The Top 4 Ways Couples Manage Their Finances
I have to admit I’m still learning a lot about finance. Not so much the rules and regulations, the dos and don’ts, or the best ways to get rich and build wealth over time. I’ve got some pretty solid time tested strategies for all that. But with every new client I meet, I find yet another personal relationship with money.
No two people manage their finances in the same way, whether it’s budgeting techniques or values and goals. Money is an extremely personal thing for almost everyone, and early on in my career I realized that everyone needed a different approach. This wasn’t really an issue until I got my first couple client…uh oh. Now there were two people with very different approaches to money. Not only did they not always agree with me, they sometimes didn’t even agree with one another!
Since then, I’ve helped many couples put their finances in order, and I think I’ve come up with the main ways successful couples handle money together. Whether you’re married, dating, or happily single, it’s good to know how you feel about money because chances are, the person you’ll eventually end up with doesn’t think about it the same way. And given that unrealistic expectations and finances are often cited at top reasons for divorce and marital stress, it’s crucial that you know if you and your partner agree on how to buy the bed you’ll share.
So here they are, the top four ways successful (and sometimes unsuccessful) couples partner together financially.
1 – The Comminglers
Comminglers are couples who share every cent. All of their paychecks, income, expenses, and budgets are kept in shared accounts. Neither have anything exclusively in their own name. They even get rid of pre-marital assets and accounts and transfer them to the shared group pile. If they have their own 401(k)s or IRAs (which legally can only be held by one person, not a joint couple), the other partner knows the passwords to those accounts as well.
This strategy may sound scary to people who are newlyweds because getting everything in one account is a daunting task and giving up autonomy of your finances can be difficult, especially for Type A folks who like to control everything. But it works really well because trust is baked into the recipe of all successful relationships, and giving someone else access to your money for the first time is a huge exercise in trust.
It also helps keep each person accountable to the other, so if it becomes clear that either person has very different saving or spending habits from their partner, they’ll be quicker to recognize it and talk about it openly. Actions speak much louder than words, and saying you have shared goals and actually living those goals are sometimes very different things.
2 – The Wall Builders
These are the folks who use the complete opposite strategy. Everything is divided and the relationship has few if any shared assets. I won’t go so far to say that these people don’t trust one another, but I’ve only ever seen this strategy work in people who rated money as extremely important to their happiness. People who don’t think money has much of an effect on happiness would be best to use a different strategy because there’s some inherent tension in the Wall Builder strategy.
For successful Wall Builders, arguments over money in a shared account were likely to be numerous even for small transgressions, so separate accounts save the relationship stress. Think of this as an “agree to disagree” kind of relationship, where you don’t want money to get in the way of love, for better or for worse. It’s definitely not for everyone, but it can work for people who bring a lot of pre-marital assets to the relationship, or where both members earn salaries they could easily live on by themselves.
Each person is free to adopt their own saving and spending strategies, as long as they don’t dip into the other person’s money. Funny enough, sometimes these couples end up saving way more than couples who use other strategies because they never want to have to ask their partner for money.
3 – The Gatekeeper
When one person is either very spendy or very frugal and the other doesn’t care about money much, they often adopt a Gatekeeper approach. The Gatekeeper is where one person controls the finances. The funds are often commingled to a point or all the way, but one person is responsible for them. This person usually keeps track of the other person’s spending habits and is the go to for any savings strategies.
This works best if one person doesn’t care much about money while the other one cares a great deal. However, there is some caution to this strategy. There’s one specific type of The Gatekeeper strategy that tends not to work long term from what I’ve seen. It’s when a couple has very lopsided incomes and the person with the higher income is both The Gatekeeper and has considerably more frugal ideas about money than his or her partner. This specific setup has a tendency to make the lower income partner feel financially trapped.
A lot of couples use a lighter version of this strategy simply because one partner doesn’t care about money. They don’t assign a Gatekeeper per se, but someone becomes the de facto money manager of the family, and takes on that responsibility.
4 – The Mysterioso
The Mysterioso is the partner (or in some case both partners) who is extremely secretive about money. Even when that partner’s purchases are completely innocent (although they aren’t always), he or she doesn’t like to talk about finances. So the couple decides to not talk about it, and in many cases don’t even have a good idea of how much money the other partner makes. A prerequisite for this strategy is usually that both partners make comfortable salaries, since it necessarily involves some variation on The Wall Builders to be successful.
I’m a strong advocate of complete transparency in relationships, financially and otherwise. If you’re hiding something because you think it will damage the relationship, that’s a sign of a lack of trust that’s going to bleed into many other facets of your life. That being said, I’m putting this strategy here as a potentially successful one because believe it or not, I’ve seen it work. I know a very happy, albeit wildly unconventional couple who’ve used this strategy for years without a hint of reproach.
I’ve also seen it fail big time because The Mysterioso was uncommonly insecure and mistrusting, so let’s not pretend this is an easy strategy to get right. However, there’s one version of the Mysterioso that never works, and that’s when you hide your saving and spending habits from children. We know that kids learn from their parents every day in every way, yet too many parents never talk to their kids about money. Even if you know you have terrible habits with money, showing kids those choices helps them realize what you’re doing right and where you’re going wrong. It’s never too early to talk openly about money both to kids and to your partner while in front of your kids.
What about your strategies?
Regardless of the category you fall into, (and I’m sure there are many more ways that couples can manage money than the ways presented above) having an open and honest conversation about money with your partner is extremely important. Like it or not, money is a big part of life, and drastically different styles of money management might not seem like a deal breaker at first, but you never know.
The reason that most people hire a financial advisor is because they are making a big change that will affect them financially, or they are contemplating a new choice and want a second opinion on whether or not it makes sense financially. And while an outside and objective opinion is important, sometimes you can get good advice (or at least a different view) on your financial decisions from the person right across the table from you.
A partner in finance is a partner in life.
Nathan is the Chief Financial Advisor at Monte Largo Financial.