Money and relationships. There’s not many things that can be so divisive between a couple. But, just like there’s more than one way to skin a cat, there is definitely more than one way for couples to manage their financials.
The folks over at the Money Advice Service also have a very useful guide to money management for couples.
From talking over the years with family, friends and colleagues, the 3 most common scenarios for couple money management I’ve encountered, are:
- Each partner has a separate bank account. They are responsible for certain household bills based on their salaries. For example, a former colleague & her husband handled separate bills; the husband was responsible for the rent payment, whereas she took care of all the utility bills. They figured out who was responsible for how much by totalling their monthly household expenditure and basing the percentage they were responsible for on their monthly earnings. He earned more, so he paid more towards their living expenses.
- Each partner has a separate bank account and a joint account. Their wages go into their own accounts and they transfer over a certain amount into the joint account to cover bills, the joint credit card bill and holidays/other joint special occasions.
- The couple has a joint account, which they use exclusively to manage their finances.
I think the second option is definitely the most prevalent amongst people I know. This can still sometimes cause arguments as nights out can become a grey area. Sure, they can be put on the joint credit card (if there is one) but I’ve heard tales from a friend’s husband who would often lament his wife suddenly had no money left for the month and so dinner was on him (again) as he was the higher wage earner and generally a bit more fiscally conservative than his wife.
how we money
Me and Mr. NC, again, perhaps bucking convention, opt for the third option to manage our finances. We do not have separate money. We do not differentiate from his wages or my wages – it is all just one big pot of money. We think of ourselves as one economic unit (we also think of ourselves as a loving, romantic couple – we’re not all about the economics!). We’re a team. So, in our budgeting each month we reserve a certain amount to spend on ourselves, individually, and ‘couple money’ to do things like days out, go to the cinema, dinners or catching up with friends.
Some may say that Mr. NC gets a raw deal as he earns significantly more money than me, but yet, has exactly the same amount of money as me to spend on himself each month. On the flip side, people may think I’m getting a pretty sweet deal, as Mr. NC earns so well and boosts our household income. We just don’t see it like that. And if, one month, Mr. NC needs new suits for work and we end up spending more on him than me, I don’t throw a fit and proclaim how unfair it is. Some months, he’ll spend more on himself, some months, I’ll get something I need.
We have a very open and honest relationship and for us, transparency, trust and communication are the most important tenets of that relationship. Perhaps it’s easy for us to manage our money that way because we had a starting point of £0. We got together when we were 16 and 17, with part time jobs that each paid about £4-5 an hour. It wasn’t until we bought a flat together, 5 years into our relationship, that we opened our joint account and we have built what we now have, together, over the last 15 years.
I am well aware, our approach does not suit everyone. Where you are in your stage of life when you enter a relationship can also have certain bearings on couple money management.
- The older you are when you meet your partner, the more financial baggage you may have. Debt, child maintenance payments, poor credit rating, bankruptcy or insolvency (or any other myriad of situations) can all have a bearing on your outgoings each month, and can mean that pooling monthly wages (and financial commitments) may not be the best way to manage your joint finances.
- Family circumstances may necessitate different money management. We know someone who had her fiance sign a prenup before they were married as her grandmother had left her a house in her will and she wanted to protect her asset in the event of a divorce.
Whilst this post has focused on current accounts and managing income and expenditures each month, savings accounts can be highly divisive too. It actually makes financial sense to both have an individual ISA and try to max that out each year to take advantage of individual tax-free savings thresholds. However, I do know some women who have ‘secret’ savings accounts their partners do not know about, to ensure, if the worst was to happen and they split, they would have a safety net of sorts to rely on. Whilst, I don’t believe it’s the best strategy to keep secrets from your significant other, I am not out to judge any person who, for whatever reason, feels more comfortable with a private nest egg.
I don’t think there’s one uniform, ‘correct’ way to manage your money as a couple and the people who think there is need to realise no two couples are the same – everyone has different financial starting points, different outlooks, different financial education and different levels of comfort/emotions surrounding money. So long as you’re both onboard and happy with the system you choose, that’s the most important thing. Also crucial is the need to communicate; don’t keep secrets from each other. It isn’t healthy and is the type of problem that will eat away and cause resentment. As the saying goes – you do you and I’ll do me!