How couples can combine their finances

Photo courtesy of Wally Gobetz

 

So, you found that special someone, and decided to take the leap, either toward cohabitation, or civil union, or marriage, or anything that merits the phrase “take the leap“.

Congrats! I bet one thing you’re not thinking about in all of the excitement is money.

Unsurprisingly, I believe that’s a mistake. Because talking about your finances not only has the power to bring you together, but not being on the same page has the power to tear you apart.

Odd couples

From talking to couples, it tends to shake out that couples consist of one person who gets really into the idea of budgeting and developing a plan, and one person who just likes to just focus on living. (You know which one you are. And it should be entirely obvious which category I fit into.)

The standard Odd Couple dynamic here is that one person can feel like the other is controlling and restricting, while the other person can feel like the other is being irresponsible and reckless. Sound familiar?

When in actuality, we need someone to keep to things dynamic and exciting, and another to keep the ship on course.

But binary distinctions only get us so far. Just know that there are some people who would prefer to talk more about finances, and some who would prefer less. And I am here to promote the argument that even if you’re not interested in talking about finances together, you will benefit from doing so in all possible ways.

So let’s take the culturally convenient case of two people living together, sharing not only a roof but also rent/mortgage. How do they plan out their financial household? After all, not only do the bills need to get paid, but both of you need to live, and that means Expenses, too.

Methods of commingling

There are a few different ways to tackle this challenge, with my own creative monickers supplied:

  1. Divide and conquer: In this method, no finances are shared. Bills are divided up (for example, A pays the rent, B pays the other bills) and each maintains complete autonomy over their own money, including separate accounts. This is in some ways more akin to a roommate situation.
  2. Semi-Joint Life: In this method, a joint account is established only for joint expenses (things like living expenses, couch, etc.) while separate accounts are maintained. Each person pays in to the joint account by a predetermined amount, and the account is only earmarked for those uses.
  3. All-In: In this method, everything is shared. One account, one plan, one goal. The plan is engineered, both agree, and execute.
  4. Parent/Child: The exact opposite of the above: One person takes care of everything, and doles out an “allowance” to the other.

There are advantages to all of these methods:

  1. With Divide and Conquer, total autonomy means that there is no scrutiny of the other’s comings and goings.
  2. With the Semi-Joint Life, you don’t need to bicker about how to equalize the Bills (for example, who’s going to pay for that couch).
  3. With All-In, you are a single unit operating together, with much less overhead (one account to rule them all).
  4. With Parent/Child, one person gets to drive the ship, which may be good if the other person doesn’t have any interest in it.

But equally, there are disadvantages to all of them:

  1. With Divide and Conquer, it really is like a roommate situation, which doesn’t build a sense of shared experience. Presumably, you’re more than just roommates, right?
  2. With the Semi-Joint Life, it is the most complex situation, requiring the most accounts and therefore the most overhead.
  3. With All-In, you are forced to confront that you may have radically different ways of operating financially. This could lead to heavy conflict.
  4. With Parent/Child, I don’t want to judge, but presumably you’d want to be partnered with someone you could trust enough to have at least a measure of autonomy, right? And wouldn’t you want some for yourself?

If it were me in this situation, I’d probably opt for something in between Semi-Joint Life and All-In. I think I’d want to be with someone with whom I could be on the same page with in these areas, where we could develop a plan together and execute. Where I’ve been in a situation like this in the past, this is how I’ve preferred to operate.

While at the same time, I know that any partner I have would be their own person, different from me, with their own ideas and plans and goals, some of which may not align 100% with mine. And that’s okay too. And frankly, it would be nice to not have to know every single gory detail of someone else’s finances, and just get the executive report, if that makes sense.

Caveats

Now, there are more complicating factors that must be taken into account. Life is messy, and there may be past relationships, current other relationships, kids, parents, and radical economic imbalances, not to mention taxes and laws, all of which must be taken into account.

If there’s any wrong answer here, it’s to not talk about your strategy. Not having these kinds of conversations will be problematic in the long run. Even if you’ve implicitly agreed on one of these arrangements, actually talking about it is important to make sure that you both actually are in agreement, and to prevent any resentment from developing.

But aside from that, I don’t believe that any strategy is inherently right or wrong. (Though Parent/Child might be a really hard sell.)

But enough about me. How do you commingle your finances? Or do you?

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

I offer a free phone consultation to anyone who is interested in changing their financial narrative. Are you ready? Click here for details.
Mike Pumphrey
Posted on June 8, 2015