Whether you’re married or cohabitating, you’ve likely thought about how to most effectively manage your money as a couple. Should you combine everything, have a household account, or simply keep everything separate? The choice is a very personal one that depends mostly on your financial goals, but there are a few other things you may want to consider.
If the one you love is making a fuss over how much you are spending on clothes, yet he or she is driving a nicer car than the one you are driving, keeping some or all of your money separate can help to reduce this type of conflict and resentment that can result from a difference in spending priorities.
Think of it this way: You might like the beach, but your significant other might like the mountains. One place is not better than the other; it is just a matter of personal preference. In the same way, having new clothes and going out to eat might be important to you, but your spouse might prefer decorating the house and having a newer car.
If shared finances are causing stress in your life and you want to keep the peace using separate accounts, keep the following points in mind:
Each person must spend less money than he or she makes. If you are both using all of your money on discretionary items, nothing will be left for necessary expenses.
Mandatory expenses must be allotted fairly between each person. While it’s up to you as a couple to define “fair,” each person should be responsible for expenses such as mortgage payments, utilities, groceries, savings, and so on.
Each person should reserve judgment on how the other spends his or her discretionary funds. You can’t be judgmental about where your significant other is spending the money allotted solely for his or her purchases. You may question one another’s spending, but as long as the purchases are within each of your spending plans, you should not criticize.
Available balances on credit cards should not be considered spending money. If a credit card has a balance of $3,000 and only $800 has been used, the remaining $2,200 shouldn’t be considered toward your discretionary limit. Maxed-out credit cards may only add to your financial stress as a couple.
If the one you love is not as fiscally responsible as you and you’re worried that separate accounts could potentially lead to a financial mess, you have other options:
Have one joint account for mandatory expenses, into which both of you contribute a predetermined amount.
Budget discretionary money for both you and your spouse. Deposit this into separate accounts each month—one for you and one for him or her—to be spent as each of you sees fit.
Trust but verify. You may each want to consider checking your credit report at least once every six months. You’ll be able to discuss your spending habits as a couple while verifying that there’s no fraudulent or incorrect activity on either person’s report.
Many couples fight about money, but having separate accounts may result in a little less bickering and a lot more romance.
Steve Repak, CFP®, is the author of Dollars & Uncommon Sense: Basic Training for Your Money.
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