Remember the old saying with couples, “What’s mine is yours and yours is mine?” That may not be the case financially in every relationship.
According to data from Fidelity Investments, only about 4 and 10 couples still combine their finances. Younger generations are leading the trend to divide with 34% of Gen Z and 26% of millennials preferring fully separate accounts, compared to 19% of Gen Xers and 15% of boomers.
Money can be touchy subject, especially when you consider how different spending habits, income levels, financial goals, and attitudes might create some tension in the relationship. However, a successful financial partnership doesn’t necessarily require identical financial personalities. Instead, it may rely more on qualities such as good communication and respect for you both to help one another work together cohesively. Here’s what to do.
Prioritize Financial Transparency
Before even talking about how to integrate your money together, it’s important to understand what challenges lie ahead for couples who practice separate finances.
Those that combine their money have the luxury of seeing everything that goes in and out: income, bills, purchases, etc. By contrast, couples who keep things separate naturally create blind spots and gray areas that may obscure the other’s perspective.
Never forget: Money is one of the leading reasons couples argue. When someone doesn’t have all the proper information available, it can lead to misunderstandings or possibly even distrust and resentment.
Transparency does not necessarily mean that every dollar must be discussed and accounted for. Couples can absolutely maintain individual accounts, but only if they’re completely open and honest with one another. The important thing is that both partners understand how their individual financial decisions affect the team as a whole.
Start by having an honest conversation about your current financial picture. Discuss income, loans, credit card balances, subscriptions, savings, investments, and other regular obligations. It may feel uncomfortable initially, particularly if one partner has significantly more debt or earns substantially more than the other. However, approaching the conversation from a place of support rather than assigning blame can make a major difference.
How to Budget Separate Finances
Couples who prefer to keep some or all their money separate may find the following a simple and effective approach to budgeting.
1) Calculate Your Share
If partners have different incomes, dividing household expenses equally may not always feel equitable. Instead, consider contributing to shared expenses based on each person’s percentage of the household income.
For example, suppose one partner earns $60,000 annually and the other earns $40,000. Together, they earn $100,000. Therefore, the first partner contributes 60% of the household income, while the second contributes 40%.
2) Divide Up Expenses
Next, make a list of all the bills and assign values to each one. This will help you both to identify who will take which one.
Continuing with the previous example, if the couple has a total of $5,000 in shared monthly expenses, they might decide to cover $3,000 and $2,000, respectively.
Again, this percentage-based approach can be helpful when there is a significant income difference. It allows both partners to contribute meaningfully without placing an outsized burden on the lower-earning partner.
Pro-tip: As expenses are being divided, be sure the allocation does not put both of you at risk. For example, if one partner has fluctuating income, then it may not make sense to have them pay for the rent or mortgage. Review the arrangement periodically and adjust it if circumstances change.
3) Work in Each Other’s Financial Priorities
Couples rarely have identical financial priorities at the same time. One person may wish to come up with the down payment for a new home while the other wants to travel. Or perhaps one partner has student loans to pay off while the other wants to save aggressively for retirement.
Rather than treating these differences as obstacles or dismissing them, challenge one another to fit them into your combined budget. A useful way to do this might be to treat them like another bill that must be paid. For instance, saving for a house might be added to your list of expenses. Or it may even be something you both wish to contribute to.
Giving each partner some financial autonomy can make it easier to compromise. When both people have a reasonable amount of money they can spend without having to justify every purchase, they may be more willing to cooperate on larger shared goals.
4) Regularly Review Your Combined Progress
A budget should not be something you create once and forget. Income, expenses, goals, and circumstances change over time, so couples should review their financial progress regularly.
A monthly check-in can be enough for many households. Look at how much you earned, what you spent, what you saved, and whether you are on track toward your goals.
Keep the conversation constructive. Instead of asking, “Why did you spend so much?” try asking, “How did our spending compare with what we planned?” The difference may seem small, but it reinforces the idea that you are solving a shared problem rather than judging one another.
Other Ways to Achieve Financial Success
A unified approach to budgeting system is only one part of working together when your finances are separate. The following are a few other ways to strengthen your financial partnership.
Listen to Each Other’s Financial Vision
Take the time to understand your partner’s financial vision. Ask questions such as:
- What does financial security mean to you?
- What would you like to accomplish in the next five or ten years?
- What are you most comfortable spending money on?
- What financial situations make you anxious?
Listening does not mean that you must agree with everything your partner says. It’s an exercise in trying to see the motivation behind their priorities and what it means for combined future.
Set Ground Rules for Large Purchases
Everyone has a spending threshold that makes them nervous. As a couple, it’s important that you find out what your partner’s number is and respect it.
For example, you might both agree that any purchase over $250 or $500 should be discussed before the money is spent. That’s not the same as saying you need to ask for permission. Consider it more of a friendly heads up and welcome any discussion that may occur. Chances are the other person may have some valid points that might persuade your decision.
Work Together Towards Retirement
The easiest way to build a retirement nest egg is to start investing as early as possible and let compounding returns work their magic. Therefore, it’s critical that two people with separate finances encourage one another to save as much as possible.
Discuss when you would ideally like to retire, what kind of lifestyle you envision, and how much you may need to support that lifestyle. Review retirement contributions periodically and take advantage of employer-sponsored retirement plans or other appropriate savings opportunities.
Remember that retirement planning is not simply about reaching a specific account balance. It is about creating options for your future together.
Collaborating on an Emergency Fund
An emergency fund can provide an important financial cushion when unexpected expenses arise. Car repairs, home maintenance, temporary income disruptions, and other surprises can quickly derail a household budget if there are no savings available.
Together, decide how much you want to keep in emergency savings and how the two of you will build it. Many financial experts recommend keeping 3 to 6 months of combined essential expenses available. Similar to your other financial expenses, it may be best to contribute to this fund proportionally based on your income.
The Bottom Line
It’s possible for two people with separate finances to make their money work together. The key is to establish a budgeting system that you can both support and follow consistently.
However, the most important element is to talk openly about money. Understanding where you’re each at today, where you want to go, and how you’ll get there will go a long way. The goal is to make sure you both have a voice in the journey.
Featured image credit: Pexels
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