Marriage and Finances: 3 Methods of Handling Household Income

by Jessica Sommerfield · 4 comments

married couple
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.

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  • Cyrus says:

    Personally, I believe a married couple should combine their finances completely. If you aren’t willing to share everything in your life, including your income and any past debts, you shouldn’t get married. Even this “3 pot” idea basically treats the household like two roommates instead of a single unit.

    My wife and I each have a set amount of cash every month in the budget for our own discretionary spending, so having two extra checking accounts to do the same thing seems like a huge hassle. Also, just because I currently make 85% of our income, just that really mean I should have, say $850 a month to spend on whatever I want while she has only $150? That doesn’t seem fair at all.

    Completely combining incomes and applying it every month to the household expenses, retirement savings and other long-term goals encourages a deep level of communication, trust and cooperation that I think is almost impossible when everything is separate.

  • Zee Hamdani says:

    I love the 3 Pot System, as it is fair. No individual should have to pay a larger percentage of their income. Though your spouse might feel a bit reluctant if he is earning way more, but hey being married means sharing responsibilities as much as you can. So I believe that if you are earning more than your spouse, then contributing more to the household should not be a problem.
    It all really comes down to trust and how responsible each partner is and whether they are willing to go that extra mile for the benefit of the entire household and not just themselves.

  • Nigel says:

    Trust is a key factor here but I guess if you cannot trust your partners there is a bigger issue. Here in Australia even if you are just living together (unmarried) for over a year then you are considered as defacto married and unless there is a pre-nup when you split then there is opportunity for the partner to claim your assets.

  • Duncan's Dividends says:

    Personally I like the three pot system as it allows the couple to spend money as they want to spend it and not have to worry about asking in advance if it’s ok. It makes a lot more sense than stressing out if you can afford something as long as you pay yourself first in retirement savings.

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