Managing Money as a Couple: How Do You Keep It Balanced?
At the beginning of spring, we received the most surprising news: my cousin, Sarah, was getting a divorce! Sarah had been married to Ben for four years, and they were a happy couple who enjoyed financial security and were planning their dream vacation to Europe. Unfortunately, the economy experienced a sudden downturn, and with the onset of a global recession, their carefully laid plans began to unravel, and with them, their marriage. Rising inflation, job insecurity, and unexpected expenses strained their relationship, disrupting the harmony of their home.
The recent surge in inflation, as highlighted in an October 2022 New York Times article, has made it even more challenging for couples to manage their finances. Rising prices on everything from groceries to housing have affected many marriages, making it crucial for couples to have a strong financial plan in place.
In this post, we’ll explore practical ways to manage money as a couple. From setting joint financial goals to creating a budget that works for both of you, we’ll guide you step-by-step through building a solid financial foundation.
Why Is Money Such a Big Deal in Relationships?
According to a recent survey by the Federal Reserve, nearly half of Americans have less than $400 in savings, highlighting the importance of building an emergency fund as a couple.
When you and your partner have different approaches to spending, saving, or budgeting, it can lead to misunderstandings and arguments. This is why it’s essential to have clear communication about your finances and develop a plan that works for both of you.
Step 1: Start with Honest Conversations About Money
The first step to managing money as a couple is to open the lines of communication. Be honest about your individual financial habits, debts, and savings goals. It’s important to be transparent with each other—after all, you’re a team. As Susannah Collins, a Certified Financial Planner, emphasizes, “Open and honest communication is the cornerstone of successful financial partnerships. Couples should regularly discuss their financial goals, concerns, and values to ensure they are aligned.” This reinforces the idea that financial transparency builds a solid foundation for shared goals.
Ask yourselves questions like:
- Do we want to combine all our finances, or should we keep some accounts separate?
- What are our short-term and long-term financial goals as a couple?
- How do we feel about debt? What is our plan for paying it off?
By having these discussions early on, you can avoid misunderstandings down the road. Remember, there’s no one-size-fits-all approach. What matters is finding what works best for your relationship.
Step 2: Define Your Financial Goals Together
Once you’ve discussed your individual financial situations, it’s time to set goals together. These goals will serve as your roadmap for managing money as a couple. Think about what you both want to achieve in the next year, five years, or even ten years. According to David Ramirez, a Certified Public Accountant, “Creating a comprehensive financial plan is essential for couples. This plan should include budgeting, debt management, retirement savings, and estate planning. A financial advisor can help you develop a personalized plan that meets your unique needs.” Following this advice ensures that both partners are on the same page and have a clear roadmap for achieving financial security together.
Common financial goals for couples include:
- Saving for a home or major purchase
- Building an emergency fund
- Paying off debt (student loans, credit card balances, etc.)
- Saving for retirement
- Planning for children or starting a family
It’s important to prioritize your goals and set a timeline for when you’d like to achieve them. Be sure to revisit these goals regularly to see how you’re progressing and make adjustments as needed.
Step 3: Create a Budget That Works for Both of You
Budgeting is a key component of successful money management. As a couple, you need a budget that reflects your joint income, expenses, and financial goals.
Here’s how to create a budget:
- List All Sources of Income: Include both salaries, any side gigs, and passive income sources.
- Track Your Expenses: Go through your monthly bills and expenses. Don’t forget to account for subscriptions, groceries, utilities, rent/mortgage, and discretionary spending. any debts. To make budgeting easier, consider using shared budgeting apps like Spending Tracker, Goodbudget, Expensify where both of you can track your expenses in real-time.
- Set Spending Limits: Based on your income and expenses, set reasonable limits for spending in different categories. You might have to compromise here, especially if one person tends to spend more on certain items.
- Allocate for Savings and Debt Repayment: Make sure you’re putting a portion of your income into savings and using another portion to pay off any debts.
To make budgeting easier, consider using a shared budgeting app where both of you can track your expenses in real-time.
Step 4: Combine Finances or Keep Them Separate?
Deciding whether to combine your finances or keep them separate is a personal choice. Some couples prefer joint accounts for simplicity and transparency, while others keep separate accounts for autonomy. There’s also the option of a hybrid approach, where you have a joint account for shared expenses and individual accounts for personal spending.
Here are the pros and cons of each approach:
- Combined Finances: This can simplify bill payments and savings but requires a high level of trust and open communication.
- Separate Finances: This approach allows for more independence, but it may require more effort in dividing expenses.
- Hybrid Approach: You both contribute to joint expenses like rent and bills but maintain your personal spending accounts.
Choose the method that works best for your relationship dynamic.
Step 5: Set Up an Emergency Fund
An emergency fund is a safety net for unexpected expenses, such as medical bills, car repairs, or sudden job loss. Experts recommend having three to six months’ worth of living expenses saved up in an emergency fund.
As a couple, decide how much you want to save and create a plan to build your emergency fund together. Having this cushion will reduce financial stress when life throws unexpected challenges your way.
Step 6: Avoid the “One Person in Charge” Trap
In many relationships, one person might naturally take over the finances. While this can work for some couples, it’s important to make sure both partners stay involved in money decisions. This prevents feelings of resentment or imbalance.
Here are a few ways to stay engaged:
- Schedule regular “money meetings” where you review your budget, savings, and financial goals.
- Use a shared financial app to track spending together.
- Take turns managing different aspects of your finances, such as paying bills or handling savings accounts.
Conclusion: Building a Strong Financial Partnership
Managing money as a couple is all about communication, compromise, and planning for the future together. By setting joint financial goals, creating a budget, and regularly discussing your finances, you’ll build a strong foundation for both your relationship and your financial future.
The road to financial harmony isn’t always smooth, but with patience and teamwork, you can navigate it successfully.
Citations:
- Collins, Susannah. “The Importance of Open Communication in Couples’ Finances.” Financial Planning Advisor, 10 December 2023, https://www.financialplanningassociation.org/.
- Ramirez, David. “Creating a Comprehensive Financial Plan for Couples.” Certified Public Accountant Journal, January 2024.
