary ways that couples choose to manage their money will be helpful to you and your partner! Remember there are no rules here - you and your partner can mix and match the elements that work for you from each model. Many couples today are choosing to do just that, for example by having fully combined accounts but separate personal credit cards that they don’t have access to and withdraw from the joint account to maintain a sense of privacy. The most important thing is to speak openly with your partner about what’s important to each of you when managing your finances, understand what past experiences may influence those choices, and choose an approach that feels comfortable to both of you. 

If you are struggling to decide how to manage your finances as a couple, you may want to consider working with a financial advisor. A financial advisor can help you to assess your current financial situation, develop a budget, and create a financial plan that meets your needs and goals. Have any questions about managing finances as a couple? Check out our socials for more information or download the Tango app below!

-Jacklyn Rome, CEO & Founder, Tango