When I was in my early 20s and single, I tracked every expense I incurred. I also maintained an Excel spreadsheet that (attempted to) set spending limits in every applicable budget category. Then I met my now-wife.
She took a more laissez-faire approach to money, but not out of carelessness or extravagance. She simply lived well below her means and didn’t have an interest in dwelling on every individual dollar. This caused me some stress when we started spending money together. She also earned more money than me, which impacted what purchases we each considered within reach.
These differences continue today, but we still have managed to agree on or work out our financial decisions over the years. Between my own experiences and those of my clients, here’s how I now view merging finances in a relationship:
I regularly receive questions from other couples around my age about the best way to merge finances as part of a long-term relationship. Many people seem to think that one specific approach to joining or sharing accounts works better than others. But that’s not the case. Why? The tactical part of personal finance decisions just aren’t responsible for creating major relationship issues most of the time.
Even so, let’s start by reviewing three basic aspects of managing finances in a relationship:
When you were single, you earned the income, owned the accounts, and dictated the spending. And managing money still wasn’t easy. Many people enter a long-term relationship already struggling to repay student loans, catch up on retirement savings, and budget consistently. The relationship, especially over time, may invite even more advanced financial topics into your life. As a result, intertwining your finances in any form must make the situation more complex. For those that do decide to join accounts, the way in which they do so must be critical.
Ultimately, though, your approach only needs to reflect your personalities and preferences. And the system you choose may change over time, as your preferences evolve. Small headaches will arise no matter what system you choose. Any larger, more enduring issues that emerge will stem from the unique characteristics you each bring to the table. You’re now making financial decisions that factor in two people’s hopes, fears, and stresses around money. You’re no longer managing money for only one individual. It’s not the financial complexity that trips up most couples — it’s the human emotions involved.
Let’s assume your partner has a similar level of education, salary, and debt burden as you. It would be easy to also assume that you both think and feel about money in the same way. But it’s critical to consider how your partner’s upbringing and experiences with money have affected their adult habits. Our immediate families are the earliest, most common influence. For example, if your partner’s parents had strict rules about spending, your partner may feel stress each time you spend meaningful amounts together.
But laws, government policies, and cultural norms play a critical, yet too-often overlooked, role. Think about how you or your partner may view finances due to:
Some men may have learned to feel emasculated when their female partner pays for a large purchase. Some women, meanwhile, may hesitate to speak up about a joint investment if our society has (wrongly) convinced them that men make better investment choices.
Long-oppressed groups, such as Black individuals and the LGBTQ community, have faced barriers to building wealth that may permeate every aspect of their finances. Even within the context of a loving relationship, they may feel uncomfortable or an inclination to act overly conservative with their financial decisions.
Almost everyone’s perspective on money includes tips and advice that they’ve picked up from various sources over the years. Such comments from parents, friends, or co-workers often are well-meaning, but they may not reflect your situation, the current economy, or the world as it actually works. People who have long thought of themselves as “poor” — whether true based on national data or not — may feel guilty or uncomfortable about what they earn now. And people who assume they’re “behind” on retirement savings may be using an unrealistic barometer for measuring their progress.
In reality, few couples will enter a relationship with similar salaries or debt levels. Some people will have outstanding credit card debt, while others may have significant student loans to repay. Some partners may enjoy spending frivolously while they’re single and without kids. Other people may financially support a sibling or aging parent. Such financial differences between you and your partner seem to make separate finances the obvious solution, right?
But what if I ask you, “Are you and your partner committed to any shared life goals?” Almost every couple will answer “yes,” whether those goals involve travel, a house, children, or something else. And these goals will require or benefit from joint financial decisions. Arguments about money are a primary reason why relationships fail. You may prize your financial independence. You may dislike some of your partner’s financial habits. But you’re in a relationship in part to achieve these shared goals, and you’ll surely want to do so in a timely, cost-efficient, and fulfilling way. Shared goals don’t mean that you need to abandon your individual goals or even your personal indulgences. You do, however, need to be willing to listen to, acknowledge, and respect each other’s financial beliefs, concerns, and goals.
An initial stumbling block in some relationships occurs when both partners work. For most of U.S. history, women weren’t even given the employment opportunities to make this much of a discussion at home. But female participation in the U.S. workforce increased rapidly from the 1950s through 1990s. As a result, two-income households have become more common, particularly among younger generations. In some relationships, though, the partners bring in significantly different amounts of money.
Each person in a relationship wants to contribute their share to common goals and obligations. And they want their partner to see and value those contributions. Income differences can make this seem like an uneven playing field, though. Without open dialogue, feelings of guilt or inadequacy may soon emerge. But for a couple in a long-term relationship with some shared life goals, these differences aren’t a problem as much as an opportunity. For high-cost obligations (e.g. student loans) and high-value purchases (e.g. vacations), the higher-earning partner’s additional income can create options that benefit both partners over the long term.
But these options won’t materialize or be sustainable without ongoing conversations about how each person wants to approach their income differences. Both partners need to agree on how they each will contribute to shared costs. They need to understand that contributions to the household can take many forms, some of which don’t involve money. The lower-earning partner needs to be willing to accept their partner’s greater financial role (in dollar terms). And the higher-earning partner needs to feel comfortable allocating more of their earnings to the relationship.
More than 10 years after my wife and I started dating, I find that we no longer dwell on the logistics of managing and allocating our money. We make sure, as part of our regular financial conversations, that we know how we will pay bills and make progress on our goals. But that aspect of the discussion only takes a few minutes. Most of our conversation time centers on what we each value and what we want our lives to look like in the years ahead.
My favorite thing about these high-level, aspirational conversations is that they’re typically more fun than talking about financial tactics. We save the discussions for when we’re in good moods and prepared to share our hopes and concerns. We’ll often talk while walking around a park or hanging out at a neighborhood coffee shop or wine bar.
Managing finances as part of a relationship looks and feels slightly different for every couple. Some partners quickly decide to join their entire financial lives together. Other people want to maintain every bit of the financial independence they have earned. Many people find some middle ground, including a prenup that delineates and protects what each partner has achieved prior to forming the relationship. There’s no single, “correct” approach — only open dialogue, trial and error, and the pursuit of a shared life together.
Kevin Mahoney, CFP® is the founder & CEO of Illumint, a Washington, D.C.-based financial planning company for young couples. He specializes in navigating the new financial decisions that arise during our late 20s and 30s, such as repaying student loans, buying a house, & investing savings. Kevin also works with employers and brands on a variety of Millennial personal finance events and projects, including speaking engagements, financial wellness programs, and sponsored campaigns.
Visit Kevin's YouTube channel for guidance on young couples' most common financial discussions, including student loans, housing, and preparing for kids.