Along with many other areas of life, finances present a potential minefield of marital conflict if they’re not handled well (or at all). In the debate of how finances are best handled within marriage, there are at least 3 schools of thought.
System #1: All Income Should be Joint and Equally Controlled
One of the first indications of how ‘joint’ a couples finances are is whether they maintain joint checking and savings accounts. This traditional approach stresses that the unifying nature of marriage applies to all aspects of life, including money. Joint income and expenses (including past debts, which can be hard for some to swallow) creates a model for cooperation, clarity, and trust when it comes to money. It’s also practical — simple for budgeting, visibility, and paperwork.
On the other hand, considering the complex financial and legal implications of joint ownership leads some financial experts to advise caution. Both incomes become exposed to each person’s past creditors and credit history, and qualification for certain income-based programs like Medicaid may change. Relationally, differences in spending habits become more apparent, and may cause strife and financial ruin if they’re not dealt with.
System #2: Income Should Remain Separate and Financial Obligations Split Up Equally
Joint finances are a lifestyle change some people choose not to deal with, especially since so many couples’ relationships problems are tied to differences in financial habits and expectations. With couples waiting longer to get married, financial independence becomes more reinforced and can be harder to change. Sadly, high divorce rates have also contributed to a fear of legal entanglements from joint ownership. This system requires agreement on who pays what of household expenses, while the rest of each partner’s income remains discretionary. For instance, the wife pays for utilities, groceries, and consumables, while the husband pays the mortgage and monthly services. Allowing control of personal income and presumably eliminates disputes over how personal incomes are spent, beyond the household obligations.
Potential pitfalls of this system include ‘grey’ areas of responsibility, ownership questions (“I paid for it, so it’s mine”), lack of ‘fairness’ to the spouse who makes less but covers an equal amount of bills (leaving less discretionary income), and lack of communication/dishonesty about actual income earned.
System #3: The “Three Pot” System
This system seeks to find a happy medium between the two extremes. It can be a little complex, but emphasizes equality. Partners maintain separate checking accounts for payroll, and a third (joint) account is created to cover the household expenses (mortgage, rent, services, utilities, groceries, etc.). After calculating the dollar amount necessary to pay all the household expenses, including a cushion for fluctuations, each partner contributes the same percentage of their income to the joint account. Whatever’s left is for personal discretion. If there’s only one income in the household, the system gets reversed (deposited in the joint account, and then dispersed by percentage into personal accounts).
While this system helps solve the ‘fairness’ issue, multiple accounts require trickier planning, and there may still be problems agreeing on joint account contributions or how each person spends the rest of their income.
The Key Is Trust and Transparency.
What about you? Are your household accounts joint, separate, or a little of both? Whichever system works best for you and your spouse, the presence of trust will define its success. Acknowledging each other’s weaknesses, admitting failures, and knowing that you ‘have each others’ back’ will make all the difference in your joint financial adventure, otherwise known as marriage.