Married couples handle money in a variety of ways. Some choose to combine their finances fully, some like to manage their finances separately and others take the middle route of ‘merge some, leave some out’. If you’re about to get married soon, have just tied the knot or are looking to shake up the way you handle money with your spouse, here are some tips to help you get started…
Merging some of your finances
How?
Both hold one joint account along with separate individual accounts
What to consider
You’ll both have to contribute a portion of your salary towards the joint account, while keeping what remains in your separate accounts. Now what’s important to discuss here is exactly what you’ll be using the joint funds for. You’ll most likely use this account to pay for all your shared household expenses – Rent, utilities, kid’s school fees etc. Further, you can decide to manage investments jointly through this account, or handle them separately. And you should ideally pay for personal expenses and little indulgences through your individual accounts.
What to watch out for
If there’s a stark difference in your income and your spouse’s, your contribution towards the joint account could be based on a percentage of your individual incomes, rather than a fixed amount.
If one of you has existing debt, you’ll both have to figure out what’s the best way to tackle this – Should you manage repayments through your individual account or should both pitch in to pay off the debt faster?
[Related: Top 5 financial tips for married couples]
Keeping your finances entirely separate
How?
Both hold separate individual accounts
What to consider
If you want to keep your finances detached as a married couple, it is important that you first discuss how you’re going to split your financial responsibilities. Make a list of all your shared household expenses and decide who takes care of what. If you’re taking on the responsibility of paying the house rent, your spouse can pay for your kid’s school fees and household utilities. Also talk about how you want to deal with your savings and investments going forward – Do you plan to keep these separate too? Take some time out every month or quarter to discuss how you’re both doing financially.
What to watch out for
In this case too, if your income is significantly higher or lower than your spouse’s, it would be fair to allocate your shared financial responsibilities proportionate to your respective incomes.
Merging all of your finances
How?
Both hold just one joint account
What to consider
You both decide to combine 100 percent of your finances, with all income coming into one account, and all expenses being paid for using the joint funds. Decide how the money should be allocated beforehand – How much do you need to pay for basic household expenses, how much should go towards savings and investments, and how much you can afford to spend on recreation. If yours is a single-income household, you will both have to discuss your joint financial strategy all the more carefully.
What to watch out for
Trust is of primary importance, since you’ll both have equal access to your joint funds. What if one of you is a saver and the other a spender? It is important to align your financial objectives right at the start.
[Related: My money is your money?]