Combining finances for a couple

*Article by Financial Coach Rebecca Pritchard

Do money and love mix? What’s the “right” way to set-up your finances when you’re in a relationship?

This is a problem that many of us face, and it can be really challenging to navigate without hurting someone’s feelings, or sabotaging yourself and your finances.

Whether it’s personal spending, bills and living expenses, savings, debt repayments or investments, there’s a lot of different elements to managing your money and the complexity goes up several notches when you’re in a relationship because it’s not all about you anymore.

Our advice for couples managing their finances?

Avoid the “shoulds”, and focus on what works for you. The “right” way to manage your finances is the way that means you consistently stick to your game plan, feel comfortable and secure, you’re not having regular and crappy conversations about money but you’re confidently moving towards your goals. That’s the right way.

When it comes to bills and living expenses, let’s squash the idea that because you live together, things must be joint. That’s not the case.

In terms of “musts”, things “must” be organised. But they can be organised separately. We recommend you have a clear conversation as early as you can about what you’d like to do, and then set that up in a clean and automated way. Either you’ve got a joint account for paying joint living expenses, or you’ve got individual accounts that fund a share of those joint living expenses. 99% of these expenses can be automated, so do that, and move on.

For sorting out your personal spending, we have three recommended approaches.

Any of these three could work for you in your relationship. You may start with one, and change to another over time.

Personal spending is an iterative experiment, not a set-and-forget approach.

Option 1: Our money

All of your personal spending gets paid into one designated bank account, for which you both have card access.

Pro’s: perfect if a lot of your spending is joint and you’re great communicators, able to stick to your budget and prepared to say no to things when you start to run low on your cash.

Con’s: limited privacy and the chance that you miss out on a purchase/event because your partner’s spent more than their fair share of the money.

Example: $682 gets paid each week into our ME Bank everyday account. We use this together for groceries, entertainment and dining out, clothing, gifts, basic medical, public transport, petrol and pets.

I think the joint savings and spendings account Tom and I have is a great way to keep us both accountable.

Prior to this structure, everything went on our credit card and I did not feel responsible for my spending. But was also disappointed in our lack of savings!

Our joint account spending allocation falls a little short some weeks but others we have surplus.

Allocated money arrives in our account on a Monday, so if we have plans on the weekend we need to be thinking ahead.

Having our finances structured through joint accounts makes things simpler for us in terms of we both know exactly what our position is. It takes trust in each other, but also provides a level of accountability that one isn’t going to constantly spent the majority of our allocated spending money…and also that if one of us does have some bigger expenses one week, we can work together to spend less in other areas.
We have relished the change in accounts set up managing our cash flow towards our goals. We opted for one account for our personal spending so we can keep track together. It has really helped us to work as a team, discuss the use of our funds, plan together when we need and when we want to purchase, whilst reducing mindless impulse spending. Our goals are shared financial goals and as we see ourselves as a team there was really no hesitation at having our personal spending in one joint account.

Option 2: Your money, my money

Of your designated household personal spending budget, it gets split into two designated bank accounts, for which you have card access to one of those accounts.  This will require a practical assessment of how you like to spend your money week to week, thinking of things like groceries, date night, petrol and any expenses for kids. Pro’s: you have a sense of financial independence and empowerment of where your money is going; you have the ability to surprise your partner or make silly little purchases judgement-freeCon’s: some negotiation may be required around joint expenses and the occasional occurrence of one person running out of money example: $382 gets paid each week into my ME Bank everyday account. I use this to pay for our groceries, my entertainment and dining out, clothing, gifts, basic medical, public transport, petrol and pets. $300 gets paid each week into your ME Bank everyday account. It has the same purpose but gets slightly less because I do the grocery shopping, otherwise, we’re pretty even.

Maintaining separate personal spending accounts is so much simpler for us, as sticking to our personal spending budget requires day-to-day monitoring and discipline, as opposed to our longer-term savings accounts that we automatically contribute to, rarely draw down on, and just check occasionally. Keeping awareness of my own daily spending takes work – from coffees to lunches to socialising – let alone watching out for the spending of two!

Option 3: Your money, my money, our money

Of your designated household personal spending budget, it gets split into three designated bank accounts, for which you have card access to one individual accounts and one joint account. This again will require a practical assessment of how you like to spend your money week to week, thinking of things like groceries, date night, petrol and any expenses for kids.Pro’s: you have a sense of financial independence and empowerment of where your money is going; you have the ability to surprise your partner or make silly little purchases judgement-free whilst still have the sense of unity over joint expenses.Con’s: a little fiddlier to set-up and may be more brain-space required to be across an additional bank account.Example: $282 gets paid each week into our joint ME Bank everyday account. We use this to pay for our groceries, some entertainment and dining out, gifts, petrol and pets. $200 gets paid each week into each of our personal ME Bank everyday accounts. We can each use this for personal expenses like entertainment, dining out, clothing, medical and transport.

I love knowing the fact I don’t have to stress about having enough funds for bills, direct debits and your [membership fees] coming out of the [cash hub] account.

Our joint and personal has a great structure also where I can [have] peace of mind that we know how much is allocated for day-to-day and week-to-week expenses, then my personal spending is controlled [because] I know I can’t overspend.

I personally like our 3 account structure of joint, cash hub and personal spending as it provides us with zero guilt regarding our spending decisions as we know that cash has been allocated for each account. We now know that we don’t have to worry if there is enough cash in our accounts for direct debit of our bills as that has been taken care of in our cash hub. Further separation of our joint and personal spending means that each of us can choose to spend our personal cash on whatever we choose to with no resentment from the other for spending more than our fair share – this includes clothing, cosmetics, nights out etc.

These examples are relatively balanced for each member of the couple. That doesn’t need to be the case. There’s ppotential to scale accounts right up or down depending on an individual’s role in their household (i.e. practically they do all the shopping, pay for the kid’s expenses) or earning capacity. There’s no right or wrong answer in the allocations – it’s about what works best for you.

What’s important is to try a structure, automate the payments and then get experimenting.

Want to get started? Here’s your homework:

  • Update (or create) your budget identifying all joint and personal expenses
  • Make a call on which cash flow structure you would like to try
  • Use your budget to calculate how much needs to go into each account each week/month
  • Automate everything
  • After 2-3 months, reflect on how that’s worked – do you need to make changes?
  • Rinse and repeat