Even if you want your contributions to be equal, how you split finances when you're married or cohabitating may not be split 50/50.
Whether it’s through marriage or cohabitation, there comes a point in most serious relationships when we start talking savings accounts, investment strategies, and retirement plans. And the big question: how should couples split finances?
Here’s the thing: Life is complicated and money is messy. You’re joining lives, but combining assets might be the most complicated part of that exercise. While your relationship might be a 50/50 commitment, your money most likely is not. But by maintaining honest, open communication about your expenses and income, creating a plan that works for both of you can help you both avoid the top reason relationships fail in the first place: fights about money.
In a study by Kansas State University, researchers found that arguing about money is the top predictor of whether a couple will get divorced. Those arguments tend to take longer to recover from and are more intense, researchers said. Regardless of where you are in your relationship, here’s how you can split finances when married or cohabitating.
Should You Have Joint or Separate Accounts? Try Both
In dual-income couples, you don’t have to choose joint or separate accounts. The easiest setup is to have a joint account that both fund to pay shared expenses. Then each partner can have separate accounts to pay for individual assets. Both partners share the financial burden of day-to-day expenses while maintaining financial independence.
“Some of the most happily married couples I’ve seen are ones that kept their money separate for their entire marriage,” says Emily Sanders, managing director of United Capital Financial Advisers in Atlanta. “It takes away some of the power and control issues that tend to be associated with how we use our money.”
A joint account requires transparency, mutual trust and shows a shared commitment toward a common goal. Sanders also recommends adding each other’s names to the apartment lease or house deed. This increases the equity in the relationship and avoids the “his house” or “her apartment” language. It’s yours together now, both the pleasure and the responsibility.
How to Decide Who Pays for What
In the simplest terms, your budget discussion starts with the question: What are our shared expenses? The mortgage, electric and gas bill are given. But then how do you handle her student loan payments? The loan for the car you bought way before you knew your partner? The balance on your credit card bill?
These are individual decisions, but solutions happen by talking this out. If your partner has a lot of debt, you may offer to help them out with the payments. Or you might take on a larger percentage of the household expenses. allowing them to tackle their debt payments. If your partner insists on paying their bills by themself, you could be the one to pay for the discretionary, or “fun” stuff from your personal account.
Saving for the Future
You both can have different goals and interests, but there are some savings goals you’ll want to tackle together. Part of your savings plan should be the result of a joint decision based on your goals. For instance, a short-term goal could be to take a vacation next year. Your long-term goal might be to buy a house. Make sure your partner not only knows about these plans, but is on board with them. When you’re both saving toward the same goal, you’ll get there faster.
Commit to a savings level you are both comfortable with and then deposit that amount in a joint savings account each month.
When you figure out how much you are both saving, don’t forget to take into account your 401(k) contributions, if applicable. If you’re putting 5 percent in your 401(k) and your partner is putting 2 percent, have a discussion about goals. There’s a chance those contributions need to change.
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