Understanding Credit & Debt
How Couples Can Manage Their Money and Avoid Conflicts
Finding a Money Model You Both Love Is Key
When couples commit to each other, they're not just combining households. They're merging the ways they manage their lives and finances, and that can bring out sharp differences in their money-management habits.
Couples often cite money as the primary topic of arguments in relationships, surpassing such issues as household chores, children, and sex in several recent surveys.
"Money is a symbol of underlying values," says Paula Pant, a personal finance writer who blogs at AffordAnything.com. "When a couple argues about money, they're really arguing about different priorities." For example, one partner might like the convenience of going out to lunch every day, while the other partner brown-bags it to build a vacation fund.
Similarly, Dianne Juhl, who provides financial counseling through her business, The Feminine Face of Money, says money is a symbol that can stand for more than spending power. "Money is often equated with status, talent, and worth. When money is tight or there are differences in income and spending habits, it can be a source of conflict with couples."
Juhl says a shared agreement around a family money model can reduce conflicts. She suggests couples start by selecting one of three models:
- Pooling their income to pay household expenses
- Dividing household expenses in proportion to their incomes
- Paying equal shares of household expenses regardless of their incomes
Which Money Model Fits Best?
While couples often keep their finances separate before marriage and then combine them after saying their vows, that's not the only approach.
"There's an old-fashioned idea that couples shouldn't pool their money together when they are not legally married," Pant says, “but I see a life partnership as similar to a business relationship in that regard."
And there are ways to share expenses without fully combining finances. A joint checking account can be used to pay household obligations, such as utility bills, mortgage, or rent, Pant says. "But that doesn't necessarily mean the partners have to go all in. They can also keep separate accounts, allowing each person to set aside money to do with what they want. … There is no single right way to do it, just like there is no single right way to be married or to be in a relationship."
Make a Plan, Then Revisit It Regularly
Since circumstances can change over the course of a relationship, it's a good idea to review the money model every year or two. For instance, Rae Redford says she and her partner kept their finances separate when they began living together two years ago. "We went through our bills and divided everything in half," Redford says. "He wrote me a check every month for his share of the rent."
But that became impractical, Redford says. "I had to make extra trips to the bank, and it got to the point where it was really inconvenient."
Within a few months, the Colorado couple decided to combine their income into one checking account. "It's just easier," Redford says. "Now we don't have to worry about remembering two log-ins and two passwords."
As they merge their financial lives, couples may need to consider the debt they each bring to the relationship. Redford says she left a previous marriage with a car loan that her partner ultimately helped her pay off. "Money has never been a big issue for us," Redford says. "If one of us needs money, the other is willing to provide it."
Pant recounts the experience of a couple who handled debt a different way. The wife came into the marriage with substantial student loan debt. "They kept their finances separate, even after they married, until she became debt-free," Pant says.
Communication Is Key
Juhl says that, while there's no single answer on how to manage spending and debt, what's important is that the couple discuss it openly and extensively.
"Couples make up their mind on that in unique ways," Juhl says. "The important thing is to have a clear agreement. Write everything down, because memories can be poor from a year ago or even a month ago."
"Harmonious relationships around money and wealth take communication," she says.
Photo: pixdeluxe/Getty Images | Diane Franklin is a freelance writer and editor living in St. Louis. Her work has appeared in Credit Union Management, Credit Union Business, and St. Louis Homes & Lifestyles, among other publications.