How to manage your finances as a couple without stress is a BIG issue for most families. And it’s something I deal with all. the. time.
I was home the other day just in time for the opinion segment on Channel Nine afternoon news. I’d flicked on the TV and what they were discussing caught my attention right away – it’s something I deal with day in and day out.
They were debating whether couples should combine their finances or keep their incomes and bank accounts separate.
Unfortunately, it seems that popular opinion has decided that taking a combined approach to managing your financial affairs as a couple means giving up your financial independence.
But when did managing your household’s finances as joint affair start to be seen as detrimental to women’s rights?
Now don’t get me wrong, I strongly believe it is important for the individuals in a couple to maintain financial independence for so many good reasons. And there is no doubt that financial abuse is a real issue.
But where everyone gets it wrong I think, is in assuming the two have to be mutually exclusive.
Instead, I am a strong advocate for the yours, mine and ours approach.
Yours, mine and ours
With this approach, you have a joint account for household expenditure (all bills, rent / mortgage, kids expenses etc.), a joint account for savings, and separate individual accounts for personal spending.
Yours, mine and ours – simple.
Now obviously this in an oversimplified example, there are likely to be tweaks to the individual account structure of different families.
For example, some families may prefer to use an offset account instead of a deposit account for savings if they have a mortgage they are trying to pay down as quickly as possible.
Or you may choose to spend on credit cards to accumulate rewards points in which case it’s not quite as simple as having all your expenses coming out of a single household transaction account.
But the important thing to take note of in the yours, mine and ours approach is this – all household income comes into the household .
Under the yours, mine and ours model, household incomes flow into and out of the joint accounts.
Whereas under the yours and mine approach, household incomes flow into a couples respective personal accounts and household expenditure is divided up between a couple in whatever arrangement is agreed upon.
Now if this approach WORKS for you as a family then that’s great! You can probably stop reading and get back to it!
BUT if you’re struggling with your budget and household cashflow which in my experience is common when families manage things separately, then you might want to read on a little further.
Where this approach comes unstuck
It gets messy.
I thought you paid that bill? There’s a greater likelihood that your household accounting is messy.
Life with a family is busy and couples very rarely communicate over their financial affairs well. So adding another layer of complexity to the management of household cashflow by each trying to ‘run your own show’ so to speak means there is naturally an increased likelihood that things get missed or paid twice.
There is also more work involved from an administration perspective as well – given there are two people involved in the accounting side of things.
And given there is no structure to your household cashflow, what I often find is that there is always a need to move money between accounts to pay for things – which again adds to the workload and messiness of it all.
There’s limited transparency
Keeping track of what’s coming in and what’s going out is generally tricky under a his and hers approach, simply because you can’t see what’s coming into or out of your partners account and they can’t see what’s coming in or out of your account.
Because of this, it can be difficult to accurately quantify how much your spending and how you are travelling from a money management perspective month to month.
That’s not to say it can’t be done, but it means sitting down with your partner and getting information from both parties which basically means it’s less likely to get done.
There’s a likelihood for greater disagreements over money
Continuing to manage your money in terms of “yours” and “mine” within the household is a good way to start arguments between a couple and bean counting.
Couples with different incomes can easily begin to feel as though the division of expenses is unfair and that one or the other is not ‘pulling their weight.’ This mindset becomes even more pronounced in the case where there is a stay at home parent.
If there are also different financial priorities between a couple, keeping your money separate can lead to resentment of one another as you grapple with how and what the other partner spends their income on instead of allocating that discretionary income to shared / family financial goals.
This is why it is important to find a way to look at your money as something you share.
This does not mean you give up your financial independence – not at all.
It means working out a household money management plan that takes a yours, mine & ours approach to cashflow.
Where income is thought of as household income, where expenses are thought of as household expenses and where each individual in the relationship has funds for personal expenses that is worked out together and of no concern to the other.
The last part is important.
It’s important for a couple to agree on a lifestyle budget that supports their shared & personal financial goals – but once that budget has been agreed upon it must be understood that those personal funds are to be spent at the discretion of the individual.
If you want to spend it on shoes – great! And if he wants to spend his at Bunnings – no problem! You’ve each agreed that is your money and so it no longer bothers you because there is no opportunity cost to what the other is spending their money on.
There are no bigger financial goals as a family that are sacrificed because of the differences in how you spend as individuals.
Now, there will always family situations where this might not be the best way to go.
For example, where couples get together later in life. Whether in the case of a second marriage or that you didn’t meet the love of your life until you were a little older.
While coming into a marriage with a few more years of maturity (and life experience) can definitely be a good thing, it does make merging money a little more complicated since both partners have gotten used to solo financial management and potentially have already accumulated a certain amount of individual wealth.
In this case, it can be more difficult to adopt an “our money” view of marital assets.
But if this describes your situation, you don’t need to throw all your financial assets into the same pile in order to start looking at the majority of your money from a team perspective.
You can still apply the yours, mine and ours approach to the management of your household cashflow and keep your existing financial assets separate.
No matter how you manage the logistics of it – working together as a team and taking a combined approach to money management at home will certainly help with your household cashflow.
I’m here to help – let me know if you and your partner could use a hand in working out your cashflow issues at home.