Author Topic: Best way to structure finances once married  (Read 13205 times)

Ipodius

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Best way to structure finances once married
« on: May 23, 2012, 07:24:08 AM »
My fiancÚ and I are getting married in December (Can't wait!)

I've been asking various people how they structure their finances as a married couple, and what the pros and cons are of doing it that way.

My fiance will be studying full time for 2013, and then for three years between 2014-2019 (depends on if she gets into honours / masters immediately, or needs to work in-between), and will be doing an internship with a limited salary for one year after Masters - so we will be living off of my salary until then.

So what do the Mustachians think?

arebelspy

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Re: Best way to structure finances once married
« Reply #1 on: May 23, 2012, 08:27:04 AM »
I'm a big advocate for combining finances.

Beyond that, you'll have to figure out what works for you and your significant other.

Do you need separate "allowances"?  Some do.  Do you check with the other for any purchase over $X?  Etc. etc.

You'll have to sit down and have a discussion on money and spending and see what will work for you two.

Congrats on the upcoming nuptials!
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tooqk4u22

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Re: Best way to structure finances once married
« Reply #2 on: May 23, 2012, 09:33:35 AM »
Combine them - it is the most efficient way to manage finances and the most telling sign about how you trust each other.  I use the allowance idea for DW for misc/BS type spending and it works great - spending is capped, I no longer get aggrevated about the little stupid stuff (mostly nick nack crap for the house and coffee) and she has carefree spending so she is happy.  Win win.

shedinator

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Re: Best way to structure finances once married
« Reply #3 on: May 23, 2012, 09:34:28 AM »
I agree with arebelspy. Unless there are significant reasons (like an addiction) for one spouse not to have access to money, combining finances is the preferred approach IMO. You're sharing a life, most of your major expenses are shared, not to mention that whole "one flesh" thing (I know that's a part of my religious tradition, and I'm not trying to convert anyone, but it factors heavily into my own decisions and recommendations). Some other reasons to go joint:
-Chances are, one of you will always have a higher income, and keeping finances separate creates a massive possibility for resentment, which grows as the disparity increases.
-If you're on this forum, you're likely planning for FIRE, and it seems like it would suck if one spouse was financially independent while the other had to keep working.
-If you plan on having kids before retiring, one of you may want to take a pay cut in order to spend time with your offspring. If you keep the finances separate, that spouse may be less likely to afford doing so.
I'm sure there are others, these are just a few that come immediately to mind.

As far as structuring your finances... both of you should take advantage of workplace retirement accounts. Also both set up retirement accounts. Since tax-deferred or tax-free retirement accounts are designed for individuals, you won't be able to make these joint, but you can name each other the primary beneficiary of your accounts, and when you withdraw from them, it can go into your joint accounts. MMM wrote a while back about how he and Mrs. MM each set up individual investment accounts, and sort of competed to see whose profile was doing better. You could do that, or you could set up a joint investment account, but I'd recommend keeping your contributions uniform (ie, "we have $2300 to invest this month, so we'll put $1150 in each account).

For regular bills, just have them auto-debit straight from your joint account(s). For day-to-day stuff, use common sense. If you need to agree on individual spending limits, go for it. It's sort of understood in my house that the way we have the responsibilities divided at present, my wife is responsible for doing most of the spending (read: grocery shopping), because she's currently the primary caregiver, and therefore home much more, but the opposite has been true at other times in our marriage.

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Re: Best way to structure finances once married
« Reply #4 on: May 23, 2012, 09:41:51 AM »
We have a joint checking, joint saving but each of us maintain our own checking accounts and that's where the paychecks flow in. My hubby does the cash flow sheet each month and will ask for a set of amount each month from me to put into the joint. He does the same.. Most months, the "asked" amount is the same since we have same monthly expenses.

This gives us some individual play money.. But both of us are very responsible ppl, so we hardly spend any play money so we just move the excess amount to joint savings.

We set this up when we first moved in with each other (not married).. But just never bother to change it after we got married.

AJ

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Re: Best way to structure finances once married
« Reply #5 on: May 23, 2012, 09:49:08 AM »
I have heard that separate finances can work well for folks who marry later in life after already establishing themselves financially (significant assets, etc.) and who make comparable salaries. Neither of those conditions seem to describe your situation. I don't think couples have to combine accounts to be happily married, but it sounds like that may be the way to go for you. It was for us (we married young).

tooqk4u22

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Re: Best way to structure finances once married
« Reply #6 on: May 23, 2012, 09:52:06 AM »
I have heard that separate finances can work well for folks who marry later in life after already establishing themselves financially (significant assets, etc.) and who make comparable salaries. Neither of those conditions seem to describe your situation. I don't think couples have to combine accounts to be happily married, but it sounds like that may be the way to go for you. It was for us (we married young).

This actually makes a lot of sense, later in life financial assets/obligations can be much more sizeable and complicated.  Also serves as protection if things don't work out. 

Mrs MM

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Re: Best way to structure finances once married
« Reply #7 on: May 23, 2012, 12:36:06 PM »
We were together 10 years before we got married, so we eased into combined finances over the years.  At some point, it just didn't make sense to keep our finances separate anymore.  One day my bank card was swallowed by the bank machine and I decided it was time to close my personal account.

I'd say just do what feels right to you guys.  You can keep doing what you're doing and make changes as you go.

gooki

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Re: Best way to structure finances once married
« Reply #8 on: May 23, 2012, 01:45:30 PM »
For my wife and I we combined our finances when we purchased a home together (before we were married).

All income goes into one checking account (we both have access to this account, used for purchases for the family).

An equal allowance goes out to each individual checking account (however these are still under both names, but we don't touch each other spending/throw away money).

And we have one credit card account that gets settled in full each month.

This has worked well for the past 7 years. And is something we'll stick to for the foreseeable future.

CNM

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Re: Best way to structure finances once married
« Reply #9 on: May 23, 2012, 02:16:47 PM »
We have a joint checking, joint saving but each of us maintain our own checking accounts and that's where the paychecks flow in. My hubby does the cash flow sheet each month and will ask for a set of amount each month from me to put into the joint. He does the same.. Most months, the "asked" amount is the same since we have same monthly expenses.

This gives us some individual play money.. But both of us are very responsible ppl, so we hardly spend any play money so we just move the excess amount to joint savings.

We set this up when we first moved in with each other (not married).. But just never bother to change it after we got married.

This is basically how we do it in my household.  We each have our accounts that we manage (although, technically, we are both on those accounts) and that is where our individual paychecks come in.  We each deposit a certain amount per paycheck to cover our mortgage, bills, and joint savings.  Then, we each have the rest of our paychecks to do what we want.  We are both very responsible and most of our "individual" money goes toward paying off our student debts. 

James

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Re: Best way to structure finances once married
« Reply #10 on: May 23, 2012, 02:32:20 PM »
For my wife and I we combined our finances when we purchased a home together (before we were married).

All income goes into one checking account (we both have access to this account, used for purchases for the family).

An equal allowance goes out to each individual checking account (however these are still under both names, but we don't touch each other spending/throw away money).

And we have one credit card account that gets settled in full each month.

This has worked well for the past 7 years. And is something we'll stick to for the foreseeable future.

We are very similar.  It was a little different 16 years ago when we got married, but I wish we had done it this way back then also.  That certainly isn't to say it's the best way to do it, just what works well for us.  The allowance idea seems to have a good psychological effect on us.  We don't want to spend our own allowance, and we don't want to spend "family" money on things that only benefit one person.  You may or may not want or need that effect.

The word "allowance" causes some people to get flustered since kids usually get allowances.  For example, my wife would never tell the book club she isn't buying coffee at the coffee house because she doesn't want to spend her allowance on it, and I wouldn't tell the guys that I'm only having one beer because I want to save my allowance.  Number one it sounds weird and immature, and number two we have principled reasons to avoid that spending, even if we had plenty of money to spend.

Just make sure you talk long and hard about financial stuff like that, now is the time.  Things will change and you will adapt over time, it doesn't have to be locked in with some system, but make sure you both understand each other and have similar goals when it comes to finances.
« Last Edit: May 23, 2012, 06:15:15 PM by James »

catalana

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Re: Best way to structure finances once married
« Reply #11 on: May 23, 2012, 03:47:50 PM »
We have our salaries and other income paid into individual accounts, and we both then pay an amount each month into the joint account.  This isn't the same amount from both of us, but it is the same percentage of our net salary from employment - 45%.  It feels a fair way of recognising that we each put the same effort in, although we don't earn the same.

The joint account is then used for rent, utilities, food, joint entertainment, and holidays.  Individually we pay for our own car and pets, although I expect those will be paid out of the joint account in the near future.  We are talking about getting rid of one car, and the pets have swapped allegiances since we moved in together!  I actually save most of the rest of my income, and my fiance does the same, although we don't have sight of eachothers individual accounts.

Having a joint account has simplified our financial life considerably.  Before then we used to keep track of joint spending and balance up every 6 weeks or so.  It was a nightmare to keep track of, with no clear budgeting and forgotten amounts cropping up.  I calculated an expected budget when we set up the joint account, so that I could figure out how much we needed to pay in.  Since then I have kept track of every spend and allocated it to a category - and as a result can tell you to the penny what our spending patterns actually are.  I was a bit cautious with the budget, and the balance is going up so it doubles as a savings account.  Oh and we have a joint savings account for a specific event we want to attend in 2015 (the Rugby Union World Cup!)

Keeping nearly half of our finances separate suits us as a) we are old crocs who are both highly independent b) we got together with c$130k difference in net worth and c) there isn't a huge gain to be made from redistributing those net assets as most will be used as deposit on a house.

AlexK

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Re: Best way to structure finances once married
« Reply #12 on: May 23, 2012, 08:27:37 PM »
I'm getting married in August and we plan to keep separate accounts. The reason being that she is less frugal than I am so she can spend her own money on gifts, massages, etc without me getting upset.  We won't be having children and we both work.

D-T

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Re: Best way to structure finances once married
« Reply #13 on: May 23, 2012, 08:54:37 PM »
My fiance and I have our own checking accounts and saving accounts. There is a income disparity since he's only working part time and is in school full time.

We have a joint credit card for all joint purchases which we split. I handle the majority of the rent given the income disparity. We've also got a joint savings account for some future goals.  We handle our own personal expenses though.

It works for us. But in your case it sounds like combining the finances might be the best

gooki

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Re: Best way to structure finances once married
« Reply #14 on: May 23, 2012, 10:43:14 PM »
The allowance idea seems to have a good psychological effect on us.  We don't want to spend our own allowance, and we don't want to spend "family" money on things that only benefit one person.  You may or may not want or need that effect.

What really warmed my mustachian heart, was the other month my wife suggested lowering her allowance. She's at home with our little girl and isn't buying much stuff these days. She wanted me to have more as I "worked". But it felt much better choosing both of us to lower the amount and simply save/invest the rest.

erwannabe

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Re: Best way to structure finances once married
« Reply #15 on: May 23, 2012, 10:59:35 PM »
Everyone is different.  We have found the transparency of sharing accounts and finances to be very helpful to trust and our relationship. Also due to different things there have been times when he was the breadwinner and times when I was (income disparity being quite large) but we treat our relationship as a partnership and we work on things together.  We also have the allowance system, and it helps to regulate spending "just because" really well.  I cant get annoyed over his spending choices and vice versa.  Personally I think everyone needs a small amount of blow money to help keep their budget on track.

Mirwen

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Re: Best way to structure finances once married
« Reply #16 on: May 23, 2012, 11:20:51 PM »
I've been married for 9 years and we married rather young (24/21) and broke.  We combined finances by having all money flowing into a single account where all bills are paid.  Spending money was withdrawn in cash or moved to a separate spending account. (It varied over the years.) If you are concerned about not arguing about little stuff, I recommend that each person get what I call "fun money" and some call an "allowance."  That way the amount can be predetermined and still leave room for personal freedom and priorities.  It's worked for us and we're still doing it, except that now our priorities and preferences are so in line that the allowance is communal.  If you have the right partner when you are young, it's fun to grow together.  We've influenced who each other are immensely.

Ipodius

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Re: Best way to structure finances once married
« Reply #17 on: May 24, 2012, 04:58:18 AM »
Wow! Thanks for all the feedback.

We've been leading towards shared finances, and I can see that it's working for a lot of people. Interesting to see that no-one lists any major issues specific to joint finances.

I like the allowance / fun money idea - my FiancÚ sometimes ends up feeling guilty about spending money, and I think such a system will give her the freedom to spoil herself in moderation.

Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

fruplicity

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Re: Best way to structure finances once married
« Reply #18 on: May 24, 2012, 05:26:42 AM »
Marriage advice? COMMUNICATION. Also I saw a quote recently that went something like, "a successful marriage is a union of two good forgivers".

I can give you a negative or two about combined finances (which we have and I still wouldn't change).

It's been implied throughout the thread that usually one person is more into frugality/money management. In our case it's me and I do ALL the financial planning and organizing. I like it, but I also would like to see the other half be more interested in it. Sometimes I feel like all the pressure is on me even though I do honestly enjoy it. At least he's into frugality and I don't have to worry about crazy spending.

Another negative to this is that if anything happened to me, he would probably be overwhelmed with the finances. I've tried to show him my system (including a master spreadsheet w/ account info, passwords, etc) but he just hasn't shown much interest.

trammatic

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Re: Best way to structure finances once married
« Reply #19 on: May 24, 2012, 09:32:34 AM »
Marriage advice? COMMUNICATION.
Agreed.  I also think that the idea that should underlie this is mutual agreement on goals.  Where do you want to be in 5 years? 10 years? What sort of lifestyle do you want? How much do you want to work?  All of this will point you in the direction of what sort of spending decisions you have.  If you want to be come a mustaschian (and why wouldn't you?) you'd both want to embrace frugality and compete on lowering spending.  Go for it.

Because really, when it comes down to it, spending is what drives everything else.  It says how much you have to work, how much you have to save to become FI, where you should live, etc.  Figure that out and then see what banking plan is appropriate.

ShavenLlama

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Re: Best way to structure finances once married
« Reply #20 on: May 24, 2012, 02:24:55 PM »
Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

Don't wear your wedding band surfing.

AJ

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Re: Best way to structure finances once married
« Reply #21 on: May 24, 2012, 02:54:26 PM »
Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

Learn how to fight right. I read some marriage counselor that said he could tell which couples would make it by how they fought. Those that avoided confrontation and those that tore each others' throats out were both doomed. The one's that could hash it out and reach a workable compromise had the best chance. Don't go to bed angry.

Also, everyone is different, but men and women tend to have different thought processes. We had a lot of unnecessary fights before realizing that. It is cheeseball, but the Mars & Venus books do a good job of highlighting the differences.

gooki

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Re: Best way to structure finances once married
« Reply #22 on: May 24, 2012, 03:50:10 PM »
I like the allowance / fun money idea - my FiancÚ sometimes ends up feeling guilty about spending money, and I think such a system will give her the freedom to spoil herself in moderation.

It really works. I happily throw $1,500 on some speakers, and my wife's only concern is how the fit in with the other furniture. Likewise, my wife recently spent $250 on a hair cut, we were both outraged at the cost, but that was directed at the hairdresser, not my wife for spending that money.

Now because our fun money/allowance is limited we don't do this every week. But it saves any arguments over personal spending, and requires one to budget for their own wants, but makes budgeting for family expenses real easy.

erwannabe

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Re: Best way to structure finances once married
« Reply #23 on: May 24, 2012, 08:41:24 PM »
Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

Don't wear your wedding band surfing.

I second this... whoops!

gooki

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Re: Best way to structure finances once married
« Reply #24 on: May 25, 2012, 01:45:01 AM »
Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

Everybody is slightly crazy. Learn to accept your partners crazy, rather than trying to change it.

CeciliaW

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Re: Best way to structure finances once married
« Reply #25 on: May 25, 2012, 12:31:43 PM »

Everybody is slightly crazy. Learn to accept your partners crazy, rather than trying to change it.

Good one, Gooki!


KMMK

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Re: Best way to structure finances once married
« Reply #26 on: May 26, 2012, 08:01:32 AM »
Not completely on topic, but I guess it can stay in the same thread - what one piece of advice would any of the married forumites give to a couple who are about to be married?

Never tell each other what to do. You're a partner, not a parent. Marry someone who you trust will make reasonable choices and then let them have at it. Telling someone they can't do something, just builds resentment and makes them want to do it more. The more I don't want my husband to do something, the more I encourage him to do it. Works great for us, both being stubborn independent people. Never want to feel like marriage is holding us back. So far it's just improved both our lives immensely.

Mirwen

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Re: Best way to structure finances once married
« Reply #27 on: May 26, 2012, 05:24:22 PM »
Quote
Everybody is slightly crazy. Learn to accept your partners crazy, rather than trying to change it.

This.

The way my husband and I say it is slightly different:  "Everybody is crazy.  The key to a happy marriage is finding someone who's brand of crazy is the type you can deal with."